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Vanguard Quantitative Funds

Filed: 26 May 16, 8:00pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-04526

 

Name of Registrant:

Vanguard Quantitative Funds

 

Address of Registrant:

P.O. Box 2600
 Valley Forge, PA 19482

 

Name and address of agent for service:

Heidi Stam, Esquire
 P.O. Box 876
 Valley Forge, PA 19482

 

Registrant’s telephone number, including area code: (610) 669-1000

 

Date of fiscal year end: September 30

 

Date of reporting period: October 1, 2015 – March 31, 2016

 

Item 1: Reports to Shareholders

 



Semiannual Report | March 31, 2016

Vanguard Growth and Income Fund


 

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.

We believe there is no wiser course for any investor.

Contents 
Your Fund’s Total Returns.1
Chairman’s Letter.2
Advisors’ Report.7
Fund Profile.11
Performance Summary.12
Financial Statements.13
About Your Fund’s Expenses.33
Glossary.35

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the
sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows
us to help millions of clients around the world reach their financial goals.


 

Your Fund’s Total Returns

Six Months Ended March 31, 2016 
 Total
 Returns
Vanguard Growth and Income Fund 
Investor Shares8.07%
Admiral™ Shares8.12
S&P 500 Index8.49
Large-Cap Core Funds Average6.23

Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

 

Your Fund’s Performance at a Glance
September 30, 2015, Through March 31, 2016

   Distributions Per Share
 StartingEndingIncomeCapital
 Share PriceShare PriceDividendsGains
Vanguard Growth and Income Fund    
Investor Shares$39.55$40.09$0.388$2.265
Admiral Shares64.5765.450.6683.697

 

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Chairman’s Letter

Dear Shareholder,

Despite a resurgence of volatility early in the second half of the period, U.S. stocks produced solid gains for the six months ended March 31, 2016. Stocks of larger-capitalization companies generally outpaced those of smaller firms.

Vanguard Growth and Income Fund, which focuses on mid- and large-cap stocks, returned about 8% for the period. It finished behind its benchmark, the Standard & Poor’s 500 Index, but ahead of the average return of its peers.

The fund posted gains in all ten industry sectors, with stocks of information technology, consumer staples, and industrials companies adding most to returns. However, the fund’s holdings in some of the top-performing sectors failed to keep pace with their counterparts in the index.

Stocks charted an uneven course en route to a favorable outcome

The broad U.S. stock market returned about 7% over the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.

Stocks rallied in March as investors again seemed encouraged by news about monetary policy. The Federal Reserve indicated, after a mid-March meeting, that it would raise interest rates fewer times in 2016 than previously anticipated. And central

2


 

bankers in Europe and Asia kept up stimulus measures to combat weak growth and low inflation.

International stocks returned about 3% for the period after surging more than 8% in March. Stocks from emerging markets and from developed markets of the Pacific region outperformed European stocks, which were nearly flat.

Bonds produced gains following a subpar start

After posting weak results for the first three months of the period, bonds managed solid gains in the final three. The broad U.S. taxable bond market returned 2.44% for the fiscal half year.

With stocks volatile and the Fed proceeding cautiously with rate hikes, bonds proved attractive. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)

Returns for money market funds and savings accounts remained limited by the Fed’s target rate of 0.25%–0.5%—still low despite rising a quarter percentage point in December.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 6.90%. International bonds got a boost as foreign currencies strengthened against the dollar, a turn-about from the trend of recent years.

Market Barometer   
 
 Total Returns
 Periods Ended March 31, 2016
 SixOneFive Years
 MonthsYear(Annualized)
Stocks   
Russell 1000 Index (Large-caps)7.75%0.50%11.35%
Russell 2000 Index (Small-caps)2.02-9.767.20
Russell 3000 Index (Broad U.S. market)7.30-0.3411.01
FTSE All-World ex US Index (International)3.09-8.530.70
 
Bonds   
Barclays U.S. Aggregate Bond Index (Broad taxable market)2.44%1.96%3.78%
Barclays Municipal Bond Index (Broad tax-exempt market)3.203.985.59
Citigroup Three-Month U.S. Treasury Bill Index0.060.080.04
 
CPI   
Consumer Price Index0.08%0.85%1.28%

 

3


 

Even without this currency benefit, however, international bond returns were solidly positive.

The fund delivered solid gains despite trailing its benchmark

The Growth and Income Fund provides broad exposure to the large- and mid-cap segments of the U.S. stock market. Each of the fund’s three advisors uses its own quantitative approach to screen stocks based on fundamental data such as earnings growth prospects and balance-sheet quality. All share the goal of outpacing the fund’s benchmark over the long term without taking on significant additional risk.

As I mentioned earlier in this letter, the fund produced positive results in all ten sectors for the most recent six months, with information technology, consumer staples, and industrials contributing most to overall performance. Together, the fund’s holdings in these three sectors accounted for almost 5 percentage points of its total return.

The fund’s underperformance relative to its benchmark can be attributed to its smaller returns in a handful of sectors. Although they notched impressive returns, the fund’s holdings in information technology and industrials failed to keep pace with their counterparts in the index. This was also true of energy, health care, and utilities.

Expense Ratios   
Your Fund Compared With Its Peer Group   
 InvestorAdmiralPeer Group
 SharesSharesAverage
Growth and Income Fund0.34%0.23%1.11%

The fund expense ratios shown are from the prospectus dated January 26, 2016, and represent estimated costs for the current fiscal year. For
the six months ended March 31, 2016, the fund’s annualized expense ratios were 0.32% for Investor Shares and 0.21% for Admiral Shares.
The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through
year-end 2015.

Peer group: Large-Cap Core Funds.

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Financials, which is one of the largest sectors, was also a relatively bright spot, as the fund’s holdings in this sector outpaced their benchmark counterparts by a wide margin. The fund also had a stronger showing than its benchmark in the lightly held materials sector.

For more about the advisors’ strategy and the Growth and Income Fund’s positioning during the six months, please see the Advisors’ Report that follows this letter.

Vanguard’s growth translates into lower costs for you
 
Research indicates that lower-cost investments have tended to outperform higher-cost ones.
So it’s little wonder that funds with lower expense ratios—including those at Vanguard—have
dominated the industry’s cash inflows in recent years.
 
Vanguard has long been a low-cost leader, with expenses well below those of many other
investment management companies. That cost difference remains a powerful advantage for
Vanguard clients. Why? Because a lower expense ratio allows a fund to pass along a greater
share of its returns to its investors.
 
What’s more, as you can see in the chart below, we’ve been able to lower our costs continually
as our assets under management have grown. Our steady growth has not been an explicit
business objective. Rather, we focus on putting our clients’ interests first at all times, and
giving them the best chance for investment success. But economies of scale—the cost
efficiencies that come with our growth—have allowed us to keep lowering our fund costs,
even as we invest in our people and technology.
 
The benefit of economies of scale

Note: Data are for U.S.-based Vanguard funds only.
Source: Vanguard.

 

5


 

Consider rebalancing to manage your risk

Let’s say you’ve taken the time to carefully create an appropriate asset allocation for your investment portfolio. Your efforts have produced a diversified mix of stock, bond, and money market funds tailored to your goals, time horizon, and risk tolerance.

But what should you do when your portfolio drifts from its original asset allocation as the financial markets rise or fall? Consider rebalancing to bring it back to the proper mix.

Just one year of outsized returns can throw your allocation out of whack. Take 2013 as an example. That year, the broad stock market (as measured by the Russell 3000 Index) returned 33.55% and the broad taxable bond market (as measured by the Barclays U.S. Aggregate Bond Index) returned –2.02%. A hypothetical portfolio that tracked the broad domestic market indexes and started the year with 60% stocks and 40% bonds would have ended with a more aggressive mix of 67% stocks and 33% bonds.

Rebalancing to bring your portfolio back to its original targets would require you to shift assets away from areas that have been performing well toward those that have been falling behind. That isn’t easy or intuitive. It’s a way to minimize risk rather than maximize returns and to stick with your investment plan through different types of markets. (You can read more about our approach in Best Practices for Portfolio Rebalancing at vanguard.com/research.)

It’s not necessary to check your portfolio every day or every month, much less rebalance it that frequently. It may be more appropriate to monitor it annually or semiannually and rebalance when your allocation swings 5 percentage points or more from its target.

It’s important, of course, to be aware of the tax implications. You’ll want to consult with your tax advisor, but generally speaking, it may be a good idea to make any asset changes within a tax-advantaged retirement account or to direct new cash flows into the underweighted asset class.

However you go about it, keeping your asset allocation from drifting too far off target can help you stay on track with the investment plan you’ve crafted to meet your financial goals.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
April 12, 2016

6


 

Advisors’ Report

Vanguard Growth and Income Fund’s Investor Shares returned 8.07% for the six months ended March 31, 2016. The Admiral Shares returned 8.12%. The S&P 500 Index returned 8.49%, and the average return of large-capitalization core funds was 6.23%.

Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.

The advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal half year and of how the portfolio’s positioning reflects this assessment. (Please note that Los Angeles Capital’s discussion refers to industry sectors as defined by Russell classifications, rather than by the Global Industry Classification Standard used elsewhere in this report.) These comments were prepared on April 18, 2016.

Vanguard Growth and Income Fund Investment Advisors
 
 Fund Assets Managed 
Investment Advisor%$ MillionInvestment Strategy
Los Angeles Capital332,049Employs a quantitative model that emphasizes stocks
   with characteristics investors are currently seeking and
   underweights stocks with characteristics investors are
   currently avoiding. The portfolio’s sector weights, size,
   and style characteristics may differ modestly from the
   benchmark in a risk-controlled manner.
D. E. Shaw Investment332,042Employs quantitative models that seek to capture
Management, L.L.C.  predominantly “bottom up” stock-specific return
   opportunities while aiming to keep the portfolio’s
   sector weights, size, and style characteristics similar to
   the benchmark.
Vanguard Quantitative Equity332,040Employs a quantitative fundamental management
Group  approach, using models that assess valuation, growth
   prospects, management decisions, market sentiment,
   and earnings and balance-sheet quality of companies
   as compared with their peers.
Cash Investments1129These short-term reserves are invested by Vanguard in
   equity index products to simulate investments in
   stocks. Each advisor also may maintain a modest cash
   position.

 

7


 

Los Angeles Capital

Portfolio Managers:

Thomas D. Stevens, CFA,
Chairman and Principal

Hal W. Reynolds, CFA,
Chief Investment Officer and Principal

The S&P 500 Index generated an 8.49% return for the six months ended March 31, 2016, as share prices recovered from January’s lows. Although falling equity volatility and rising energy prices eased credit concerns, investors remained concerned that earnings weakness could broaden outside of the energy and materials sectors.

The best-performing stocks over the six months were those with larger market capitalization and higher dividend yields. Stocks of companies with a large percentage of revenues outside the United States also performed well. These themes were driven by falling bond yields and a recent reversal in dollar strength. The high-yielding telecommunication services and utilities sectors outperformed and the internet subsector also posted strong gains. The biotechnology and financials segments lagged, with banks especially weak as low interest rates continued to impact net interest margins.

Over the six months, the portfolio maintained a bias towards lower-volatility stocks with strong analyst sentiment that contributed positively to returns. In addition, the portfolio’s tilt toward yield added value as investors sought stocks with higher payout ratios. Its bias toward

smaller-cap stocks and its underweighting of stocks with foreign revenues modestly detracted from results. In terms of sectors, lower exposure to utilities detracted, while overweighting consumer staples and materials contributed to returns.

Although the market continues to favor companies with strong profit margins, value-linked factors such as stronger earnings yield and stronger dividend yield are increasingly attractive. Investors are still penalizing volatile assets, along with riskier factors such as leverage and distress. The portfolio is tilted away from higher-growth segments of the market such as biotechnology, internet, and retail, and is tilted towards consumer staples.

D. E. Shaw Investment
Management, L.L.C.

Portfolio Managers:

Anne Dinning, Ph.D., Managing Director
and Chief Investment Officer

Philip Kearns, Ph.D., Managing Director

The S&P 500 Index fluctuated during the six months, but ended the period with a return of 8.5% after a strong rally in the final six weeks. After much anticipation, the Federal Reserve raised interest rates in mid-December. Possibly because it had been telegraphed well ahead of time, the move seemed to have little effect on equity markets. The price of crude oil fell during the period but showed some signs of life at the tail end; the oil component of the S&P GSCI Commodity Index, for example, dropped 40% through mid-February but finished down only 15%.

8


 

Global equity markets exhibited mixed performance, with the MSCI Pacific Index returning 4.9% and the MSCI Europe Index essentially flat. The Shanghai Composite Index had returned 20% as of the third week in December, but gave it all back after the People’s Bank of China cut the yuan fixing rate by nearly 1.5% over a period of eight days. European stocks fell in December after the European Central Bank (ECB) lowered its deposit rate to –0.3% and extended its bond purchase program by six months. The Eurostoxx 50 Index lost 9.5% in eight days following the ECB announcement.

While we actively monitor such market activity, we generally do not make portfolio decisions based on a subjective analysis of the investment environment, aside from attempting to mitigate newly emergent risk factors identified by the firm. There were no such occurrences during the half year.

Our quantitative equity investment process deploys alpha models that seek to forecast individual stock returns and deploys risk models that seek to mitigate active exposures to industries, sectors, and common risk factors. However, in constructing the equity portfolios, this process may result in small to moderate active exposures to industries, sectors, and risk factors as a by-product of our focus on bottom-up stock selection. We therefore generally attribute portfolio performance to three major sources: bottom-up stock selection; exposure to risk factors such as value, growth, and market capitalization; and exposure to industry groups.

Stock selection was the main reason for the underperformance of our portfolio, followed by exposure to certain industry groups. The largest drag on relative performance came from an overweight exposure to multiple segments of the pharmaceutical and energy sectors. Overall exposure to risk factors did not contribute materially to relative performance. Although underweight exposure to high-dividend-yield stocks and overweight exposure to high-volatility stocks detracted from relative performance, these were largely counterbalanced by underweight exposure to momentum stocks.

The three largest single-stock contributors were an underweight position in Bank of America, an overweight position in AT&T, and an underweight position in JP Morgan Chase & Co. The three largest single-stock detractors were underweight positions in Facebook and Verizon Communications and an overweight position in Williams.

The U.S. economy appears to be picking up strength, with unemployment remaining at or below 5% and the economy adding over 1.4 million nonfarm payroll jobs during the period. However, uncertainty and signs of weakness in various regions and sectors of the world economy could still dampen equity market returns. Japanese and core European five-year interest rates are currently negative, which may indicate troubled economic times ahead. In addition, China’s economy is still relatively weak, and the direction of oil prices remains uncertain. And while markets are generally anticipating that the Fed will raise interest rates again this year, there is much debate about the timing and size of the hike.

9


 

Vanguard Quantitative Equity Group

Portfolio Managers:

Michael R. Roach, CFA

James P. Stetler, Principal

Binbin Guo, Principal, Head of Equity
Research and Portfolio Strategies

Moving into 2016, the U.S. economy continued to grow, but at a slower pace. Fourth quarter 2015 real GDP grew 1.4%, down from 2.0% in the third quarter. The deceleration was mainly attributed to downturns in nonresidential fixed investment, exports, and state and local government spending. Corporate profits decreased 8.1%, reflecting the largest quarterly decline since the first quarter of 2011. The job market further improved, however. Total nonfarm payroll employment rose by 215,000 in March, while the unemployment rate was slightly changed at 5.0%.

In the first quarter of 2016, oil prices declined significantly but then recovered, increasing by more than 40% from mid-February’s bottom. This volatility spilled over into the global stock markets as they saw similar price action in the same quarter.

The U.S. Federal Reserve raised interest rates in December, after keeping rates near zero since 2008. Further gradual interest rate hikes are expected later this year, but they are dependent on the direction of global economic data. Even as the United States begins experiencing higher interest rates, several other central banks, including the European Central Bank and the Bank of Japan, are experimenting with negative interest rates in an attempt to spur economic growth.

Over the period, our growth and management models contributed positively to performance, but our sentiment, valuation, and quality models did not perform as expected. We were able to produce positive stock selection results in five of the ten sectors in the benchmark. Our strongest results were in consumer discretionary, telecommunication services, and financials. Our worst results were in energy and information technology.

At the individual stock level, the largest contributions came from overweight positions in PVH Corp, Leggett and Platt, and CenturyLink. In addition, when comparing the portfolio’s performance relative to its benchmark’s, we benefited from underweighting or avoiding poorly performing stocks such as Chipotle Mexican Grill, Staples, and Netflix.

Unfortunately, we were not able to avoid all bad performers. Overweight positions in Transocean Ltd, Marathon Petroleum Corporation, and Ensco Plc directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as Chevron Corporation and Facebook Inc., hurt our overall outperformance relative to the benchmark.

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Growth and Income Fund

Fund Profile
As of March 31, 2016

Share-Class Characteristics 
 
 InvestorAdmiral
 SharesShares
Ticker SymbolVQNPXVGIAX
Expense Ratio10.34%0.23%
30-Day SEC Yield1.87%1.99%

 

Portfolio Characteristics  
   DJ
   U.S. Total
  S&P 500Market
 FundIndexFA Index
Number of Stocks9495043,900
Median Market Cap$52.6B$79.4B$52.5B
Price/Earnings Ratio18.6x20.5x21.8x
Price/Book Ratio2.8x2.8x2.7x
Return on Equity18.5%18.5%17.5%
Earnings Growth   
Rate8.2%7.6%8.0%
Dividend Yield2.3%2.2%2.1%
Foreign Holdings0.2%0.0%0.0%
Turnover Rate   
(Annualized)99%
Short-Term Reserves0.5%

 

Sector Diversification (% of equity exposure)
   DJ
   U.S. Total
  S&P 500Market
 FundIndex FA Index
Consumer   
Discretionary12.2%12.9%13.6%
Consumer Staples11.510.49.2
Energy6.46.86.1
Financials15.015.617.4
Health Care14.514.313.7
Industrials10.310.110.7
Information   
Technology20.120.820.1
Materials3.72.83.2
Telecommunication   
Services3.02.82.5
Utilities3.33.53.5

 

Volatility Measures  
  DJ
  U.S. Total
 S&P 500Market
 IndexFA Index
R-Squared0.990.99
Beta0.980.96

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc.Technology 
 Hardware, Storage & 
 Peripherals3.3%
Johnson & JohnsonPharmaceuticals2.3
Microsoft Corp.Systems Software2.0
Exxon Mobil Corp.Integrated Oil & Gas1.7
AT&T Inc.Integrated 
 Telecommunication 
 Services1.6
Alphabet Inc.Internet Software & 
 Services1.6
Wells Fargo & Co.Diversified Banks1.5
Coca-Cola Co.Soft Drinks1.2
Amazon.com Inc.Internet Retail1.2
Altria Group Inc.Tobacco1.1
Top Ten 17.5%

The holdings listed exclude any temporary cash investments and equity index products.

 

Investment Focus


1 The expense ratios shown are from the prospectus dated January 26, 2016, and represent estimated costs for the current fiscal year. For the six
months ended March 31, 2016, the annualized expense ratios were 0.32% for Investor Shares and 0.21% for Admiral Shares.

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Growth and Income Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

Fiscal-Year Total Returns (%): September 30, 2005, Through March 31, 2016

Note: For 2016, performance data reflect the six months ended March 31, 2016.

Average Annual Total Returns: Periods Ended March 31, 2016

 InceptionOneFiveTen
 DateYearYearsYears
Investor Shares12/10/19861.75%11.98%6.31%
Admiral Shares5/14/20011.8812.106.44

 

See Financial Highlights for dividend and capital gains information.

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Growth and Income Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

   Market
   Value
  Shares($000)
Common Stocks (97.6%)1  
Consumer Discretionary (11.9%) 
*Amazon.com Inc.122,58172,769
 Home Depot Inc.471,51962,915
 Walt Disney Co.464,22346,102
 McDonald’s Corp.278,97035,061
 Target Corp.377,62331,071
 Comcast Corp. Class A475,17029,023
 Time Warner Cable Inc.123,02625,174
 Lowe’s Cos. Inc.322,85224,456
 Omnicom Group Inc.270,03222,475
 Darden Restaurants Inc.334,60922,185
 Leggett & Platt Inc.438,34021,216
*Priceline Group Inc.15,60020,108
 L Brands Inc.210,78018,509
 Time Warner Inc.254,20518,443
 Interpublic Group of Cos.  
 Inc.783,71617,986
 Carnival Corp.324,25617,111
 General Motors Co.474,04114,899
 NIKE Inc. Class B239,70014,734
 Wyndham Worldwide Corp.192,65014,724
 PVH Corp.142,15014,081
 Best Buy Co. Inc.423,67013,744
*O’Reilly Automotive Inc.50,01313,687
 Marriott International Inc.  
 Class A175,60012,499
 Goodyear Tire & Rubber  
 Co.374,21812,342
^Nordstrom Inc.192,51811,014
 GameStop Corp. Class A329,50010,455
*Netflix Inc.97,1009,927
 News Corp. Class B749,1429,926
*Discovery Communications  
 Inc. Class A329,3939,430
 VF Corp.123,3007,985
 Staples Inc.528,7335,832
*AutoZone Inc.7,1185,671
 Twenty-First Century Fox  
 Inc. Class A200,5545,591
*Liberty Global plc132,8004,988
*Michael Kors Holdings Ltd.85,8404,889
 Viacom Inc. Class B111,8004,615
 Johnson Controls Inc.112,7404,393
*Mohawk Industries Inc.19,8203,784
 Hanesbrands Inc.133,1003,772
*AutoNation Inc.75,8003,538
 TEGNA Inc.140,4753,296
 Kohl’s Corp.64,4703,005
 DR Horton Inc.85,0542,571
 Tiffany & Co.34,7002,546
*Ulta Salon Cosmetics &  
 Fragrance Inc.12,7002,460
*Discovery Communications  
 Inc.78,3022,114
*DISH Network Corp.  
 Class A42,5661,969
 Aramark49,8001,649
 Hasbro Inc.19,7271,580
 Hilton Worldwide Holdings  
 Inc.65,8571,483
 Restaurant Brands  
 International Inc.35,9601,396
 Bloomin’ Brands Inc.71,3371,203
 Graham Holdings Co.  
 Class B2,3541,130
 News Corp. Class A82,8201,058
*Liberty Ventures Class A24,700966
 Cable One Inc.2,155942
 Royal Caribbean Cruises  
 Ltd.10,585870
 Service Corp. International35,000864
 Gannett Co. Inc.54,195820
*TripAdvisor Inc.12,200811
*Sirius XM Holdings Inc.199,800789
*Vista Outdoor Inc.14,100732
*Sally Beauty Holdings Inc.21,200686
 TJX Cos. Inc.8,269648
 Twenty-First Century Fox  
 Inc.21,400603

 

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Growth and Income Fund

   Market
   Value
  Shares($000)
*Liberty Global plc Class A15,600601
 Magna International Inc.12,900554
 Wendy’s Co.48,200525
 Whirlpool Corp.2,557461
 Starbucks Corp.6,600394
^Lions Gate Entertainment  
 Corp.18,000393
*Michaels Cos. Inc.13,800386
 Fiat Chrysler Automobiles  
 NV46,600376
 CST Brands Inc.9,600368
*Liberty Media Corp.9,447360
*LKQ Corp.10,800345
 Rent-A-Center Inc.20,100319
*Denny’s Corp.23,600244
*Houghton Mifflin Harcourt  
 Co.11,100221
*Liberty Media Corp. Class A5,400209
*Restoration Hardware  
 Holdings Inc.4,700197
 Newell Rubbermaid Inc.4,167185
 PulteGroup Inc.8,800165
 Time Inc.9,700150
 DeVry Education Group Inc.7,000121
*NVR Inc.60104
 Churchill Downs Inc.682101
*La Quinta Holdings Inc.8,042101
*Isle of Capri Casinos Inc.6,52791
 Cheesecake Factory Inc.1,70090
 Marriott Vacations  
 Worldwide Corp.1,33190
*New York & Co. Inc.19,27376
 Libbey Inc.3,90073
 Nutrisystem Inc.3,00063
 Gentex Corp.3,90061
*Bed Bath & Beyond Inc.1,07053
 Aaron’s Inc.2,00050
 Sonic Automotive Inc.  
 Class A2,40044
 Barnes & Noble Inc.3,40042
 La-Z-Boy Inc.1,50040
*TopBuild Corp.1,30039
*Murphy USA Inc.60037
*Party City Holdco Inc.2,34035
*Liberty TripAdvisor Holdings  
 Inc. Class A1,50033
 Chico’s FAS Inc.2,50033
*Bojangles’ Inc.1,90032
 Gap Inc.1,08032
 Citi Trends Inc.1,59628
 Cato Corp. Class A70027
 Texas Roadhouse Inc. Class A60026
*Townsquare Media Inc.  
 Class A2,30226
 ClubCorp Holdings Inc.1,76425
*Sears Holdings Corp. 1,59024
*Liberty Broadband Corp. 40023
 Carter’s Inc. 20021
*Live Nation Entertainment   
 Inc. 90020
 Genuine Parts Co. 20020
 Journal Media Group Inc. 1,60019
*Lee Enterprises Inc. 9,59717
 Yum! Brands Inc. 20016
*Chegg Inc. 3,50016
*Express Inc. 70015
*Ruby Tuesday Inc. 2,67014
*Biglari Holdings Inc. 3413
 Signet Jewelers Ltd. 10012
*Nautilus Inc. 60012
 Ross Stores Inc. 20012
*ServiceMaster Global   
 Holdings Inc. 30011
 Williams-Sonoma Inc. 20011
*Tumi Holdings Inc. 40011
*Starz 40011
 Lennar Corp. Class A 20010
 Wolverine World Wide Inc. 5009
*Regis Corp. 6009
*Container Store Group Inc. 1,4008
*Liberty Interactive Corp.   
 QVC Group Class A 3008
*Barnes & Noble Education Inc.7007
*Carrols Restaurant Group Inc.4547
 Haverty Furniture Cos. Inc. 3006
 International Game   
 Technology plc 3356
*MGM Resorts International 2345
*Caesars Entertainment Corp.7005
*Mattress Firm Holding Corp.1004
*J Alexander’s Holdings Inc. 3654
*Cherokee Inc. 2004
*Perry Ellis International Inc. 1072
    745,733
Consumer Staples (11.2%)   
 Coca-Cola Co.1,674,90477,699
 Altria Group Inc.1,108,71269,472
 Procter & Gamble Co.805,14166,271
 Wal-Mart Stores Inc.877,87760,126
 PepsiCo Inc.497,17850,951
 Philip Morris International   
 Inc.402,92139,531
 General Mills Inc.499,09831,618
 Kimberly-Clark Corp.234,89031,595
 Dr Pepper Snapple Group   
 Inc.318,00628,436
 CVS Health Corp.246,09925,528
 Kroger Co.614,15923,492
 Clorox Co.183,84423,175
 ConAgra Foods Inc.455,11520,307

 

14


 

Growth and Income Fund

    Market
    Value
   Shares($000)
 Campbell Soup Co. 271,54417,322
 Colgate-Palmolive Co. 208,16014,706
 Mondelez International Inc.   
 Class A 361,80014,515
 Sysco Corp. 278,13912,997
 Hershey Co. 140,20512,911
 Tyson Foods Inc. Class A 188,73512,581
 Coca-Cola Enterprises Inc. 240,81012,219
 Kraft Heinz Co. 149,30011,729
 Archer-Daniels-Midland Co. 261,4379,493
 Kellogg Co. 116,3238,905
 Constellation Brands Inc.   
 Class A 44,7006,754
 Bunge Ltd. 73,8004,182
 Church & Dwight Co. Inc. 40,0823,695
 Mead Johnson Nutrition Co.41,2003,501
 Walgreens Boots Alliance   
 Inc. 40,0003,370
 Whole Foods Market Inc. 90,1002,803
 Costco Wholesale Corp. 15,3202,414
 Molson Coors Brewing Co.   
 Class B 5,500529
 Hormel Foods Corp. 10,079436
*,^Pilgrim’s Pride Corp. 16,400417
 Spectrum Brands Holdings   
 Inc. 3,600393
*Edgewell Personal Care Co.4,800387
 McCormick & Co. Inc. 1,390138
 Reynolds American Inc. 2,203111
*Adecoagro SA 6,10070
 Brown-Forman Corp. Class B70069
*Sprouts Farmers Market Inc.1,70049
*Hain Celestial Group Inc. 90037
 Lancaster Colony Corp. 30033
 JM Smucker Co. 22129
 Dean Foods Co. 1,30022
 Flowers Foods Inc. 80015
*SunOpta Inc. 3,20014
*USANA Health Sciences Inc.10012
    705,059
Energy (6.2%)   
 Exxon Mobil Corp.1,247,902104,312
 Schlumberger Ltd. 498,69336,779
 Phillips 66 309,14026,768
 Valero Energy Corp. 416,15026,692
 Tesoro Corp. 293,19225,217
 Chevron Corp. 256,76824,496
 Marathon Petroleum Corp. 488,38018,158
*FMC Technologies Inc. 607,76416,628
 Ensco plc Class A1,258,79613,054
 Anadarko Petroleum Corp. 233,91310,893
 Occidental Petroleum Corp. 149,48310,229
 Kinder Morgan Inc. 532,3009,507
^Transocean Ltd. 974,5928,908
 National Oilwell Varco Inc. 270,0728,399
 Noble Corp. plc 751,1007,774
*Cameron International Corp.101,5216,807
 EOG Resources Inc.93,1256,759
 Williams Cos. Inc.398,5006,404
 ConocoPhillips115,6014,655
 Devon Energy Corp.161,6174,435
 Marathon Oil Corp.234,8122,616
 Apache Corp.40,6541,984
*,^Southwestern Energy Co.146,4401,182
 Cabot Oil & Gas Corp.35,900815
 Columbia Pipeline Group Inc.31,950802
 ONEOK Inc.24,116720
 Energen Corp.16,530605
*,^Seadrill Ltd.158,100522
*Newfield Exploration Co.12,806426
^Cameco Corp.31,100399
 EQT Corp.4,400296
 Golar LNG Ltd.12,100217
 Encana Corp.18,500113
 Golar LNG Partners LP6,58097
*Memorial Resource  
 Development Corp.8,78089
 US Silica Holdings Inc.3,90089
 CVR Energy Inc.3,10081
 Euronav NV6,24564
*Cobalt International Energy  
 Inc.21,40064
*Oasis Petroleum Inc.8,00058
 Halliburton Co.1,57056
*Harvest Natural Resources  
 Inc.79,00048
 Frank’s International NV2,58243
 EnLink Midstream LLC3,60040
*Kosmos Energy Ltd.6,90040
*TETRA Technologies Inc.4,90031
*Laredo Petroleum Inc.3,50028
 Aegean Marine Petroleum  
 Network Inc.3,26025
 Teekay Corp.2,80024
 Plains GP Holdings LP  
 Class A2,60023
*InterOil Corp.60019
*Forum Energy  
 Technologies Inc.1,38618
 Baker Hughes Inc.34815
 SemGroup Corp. Class A4009
*TransAtlantic Petroleum Ltd.8,8877
*Natural Gas Services Group  
 Inc.3006
*Gener8 Maritime Inc.8006
 Atwood Oceanics Inc.6005
*Pacific Drilling SA9,2405
*Weatherford International plc4003
*Willbros Group Inc.1,4473
 California Resources Corp.2,3492
   388,569

 

15


 

Growth and Income Fund

   Market
   Value
  Shares($000)
Financials (14.6%)  
 Wells Fargo & Co.1,883,36891,080
 JPMorgan Chase & Co.982,28058,171
 Citigroup Inc.1,370,87357,234
*Berkshire Hathaway Inc.  
 Class B381,00254,057
 Bank of New York Mellon  
 Corp.860,39931,688
 Travelers Cos. Inc.261,59730,531
 Hartford Financial Services  
 Group Inc.622,16028,669
 Prologis Inc.599,73526,496
 Crown Castle International  
 Corp.296,29025,629
 Bank of America Corp.1,750,36623,665
 Aon plc200,98020,992
 AvalonBay Communities  
 Inc.103,41019,669
 McGraw Hill Financial Inc.179,23717,741
 Prudential Financial Inc.223,41116,135
 Navient Corp.1,266,20015,156
 Capital One Financial Corp.215,76314,955
 Kimco Realty Corp.482,86413,897
 Progressive Corp.370,17313,008
 Huntington Bancshares  
 Inc.1,359,36712,968
 Discover Financial  
 Services253,92712,930
 Ameriprise Financial Inc.135,70812,758
 American Express Co.207,50012,740
 People’s United Financial  
 Inc.768,75212,246
 SunTrust Banks Inc.337,72612,185
 Public Storage42,76911,797
 Nasdaq Inc.174,86211,607
 Fifth Third Bancorp678,51811,324
 CME Group Inc.115,00011,046
 Equinix Inc.32,16110,636
 Macerich Co.119,6369,480
 Moody’s Corp.96,0009,270
 Allstate Corp.135,7049,142
 Chubb Ltd.75,2178,962
 Northern Trust Corp.134,9818,797
 BlackRock Inc.24,9808,507
 Aflac Inc.127,7858,068
 US Bancorp191,1807,760
 Extra Space Storage Inc.77,9707,287
 Unum Group224,6716,947
 Cincinnati Financial Corp.102,4166,694
*Synchrony Financial232,9836,677
 Realty Income Corp.105,1986,576
 Simon Property Group Inc.30,6186,359
 Marsh & McLennan Cos.  
 Inc.101,9806,199
 Willis Towers Watson plc50,1015,945
 Weyerhaeuser Co.177,7455,507
 Intercontinental Exchange  
 Inc.22,4405,277
 Principal Financial Group  
 Inc.132,9305,244
 Welltower Inc.74,4245,161
 Equity LifeStyle Properties  
 Inc.66,7384,854
 Voya Financial Inc.160,6004,781
 First Horizon National Corp.335,6704,397
 Lincoln National Corp.109,6514,298
 General Growth Properties  
 Inc.135,1304,017
*Realogy Holdings Corp.91,0003,286
 Goldman Sachs Group Inc.19,9613,133
 Torchmark Corp.55,2122,990
 HCP Inc.91,6722,987
 Regions Financial Corp.371,8472,919
 Comerica Inc.76,1002,882
 MetLife Inc.65,4722,877
 Vornado Realty Trust21,6902,048
 American International  
 Group Inc.36,7001,984
 Zions Bancorporation75,9501,839
 Host Hotels & Resorts Inc.109,2331,824
 Equity Residential23,4281,758
 PNC Financial Services  
 Group Inc.20,1001,700
 State Street Corp.25,9801,520
 Boston Properties Inc.11,4001,449
 Apartment Investment &  
 Management Co.34,4201,439
 East West Bancorp Inc.43,1001,400
 Four Corners Property Trust  
 Inc.76,4041,371
 Ventas Inc.19,6931,240
 Charles Schwab Corp.39,6001,110
 FNF Group27,800942
 Synovus Financial Corp.32,500940
 Essex Property Trust Inc.3,427801
 Retail Properties of America  
 Inc.40,700645
 Radian Group Inc.46,200573
*Equity Commonwealth19,800559
 Umpqua Holdings Corp.31,596501
*Santander Consumer USA  
 Holdings Inc.45,500477
 Franklin Resources Inc.12,173475
 FNB Corp.35,600463
*E*TRADE Financial Corp.17,500429
 Citizens Financial Group Inc.19,500409
 Great Western Bancorp Inc.14,800404
 KeyCorp36,085398
 Axis Capital Holdings Ltd.7,100394
*MGIC Investment Corp.50,800390

 

16


 

Growth and Income Fund

   Market
   Value
  Shares($000)
 Assured Guaranty Ltd.15,000379
*Arch Capital Group Ltd.5,100363
 Annaly Capital Management  
 Inc.35,300362
 TCF Financial Corp.27,915342
 Empire State Realty Trust  
 Inc.18,400323
 ProAssurance Corp.6,100309
 WR Berkley Corp.5,400303
*Essent Group Ltd.12,000250
 National Health Investors Inc.3,700246
 Post Properties Inc.4,003239
 American Capital Agency  
 Corp.11,600216
 United Bankshares Inc.5,288194
 Loews Corp.4,900187
 Legg Mason Inc.5,400187
 Wintrust Financial Corp.4,100182
 Liberty Property Trust5,400181
 Morgan Stanley7,046176
 RLJ Lodging Trust7,300167
 Ares Capital Corp.11,136165
 Allied World Assurance Co.  
 Holdings AG4,500157
 UMB Financial Corp.3,000155
 Prosperity Bancshares Inc.3,300153
 MFA Financial Inc.22,200152
 Aspen Insurance Holdings  
 Ltd.3,100148
 Care Capital Properties Inc.5,500148
 Two Harbors Investment  
 Corp.18,500147
 Old Republic International  
 Corp.7,200132
 Trustmark Corp.5,700131
 Hancock Holding Co.5,200119
 Forest City Realty Trust Inc.  
 Class A5,500116
 Invesco Ltd.3,706114
*CBRE Group Inc. Class A3,700107
*Markit Ltd.2,824100
 Washington Federal Inc.4,400100
*PHH Corp.7,60095
 Hospitality Properties Trust3,50093
 Cathay General Bancorp3,20091
 BankUnited Inc.2,60090
*Stifel Financial Corp.3,00089
*Flagstar Bancorp Inc.3,90084
 Brookline Bancorp Inc.7,00077
 Camden Property Trust90076
 Columbia Property Trust Inc.3,40075
 Ryman Hospitality Properties  
 Inc.1,28066
 Blackstone Mortgage Trust  
 Inc. Class A2,00054
 SEI Investments Co.1,20052
*Beneficial Bancorp Inc.3,48048
 Erie Indemnity Co. Class A50046
*FNFV Group4,20046
 Financial Engines Inc.1,40044
 Glacier Bancorp Inc.1,70043
 BancorpSouth Inc.2,00043
 Outfront Media Inc.1,90040
*Western Alliance Bancorp1,20040
*Ocwen Financial Corp.15,00037
 Old National Bancorp2,90035
 Iron Mountain Inc.1,00034
*NewStar Financial Inc.3,57231
 Brixmor Property Group Inc.1,20031
 United Community Banks Inc.1,60030
 Greenhill & Co. Inc.1,20027
 First Financial Bancorp1,42726
 Meridian Bancorp Inc.1,80025
 Southwest Bancorp Inc.1,60024
 Monogram Residential Trust  
 Inc.2,40024
 Apollo Investment Corp.4,00022
 Government Properties  
 Income Trust1,20021
 Omega Healthcare Investors  
 Inc.60021
 American Tower Corporation20020
 Arbor Realty Trust Inc.2,80019
 AG Mortgage Investment  
 Trust Inc.1,40518
*Credit Acceptance Corp.10018
 Columbia Banking System Inc.60018
 HFF Inc. Class A60016
 Argo Group International  
 Holdings Ltd.27916
 Anworth Mortgage Asset  
 Corp.3,40016
 Boston Private Financial  
 Holdings Inc.1,33515
 Ladder Capital Corp.1,20015
 First Republic Bank20113
 Credicorp Ltd.10013
*PRA Group Inc.40012
 Valley National Bancorp1,20011
 SL Green Realty Corp.10010
 Raymond James Financial Inc.20010
 Associated Banc-Corp5009
 WP Carey Inc.1419
 Washington REIT3009
 American Equity Investment  
 Life Holding Co.5008
 Brown & Brown Inc.2118
 Alexander & Baldwin Inc.2007
 Brandywine Realty Trust5007
 Sierra Bancorp3867

 

17


 

Growth and Income Fund

    Market
    Value
   Shares($000)
 Armada Hoffler Properties Inc.6007
 West Bancorporation Inc. 3526
 Corrections Corp. of America2006
 Hudson Pacific Properties Inc.2216
 New Residential   
 Investment Corp. 5006
*OneMain Holdings Inc.   
 Class A 2005
 THL Credit Inc. 4455
 Investors Bancorp Inc. 4005
 Banner Corp. 1004
 MVC Capital Inc. 4573
*SLM Corp. 5003
 Artisan Partners Asset   
 Management Inc. Class A 1003
 BB&T Corp. 823
 CareTrust REIT Inc. 2003
 Suffolk Bancorp 1003
 FelCor Lodging Trust Inc. 3002
    916,576
Health Care (14.1%)   
 Johnson & Johnson1,313,633142,135
 Merck & Co. Inc.1,186,20062,762
 Pfizer Inc.1,967,36158,313
 Amgen Inc.388,30258,218
 Gilead Sciences Inc.540,00649,605
 Eli Lilly & Co.633,07545,588
 Bristol-Myers Squibb Co.619,69239,586
 Anthem Inc.278,62638,726
*Express Scripts Holding   
 Co.523,48335,958
 AbbVie Inc.540,47530,872
 Cardinal Health Inc.347,78728,501
 AmerisourceBergen Corp.   
 Class A241,53020,904
 Abbott Laboratories492,21320,589
 McKesson Corp.128,08120,141
*Biogen Inc. 73,16519,046
 UnitedHealth Group Inc.143,25418,465
*Allergan plc 63,13216,921
*HCA Holdings Inc.211,04616,472
 Medtronic plc204,54815,341
 Aetna Inc.126,53814,217
 Thermo Fisher Scientific   
 Inc. 99,77014,126
 Agilent Technologies Inc.313,41612,490
 Zoetis Inc.278,61012,351
 Cigna Corp. 78,29210,745
 Zimmer Biomet Holdings   
 Inc. 77,5008,264
*DaVita HealthCare Partners   
 Inc.109,4008,028
*Boston Scientific Corp.400,7907,539
*Vertex Pharmaceuticals Inc. 75,0005,962
 Patterson Cos. Inc.124,1205,775
*Regeneron Pharmaceuticals   
 Inc. 14,0415,061
 Stryker Corp. 42,8504,597
 Baxter International Inc.109,5314,500
 Baxalta Inc.102,1184,126
 Becton Dickinson and Co. 25,9223,935
 Humana Inc. 21,3603,908
 CR Bard Inc. 16,6603,377
*Cerner Corp. 50,4532,672
 Universal Health Services   
 Inc. Class B 20,0952,506
 Perrigo Co. plc 15,7002,009
 St. Jude Medical Inc. 32,7971,804
*VCA Inc. 22,8001,315
 Quest Diagnostics Inc. 16,0001,143
*United Therapeutics Corp. 9,3001,036
*Hologic Inc. 22,200766
*Intuitive Surgical Inc. 1,000601
*Medivation Inc. 12,900593
*Envision Healthcare   
 Holdings Inc. 21,600441
 PerkinElmer Inc. 8,221407
 DENTSPLY SIRONA Inc. 6,241385
*Community Health Systems   
 Inc. 17,300320
*VWR Corp. 7,900214
*Myriad Genetics Inc. 4,500168
*QIAGEN NV 7,456167
*Pain Therapeutics Inc. 66,692149
*Mallinckrodt plc 2,300141
*Mylan NV��2,952137
*IMS Health Holdings Inc. 5,000133
*Rigel Pharmaceuticals Inc. 52,910110
*Amicus Therapeutics Inc. 10,30087
*Waters Corp. 62082
*BioTelemetry Inc. 4,80056
*AMAG Pharmaceuticals Inc. 2,30054
*PAREXEL International Corp. 80050
*Innoviva Inc. 3,60045
*SciClone Pharmaceuticals Inc.3,30036
*Neurocrine Biosciences Inc. 80032
*ARIAD Pharmaceuticals Inc. 4,40028
*Triple-S Management Corp.   
 Class B 1,06526
*FibroGen Inc. 1,20526
*BioCryst Pharmaceuticals Inc.8,60024
*Catalent Inc. 90024
*Centene Corp. 37023
*Imprivata Inc. 1,70021
*Orthofix International NV 50021
*OraSure Technologies Inc. 2,00014
*Halyard Health Inc. 50014
*ArQule Inc. 8,64914
*Acorda Therapeutics Inc. 50013
*,^MannKind Corp. 6,20010

 

18


 

Growth and Income Fund

    Market
    Value
   Shares($000)
*Corcept Therapeutics Inc. 2,10010
 Bio-Techne Corp. 1009
 Bruker Corp. 3008
*INC Research Holdings Inc.   
 Class A 2008
 Owens & Minor Inc. 2008
*OPKO Health Inc. 7007
*Lexicon Pharmaceuticals Inc.6007
*Genocea Biosciences Inc. 9237
*Syneron Medical Ltd. 8997
*Threshold Pharmaceuticals   
 Inc. 14,0006
*BioScrip Inc. 2,8006
*Momenta Pharmaceuticals   
 Inc. 6006
*Nektar Therapeutics 4006
*Exact Sciences Corp. 8005
 Hill-Rom Holdings Inc. 1005
*Puma Biotechnology Inc. 1625
*Select Medical Holdings Corp.4005
*HealthStream Inc. 2004
 HealthSouth Corp. 1004
*GTx Inc. 4,4872
*RTI Surgical Inc. 4002
    885,188
Industrials (10.1%)   
 General Electric Co.1,971,80862,684
 General Dynamics Corp.358,00047,030
 Northrop Grumman Corp.159,76331,617
 Lockheed Martin Corp.138,37430,650
 Boeing Co.189,02223,994
 Cintas Corp.246,35522,125
 Southwest Airlines Co.491,55422,022
 Stanley Black & Decker Inc.198,93520,930
 United Parcel Service Inc.   
 Class B168,41717,763
*United Continental   
 Holdings Inc.274,12516,409
 Masco Corp.518,00016,291
 PACCAR Inc.271,49214,848
 Republic Services Inc.   
 Class A307,22714,639
 Pitney Bowes Inc.648,77013,975
 Raytheon Co.109,93013,481
 Union Pacific Corp.163,40012,999
 Illinois Tool Works Inc.123,55012,656
 Equifax Inc.109,66012,533
 Delta Air Lines Inc.252,24812,279
 Ingersoll-Rand plc192,18011,917
 3M Co. 70,81811,800
*United Rentals Inc.189,25911,770
 Waste Management Inc.193,98011,445
*Quanta Services Inc.506,48611,426
 FedEx Corp. 69,60011,325
 Caterpillar Inc.140,50410,754
 Fluor Corp.200,26310,754
 American Airlines Group  
 Inc.251,36910,309
 Allison Transmission  
 Holdings Inc.373,52010,078
 Tyco International plc219,0008,040
 Honeywell International  
 Inc.67,9007,608
*Spirit AeroSystems  
 Holdings Inc. Class A147,0006,668
 Snap-on Inc.40,6926,388
 KAR Auction Services Inc.152,7005,824
 Rockwell Automation Inc.48,5735,525
 AMETEK Inc.92,9004,643
 ADT Corp.109,1004,501
 L-3 Communications  
 Holdings Inc.36,0354,270
 Dun & Bradstreet Corp.33,3303,436
 Nielsen Holdings plc63,5703,348
 CSX Corp.125,1523,223
 Cummins Inc.25,7602,832
*AerCap Holdings NV68,6002,659
 Danaher Corp.27,6922,627
 United Technologies Corp.25,0852,511
 Allegion plc35,1002,236
 Deere & Co.27,9942,155
 Expeditors International of  
 Washington Inc.44,0002,148
 CH Robinson Worldwide Inc.27,2002,019
*IHS Inc. Class A15,2591,895
 Textron Inc.48,8831,782
 Pentair plc27,1001,470
 Roper Technologies Inc.7,1411,305
*JetBlue Airways Corp.54,8001,157
 Norfolk Southern Corp.11,300941
 Carlisle Cos. Inc.9,300925
*Armstrong World Industries  
 Inc.19,100924
*HD Supply Holdings Inc.26,800886
 Covanta Holding Corp.47,300798
 BWX Technologies Inc.19,900668
*RPX Corp.53,900607
 Dover Corp.8,237530
 Hubbell Inc. Class B4,769505
*Kirby Corp.5,280318
*Continental Building  
 Products Inc.17,100317
 Kansas City Southern3,600308
 Huntington Ingalls Industries  
 Inc.2,200301
 Xylem Inc.7,000286
 Air Lease Corp. Class A6,900222
 Joy Global Inc.11,800190
 Nordson Corp.2,300175
 West Corp.7,011160

 

19


 

Growth and Income Fund

   Market
   Value
  Shares($000)
 Watsco Inc.1,100148
 Landstar System Inc.2,100136
 Steelcase Inc. Class A8,173122
*Babcock & Wilcox  
 Enterprises Inc.5,100109
 Eaton Corp. plc1,33083
 Albany International Corp.2,10079
 SPX Corp.4,70371
*Rexnord Corp.3,40069
 Barnes Group Inc.1,92467
 Kaman Corp.1,50064
 Woodward Inc.1,10057
*Hub Group Inc. Class A1,40057
 Allegiant Travel Co. Class A30053
*NCI Building Systems Inc.3,60051
 RR Donnelley & Sons Co.3,00049
*Moog Inc. Class A1,00046
 Brady Corp. Class A1,70046
*ARC Document Solutions Inc.9,80044
*Masonite International Corp.60039
*MFC Bancorp Ltd.19,51239
 JB Hunt Transport Services  
 Inc.44037
*Mistras Group Inc.1,48737
*Atlas Air Worldwide Holdings  
 Inc.80034
 Knoll Inc.1,51733
*Jacobs Engineering Group Inc.70031
 Matson Inc.60024
 Quad/Graphics Inc.1,80023
 Triumph Group Inc.70022
 Seaspan Corp. Class A1,20022
*Air Transport Services Group  
 Inc.1,30020
 Ennis Inc.1,00020
*Hertz Global Holdings Inc.1,70018
*Huron Consulting Group Inc.30017
 Hillenbrand Inc.40012
 Mueller Water Products Inc.  
 Class A1,10011
 Exponent Inc.20010
*Blount International Inc.1,01210
*USG Corp.40010
 Korn/Ferry International3009
*Navigant Consulting Inc.5008
 IDEX Corp.786
 EnPro Industries Inc.734
*Saia Inc.1434
*Roadrunner Transportation  
 Systems Inc.3004
 NN Inc.2063
 Costamare Inc.3003
*Accuride Corp.1,5002
   631,697
Information Technology (19.6%) 
 Apple Inc.1,875,902204,455
 Microsoft Corp.2,198,413121,418
 Intel Corp.1,979,58264,039
 International Business  
 Machines Corp.420,12963,629
*Alphabet Inc. Class A81,40062,100
 Visa Inc. Class A757,07757,901
*Alphabet Inc. Class C53,75540,045
 Cisco Systems Inc.1,267,11736,075
 Accenture plc Class A297,74834,360
 Symantec Corp.1,663,05630,567
 Broadcom Ltd.158,14424,433
 Western Union Co.1,179,69322,756
*Facebook Inc. Class A199,03922,710
*Citrix Systems Inc.264,51020,785
 HP Inc.1,676,97120,660
 QUALCOMM Inc.394,96020,198
 Intuit Inc.188,62919,619
 Motorola Solutions Inc.256,69319,432
*Fiserv Inc.181,56118,625
 CSRA Inc.667,23117,949
 MasterCard Inc. Class A184,23617,410
 Fidelity National  
 Information Services Inc.263,54416,685
*Electronic Arts Inc.248,54816,432
 Total System Services Inc.332,76815,833
 Hewlett Packard  
 Enterprise Co.886,87015,724
 Xerox Corp.1,235,84213,792
 NVIDIA Corp.376,57613,417
 Juniper Networks Inc.519,29413,247
*VeriSign Inc.140,30012,422
 Oracle Corp.282,15311,543
 Texas Instruments Inc.197,56211,344
*F5 Networks Inc.96,10010,172
 Corning Inc.486,78510,169
 Paychex Inc.183,4119,906
*PayPal Holdings Inc.243,9709,417
 TE Connectivity Ltd.141,5008,762
 Lam Research Corp.104,1698,604
*Teradata Corp.317,0728,320
 Computer Sciences Corp.238,6508,207
 Harris Corp.91,9507,159
 Automatic Data  
 Processing Inc.75,5006,773
 Analog Devices Inc.78,9004,670
 EMC Corp.168,6404,494
 Applied Materials Inc.193,5004,098
*eBay Inc.167,4003,994
 CA Inc.122,8103,781
 Seagate Technology plc106,1273,656
*Akamai Technologies Inc.58,4003,245
 Western Digital Corp.59,1002,792
*LinkedIn Corp. Class A22,2622,546

 

20


 

Growth and Income Fund

   Market
   Value
  Shares($000)
 IAC/InterActiveCorp35,7001,681
*Flextronics International  
 Ltd.136,3001,644
*Red Hat Inc.22,0601,644
 Amdocs Ltd.23,2001,402
*VMware Inc. Class A25,9001,355
*Cadence Design Systems  
 Inc.53,9271,272
*Micron Technology Inc.109,9081,151
*CoreLogic Inc.31,7001,100
 FLIR Systems Inc.33,0361,089
*ANSYS Inc.10,700957
*Twitter Inc.45,500753
 Marvell Technology Group  
 Ltd.68,200703
*InterXion Holding NV16,300564
*Genpact Ltd.20,400555
*ON Semiconductor Corp.56,000537
*Trimble Navigation Ltd.18,800466
*Synopsys Inc.8,800426
*WebMD Health Corp.6,200388
 Teradyne Inc.15,900343
*MicroStrategy Inc. Class A1,900341
 Tessera Technologies Inc.10,600329
*CommScope Holding Co. Inc.11,400318
*Mellanox Technologies Ltd.5,000272
 Brocade Communications  
 Systems Inc.25,200267
*Polycom Inc.22,500251
 Sabre Corp.8,474245
*Pandora Media Inc.27,300244
*Zebra Technologies Corp.3,500242
*OSI Systems Inc.3,296216
*Nuance Communications Inc. 10,700200
*Sohu.com Inc.4,000198
*NCR Corp.6,300189
*Keysight Technologies Inc.6,500180
 NIC Inc.9,700175
*VeriFone Systems Inc.5,783163
*Amkor Technology Inc.27,700163
*Blackhawk Network  
 Holdings Inc.4,564157
*Calix Inc.21,824155
 Leidos Holdings Inc.2,900146
 Jabil Circuit Inc.6,800131
*Zynga Inc. Class A51,500117
*NetScout Systems Inc.4,500103
*Bankrate Inc.11,132102
*Cimpress NV1,100100
*Rackspace Hosting Inc.4,40095
*Qlik Technologies Inc.3,20093
 Intersil Corp. Class A6,70090
*Net 1 UEPS Technologies  
 Inc.9,43187
*Rambus Inc.6,30087
*RetailMeNot Inc.10,78286
*Photronics Inc.8,20085
*EchoStar Corp. Class A1,90784
 SanDisk Corp.1,10084
*comScore Inc.2,60078
*II-VI Inc.3,40074
*QLogic Corp.5,20070
*SPS Commerce Inc.1,60069
 Cabot Microelectronics Corp.1,67669
*DHI Group Inc.7,70062
*Angie’s List Inc.7,28559
 Plantronics Inc.1,50059
 InterDigital Inc.91051
*Verint Systems Inc.1,20040
 Mentor Graphics Corp.1,80037
*Silicon Laboratories Inc.80036
*Semtech Corp.1,60035
*SunEdison Semiconductor  
 Ltd.5,40035
*SunPower Corp. Class A1,50034
*TechTarget Inc.4,20031
 Activision Blizzard Inc.90030
 NVE Corp.53030
*XO Group Inc.1,82129
*ShoreTel Inc.3,70028
*Knowles Corp.2,00026
*Celestica Inc.2,30025
*Ixia2,00025
*FormFactor Inc.3,36024
 Belden Inc.39424
*Web.com Group Inc.1,20024
*Alliance Data Systems Corp.10022
*Progress Software Corp.90022
*United Online Inc.1,50017
*Blucora Inc.3,30017
*Zix Corp.4,30017
 EVERTEC Inc.1,20017
 MKS Instruments Inc.40015
 Microchip Technology Inc.30014
*Orbotech Ltd.60014
 Xilinx Inc.30014
 NetApp Inc.50014
*ACI Worldwide Inc.60012
*Cognizant Technology  
 Solutions Corp. Class A19612
*Endurance International  
 Group Holdings Inc.1,10012
 Amphenol Corp. Class A20012
*ARRIS International plc50011
*Ultratech Inc.51511
*VASCO Data Security  
 International Inc.70011
*Sigma Designs Inc.1,50010
*Veeco Instruments Inc.50010
*Quotient Technology Inc.8009
*Entegris Inc.6008
*Diodes Inc.4008

 


 

Growth and Income Fund

   Market
   Value
  Shares($000)
*Monster Worldwide Inc.2,4008
*Yandex NV Class A5008
 Maxim Integrated Products  
 Inc.2037
*TTM Technologies Inc.9686
*Ciber Inc.2,8446
*BlackBerry Ltd.7006
*Brightcove Inc.9006
*Bazaarvoice Inc.1,7005
*Anixter International Inc.1005
*Zillow Group Inc. Class A2005
*Infinera Corp.3005
*Kemet Corp.2,0004
*GoDaddy Inc. Class A1003
*Fortinet Inc.1003
*Advanced Micro Devices Inc.9003
*Lionbridge Technologies Inc.5003
*VirnetX Holding Corp.5042
   1,225,693
Materials (3.6%)  
 Air Products & Chemicals  
 Inc.246,15435,459
 Sealed Air Corp.635,83630,527
 LyondellBasell Industries  
 NV Class A263,10022,516
 Sherwin-Williams Co.77,05221,934
 Dow Chemical Co.422,86321,507
 Avery Dennison Corp.263,86419,027
 Monsanto Co.150,52013,207
 Ball Corp.160,90611,471
 PPG Industries Inc.76,3278,510
 Mosaic Co.292,7907,905
 Praxair Inc.48,3905,538
 Eastman Chemical Co.63,8014,608
 Newmont Mining Corp.131,1003,485
 Ecolab Inc.26,1002,911
 Martin Marietta Materials  
 Inc.10,8001,723
 Freeport-McMoRan Inc.150,7001,558
 Vulcan Materials Co.14,2001,499
 Graphic Packaging Holding  
 Co.107,6001,383
 International Paper Co.32,9561,353
 Westlake Chemical Corp.22,9001,060
 Celanese Corp. Class A15,4871,014
 International Flavors &  
 Fragrances Inc.8,8481,007
 Nucor Corp.19,900941
 CF Industries Holdings Inc.26,185821
*Crown Holdings Inc.13,300660
 Reliance Steel & Aluminum  
 Co.4,500311
*Berry Plastics Group Inc.7,811282
 EI du Pont de Nemours &  
 Co.3,700234
 Potash Corp. of   
 Saskatchewan Inc. 11,200191
 SunCoke Energy Inc. 22,600147
 Ferroglobe plc 13,700121
*Axalta Coating Systems Ltd.3,500102
*Headwaters Inc. 5,00099
*Century Aluminum Co. 13,60096
 Valspar Corp. 80786
 Materion Corp. 2,90077
*Constellium NV Class A 13,30069
*Turquoise Hill Resources   
 Ltd. 21,55055
*Ferro Corp. 3,70044
*Owens-Illinois Inc. 2,50040
 Schweitzer-Mauduit   
 International Inc. 1,20038
 Bemis Co. Inc. 70036
 Eldorado Gold Corp. 10,40033
 Orion Engineered Carbons   
 SA 2,08829
*Boise Cascade Co. 1,40029
 Mercer International Inc. 2,80026
*Novagold Resources Inc. 4,40022
 Silgan Holdings Inc. 40021
 Allegheny Technologies Inc.1,20020
 KMG Chemicals Inc. 70016
 PH Glatfelter Co. 64013
 Mesabi Trust 2,01512
*Flotek Industries Inc. 1,60012
 Kaiser Aluminum Corp. 1008
*Intrepid Potash Inc. 5,5006
 Sonoco Products Co. 1176
 Olin Corp. 2003
*Stillwater Mining Co. 2983
    223,911
Other (0.2%)   
 SPDR S&P 500 ETF Trust 55,57211,423
*Safeway Inc. CVR (Casa Ley)  
 Exp. 01/30/2018 75,81010
*Safeway Inc. CVR (PDC)   
 Exp. 01/30/2017 75,8104
*Biosante Pharmaceutical   
 Inc. CVR 4,189
    11,437
Telecommunication Services (2.9%) 
 AT&T Inc.2,634,359103,188
 Verizon Communications   
 Inc.1,038,04856,138
 CenturyLink Inc. 479,77415,333
*Level 3 Communications   
 Inc. 114,6006,057
 Frontier Communications   
 Corp. 78,800440
 Telephone & Data   
 Systems Inc. 9,800295

 

22


 

Growth and Income Fund

    Market
    Value
   Shares($000)
*Sprint Corp. 10,73837
 Inteliquent Inc. 1,10018
*Globalstar Inc. 7,90012
    181,518
Utilities (3.2%)   
 American Electric Power  
 Co. Inc. 287,26019,074
 Southern Co. 354,87018,357
 Entergy Corp. 229,97618,233
 FirstEnergy Corp. 489,45717,606
 Ameren Corp. 314,42515,753
 Exelon Corp. 417,41014,968
 PPL Corp. 378,28614,401
 Public Service Enterprise  
 Group Inc. 295,27313,919
 Duke Energy Corp. 160,39012,940
 NextEra Energy Inc.84,2409,969
 Sempra Energy 80,6108,387
 Consolidated Edison Inc.104,9328,040
 CenterPoint Energy Inc.300,6106,289
 Dominion Resources Inc.74,9845,633
 PG&E Corp. 62,9853,761
 Pinnacle West Capital Corp.46,2353,471
 DTE Energy Co. 29,6192,685
 SCANA Corp. 23,8001,670
 NiSource Inc. 35,040826
*Dynegy Inc. 44,100634
*Calpine Corp. 25,700390
 Edison International 3,860277
 Atlantic Power Corp.104,726258
 Xcel Energy Inc. 5,860245
 Atmos Energy Corp.2,500186
 Eversource Energy 2,430142
 Great Plains Energy Inc.3,700119
 New Jersey Resources Corp.2,30084
 Laclede Group Inc. 1,00068
 PNM Resources Inc.1,80061
 OGE Energy Corp. 1,30037
 Pattern Energy Group Inc.  
 Class A 1,59030
 Avista Corp. 44118
 WGL Holdings Inc. 20014
 El Paso Electric Co. 30014
 ONE Gas Inc. 20012
 MDU Resources Group Inc.4008
    198,579
Total Common Stocks   
(Cost $5,267,587)  6,113,960
Temporary Cash Investments (2.7%)1 
Money Market Fund (2.5%)  
2,3Vanguard Market   
 Liquidity Fund,   
 0.495%157,662,748157,663
  FaceMarket
  AmountValue
  ($000)($000)
U.S. Government and Agency Obligations (0.2%)
4,5Federal Home Loan  
 Bank Discount Notes,  
 0.245%, 4/20/162,0001,999
4,5Federal Home Loan  
 Bank Discount Notes,  
 0.260%, 4/27/16500500
4,5Federal Home Loan  
 Bank Discount Notes,  
 0.290%, 4/29/165,0004,999
6Freddie Mac Discount  
 Notes, 0.220%, 4/15/162,3002,300
   9,798
Total Temporary Cash Investments 
(Cost $167,461) 167,461
Total Investments (100.3%)  
(Cost $5,435,048) 6,281,421
 
   Amount
   ($000)
Other Assets and Liabilities (-0.3%) 
Other Assets  
Investment in VGI 526
Receivables for Investment Securities Sold 63,280
Receivables for Accrued Income 7,983
Receivables for Capital Shares Issued2,719
Other Assets 12
Total Other Assets 74,520
Liabilities  
Payables for Investment Securities 
Purchased (69,623)
Collateral for Securities on Loan (6,656)
Payables to Investment Advisor (1,249)
Payables for Capital Shares Redeemed(5,597)
Payables to Vanguard (12,821)
Other Liabilities (261)
Total Liabilities (96,207)
Net Assets (100%) 6,259,734
At March 31, 2016, net assets consisted of:
 Amount
 ($000)
Paid-in Capital5,340,405
Undistributed Net Investment Income28,866
Accumulated Net Realized Gains41,438
Unrealized Appreciation (Depreciation) 
Investment Securities846,373
Futures Contracts2,652
Net Assets6,259,734

 

23


 

Growth and Income Fund 
 
 
 
 
 Amount
 ($000)
Investor Shares—Net Assets 
Applicable to 70,092,671 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)2,809,708
Net Asset Value Per Share— 
Investor Shares$40.09
 
 
Admiral Shares—Net Assets 
Applicable to 52,711,280 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)3,450,026
Net Asset Value Per Share— 
Admiral Shares$65.45

• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $6,162,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 99.8% and 0.5%, respectively,
of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
3 Includes $6,656,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
5 Securities with a value of $6,499,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for
senior preferred stock.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.

24


 

Growth and Income Fund

Statement of Operations

 Six Months Ended
 March 31, 2016
 ($000)
Investment Income 
Income 
Dividends178,321
Interest2271
Securities Lending173
Total Income78,765
Expenses 
Investment Advisory Fees—Note B 
Basic Fee3,539
Performance Adjustment(220)
The Vanguard Group—Note C 
Management and Administrative—Investor Shares2,475
Management and Administrative—Admiral Shares1,424
Marketing and Distribution—Investor Shares269
Marketing and Distribution—Admiral Shares133
Custodian Fees116
Shareholders’ Reports—Investor Shares36
Shareholders’ Reports—Admiral Shares10
Trustees’ Fees and Expenses4
Total Expenses7,786
Net Investment Income70,979
Realized Net Gain (Loss) 
Investment Securities Sold78,718
Futures Contracts6,109
Realized Net Gain (Loss)84,827
Change in Unrealized Appreciation (Depreciation) 
Investment Securities311,064
Futures Contracts5,080
Change in Unrealized Appreciation (Depreciation)316,144
Net Increase (Decrease) in Net Assets Resulting from Operations471,950
1 Dividends are net of foreign withholding taxes of $9,000.
2 Interest income from an affiliated company of the fund was $258,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

25


 

Growth and Income Fund

Statement of Changes in Net Assets

 Six Months EndedYear Ended
 March 31,September 30,
 20162015
 ($000)($000)
Increase (Decrease) in Net Assets  
Operations  
Net Investment Income70,979109,469
Realized Net Gain (Loss)84,827348,167
Change in Unrealized Appreciation (Depreciation)316,144(438,192)
Net Increase (Decrease) in Net Assets Resulting from Operations471,95019,444
Distributions  
Net Investment Income  
Investor Shares(26,123)(50,108)
Admiral Shares(32,871)(57,404)
Realized Capital Gain1  
Investor Shares(152,494)(180,933)
Admiral Shares(181,922)(179,399)
Total Distributions(393,410)(467,844)
Capital Share Transactions  
Investor Shares83,951(82,169)
Admiral Shares229,736501,641
Net Increase (Decrease) from Capital Share Transactions313,687419,472
Total Increase (Decrease)392,227(28,928)
Net Assets  
Beginning of Period5,867,5075,896,435
End of Period26,259,7345,867,507

1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $65,407,000 and $830,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $28,866,000 and $16,881,000.

See accompanying Notes, which are an integral part of the Financial Statements.

26


 

Growth and Income Fund

Financial Highlights

Investor Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$39.55$42.69$36.02$30.73$23.86$23.98
Investment Operations       
Net Investment Income . 459.729. 671. 631. 549. 482
Net Realized and Unrealized Gain (Loss)      
on Investments 2.734(.541)6.6395.2886.846(.124)
Total from Investment Operations 3.193.1887.3105.9197.395.358
Distributions       
Dividends from Net Investment Income(. 388)(.724)(. 640)(. 629)(. 525)(. 478)
Distributions from Realized Capital Gains(2.265)(2.604)
Total Distributions (2.653)(3.328)(.640)(.629)(.525)(.478)
Net Asset Value, End of Period $40.09$39.55$42.69$36.02$30.73$23.86
 
Total Return1 8.07%0.22%20.42%19.54%31.27%1.28%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$2,810$2,691$2,979$2,869$2,798$2,548
Ratio of Total Expenses to       
Average Net Assets2 0.32%0.34%0.37%0.36%0.36%0.32%
Ratio of Net Investment Income to      
Average Net Assets 2.31%1.70%1.67%1.90%1.94%1.78%
Portfolio Turnover Rate 99%116%133%109%102%120%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes performance-based investment advisory fee increases (decreases) of (0.01%), 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).

See accompanying Notes, which are an integral part of the Financial Statements.

27


 

Growth and Income Fund

Financial Highlights

Admiral Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,  Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$64.57$69.71$58.82$50.18$38.97$39.15
Investment Operations       
Net Investment Income .7841.2721.1761.097.952.832
Net Realized and Unrealized Gain (Loss)      
on Investments 4.461(.897)10.8338.63311.168(.199)
Total from Investment Operations 5.245.37512.0099.73012.120.633
Distributions       
Dividends from Net Investment Income(.668)(1.264)(1.119)(1.090)(.910)(.813)
Distributions from Realized Capital Gains(3.697)(4.251)
Total Distributions (4.365)(5.515)(1.119)(1.090)(.910)(.813)
Net Asset Value, End of Period $65.45$64.57$69.71$58.82$50.18$38.97
 
Total Return1 8.12%0.31%20.55%19.69%31.40%1.39%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$3,450$3,177$2,917$2,157$1,591$1,131
Ratio of Total Expenses to       
Average Net Assets2 0.21%0.23%0.26%0.26%0.25%0.21%
Ratio of Net Investment Income to      
Average Net Assets 2.42%1.81%1.78%2.00%2.05%1.89%
Portfolio Turnover Rate 99%116%133%109%102%120%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about
any applicable account service fees.
2 Includes performance-based investment advisory fee increases (decreases) of (0.01%), 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).

See accompanying Notes, which are an integral part of the Financial Statements.

28


 

Growth and Income Fund

Notes to Financial Statements

Vanguard Growth and Income Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented 2% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

29


 

Growth and Income Fund

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

30


 

Growth and Income Fund

B. The investment advisory firms Los Angeles Capital Management and Equity Research, Inc., and D. E. Shaw Investment Management, L.L.C., each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fee of Los Angeles Capital Management and Equity Research, Inc., is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years. The basic fee of and D. E. Shaw Investment Management, L.L.C., is subject to quarterly adjustments based on performance relative to the S&P 500 Index for the preceding three years.

Vanguard provides investment advisory services to a portion of the fund as described below; the fund paid Vanguard advisory fees of $782,000 for the six months ended March 31, 2016.

For the six months ended March 31, 2016, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.12% of the fund’s average net assets, before a net decrease of $220,000 (-0.01%) based on performance.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, distribution, and cash management services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $526,000, representing 0.01% of the fund’s net assets and 0.21% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1Quoted prices in active markets for identical securities.
Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:

 Level 1Level 2Level 3
Investments($000)($000)($000)
Common Stocks6,113,94614
Temporary Cash Investments157,6639,798
Futures Contracts—Assets111
Futures Contracts—Liabilities1(259)
Total6,271,3619,79814
1 Represents variation margin on the last day of the reporting period.

 

31


 

Growth and Income Fund

E. At March 31, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

   ($000)
   Aggregate 
  Number ofSettlementUnrealized
  Long (Short)ValueAppreciation
Futures ContractsExpirationContractsLong (Short)(Depreciation)
E-mini S&P 500 IndexJune 20161,284131,7062,652

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

F. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.

At March 31, 2016, the cost of investment securities for tax purposes was $5,435,055,000. Net unrealized appreciation of investment securities for tax purposes was $846,366,000, consisting of unrealized gains of $979,257,000 on securities that had risen in value since their purchase and $132,891,000 in unrealized losses on securities that had fallen in value since their purchase.

G. During the six months ended March 31, 2016, the fund purchased $2,948,249,000 of investment securities and sold $2,940,497,000 of investment securities, other than temporary cash investments.

H. Capital share transactions for each class of shares were:

 Six Months EndedYear Ended
 March 31, 2016September 30, 2015
 AmountSharesAmountShares
 ($000)(000)($000)(000)
Investor Shares    
Issued120,5943,043316,3367,469
Issued in Lieu of Cash Distributions173,4454,324225,1865,491
Redeemed(210,088)(5,305)(623,691)(14,720)
Net Increase (Decrease)—Investor Shares83,9512,062(82,169)(1,760)
Admiral Shares    
Issued196,7683,034646,6109,344
Issued in Lieu of Cash Distributions200,8603,068221,9043,311
Redeemed(167,892)(2,589)(366,873)(5,305)
Net Increase (Decrease)—Admiral Shares229,7363,513501,6417,350

 

I. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

32


 

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

33


 

Six Months Ended March 31, 2016   
 BeginningEndingExpenses
 Account ValueAccount ValuePaid During
Growth and Income Fund9/30/20153/31/2016Period
Based on Actual Fund Return   
Investor Shares$1,000.00$1,080.70$1.66
Admiral Shares1,000.001,081.221.09
Based on Hypothetical 5% Yearly Return   
Investor Shares$1,000.00$1,023.40$1.62
Admiral Shares1,000.001,023.951.06

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that
period are 0.32% for Investor Shares and 0.21% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the
annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent
six-month period, then divided by the number of days in the most recent 12-month period (183/366).

34


 

Glossary

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.

Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.

Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.

Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.

Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.

Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund’s investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is measured from the inception date.

Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.

Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.

35


 

Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.

R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.

Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.

Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.

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The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.

The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

InterestedTrustee1Rajiv L. Gupta
 Born 1945. Trustee Since December 2001.2 Principal
F. William McNabb IIIOccupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman ofExperience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past(retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of theRohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each ofInternational PLC (diversified manufacturing and
the investment companies served by The Vanguardservices), HP Inc. (printer and personal computer
Group, since January 2010; Director of The Vanguardmanufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and(automotive components); Senior Advisor at
President of The Vanguard Group, and of each ofNew Mountain Capital.
the investment companies served by The Vanguard 
Group, since 2008; Director of Vanguard MarketingAmy Gutmann
Corporation; Managing Director of The VanguardBorn 1949. Trustee Since June 2006. Principal
Group (1995–2008).Occupation(s) During the Past Five Years and
 Other Experience: President of the University of
IndependentTrusteesPennsylvania; Christopher H. Browne Distinguished
 Professor of Political Science, School of Arts and
Emerson U. FullwoodSciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. PrincipalSchool for Communication, with secondary faculty
Occupation(s) During the Past Five Years and Otherappointments in the Department of Philosophy, School
Experience: Executive Chief Staff and Marketingof Arts and Sciences, and at the Graduate School of
Officer for North America and Corporate Vice PresidentEducation, University of Pennsylvania; Trustee of the
(retired 2008) of Xerox Corporation (document manage-National Constitution Center; Chair of the Presidential
ment products and services); Executive in ResidenceCommission for the Study of Bioethical Issues.
and 2009–2010 Distinguished Minett Professor at 
the Rochester Institute of Technology; Lead DirectorJoAnn Heffernan Heisen
of SPX FLOW, Inc. (multi-industry manufacturing);Born 1950. Trustee Since July 1998. Principal
Director of the United Way of Rochester, the UniversityOccupation(s) During the Past Five Years and
of Rochester Medical Center, Monroe CommunityOther Experience: Corporate Vice President and
College Foundation, North Carolina A&T University,Chief Global Diversity Officer (retired 2008) and
and Roberts Wesleyan College.Member of the Executive Committee (1997–2008)
 of Johnson & Johnson (pharmaceuticals/medical
 devices/consumer products); Director of Skytop
 Lodge Corporation (hotels) and the Robert Wood
 Johnson Foundation; Member of the Advisory
 Board of the Institute for Women’s Leadership
 at Rutgers University.

 


 

F. Joseph LoughreyExecutive Officers 
Born 1949. Trustee Since October 2009. Principal  
Occupation(s) During the Past Five Years and OtherGlenn Booraem 
Experience: President and Chief Operating OfficerBorn 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery);Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specializedOther Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; DirectorInc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materialsserved by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundationthe investment companies served by The Vanguard
for Education, and the V Foundation for CancerGroup (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for thethe investment companies served by The Vanguard
College of Arts and Letters and of the Advisory BoardGroup (2001–2010). 
to the Kellogg Institute for International Studies, both
at the University of Notre Dame.Thomas J. Higgins 
Born 1957. Chief Financial Officer Since September
Mark Loughridge2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. PrincipalYears and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and OtherGroup, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financialinvestment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technologyTreasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Planby The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical 
Company; Member of the Council on Chicago Booth.Peter Mahoney
Born 1974. Controller Since May 2015. Principal
Scott C. MalpassOccupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. PrincipalOther Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Otherat The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Viceinvestment companies served by The Vanguard Group;
President at the University of Notre Dame; AssistantHead of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College ofGroup (2008–2014). 
Business at Notre Dame; Member of the Notre Dame 
403(b) Investment Committee, the Board of AdvisorsHeidi Stam
for Spruceview Capital Partners, and the InvestmentBorn 1956. Secretary Since July 2005. Principal
Advisory Committee of Major League Baseball; BoardOccupation(s) During the Past Five Years and Other
Member of TIFF Advisory Services, Inc., and CatholicExperience: Managing Director of The Vanguard
Investment Services, Inc. (investment advisors).Group, Inc.; General Counsel of The Vanguard Group;
Secretary of The Vanguard Group and of each of the
André F. Peroldinvestment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. PrincipalDirector and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and OtherMarketing Corporation. 
Experience: George Gund Professor of Finance and  
Banking, Emeritus at the Harvard Business SchoolVanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and ManagingMortimer J. BuckleyJames M. Norris
Partner of HighVista Strategies LLC (private investmentKathleen C. GubanichThomas M. Rampulla
firm); Director of Rand Merchant Bank; Overseer ofMartha G. KingGlenn W. Reed
the Museum of Fine Arts Boston.John T. MarcanteKarin A. Risi
Chris D. McIsaac 
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal  
Occupation(s) During the Past Five Years and OtherChairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer  
(retired 2010) of Corning Incorporated (communications John J. Brennan 
equipment); Trustee of Colby-Sawyer College and Chairman, 1996–2009 
Chairman of its Finance and Enrollment Committee; Chief Executive Officer and President, 1996–2008
Member of the Advisory Board of the Norris Cotton  
Cancer Center.Founder 
 John C. Bogle 
 Chairman and Chief Executive Officer, 1974–1996

 

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


 

 

  P.O. Box 2600
  Valley Forge, PA 19482-2600
 
 
 
connect with vanguard® > vanguard.com
 
 
 
Fund Information > 800-662-7447 CFA® is a registered trademark owned by CFA Institute.
Direct Investor Account Services > 800-662-2739 
Institutional Investor Services > 800-523-1036 
Text Telephone for People  
Who Are Deaf or Hard of Hearing> 800-749-7273 
 
This material may be used in conjunction 
with the offering of shares of any Vanguard 
fund only if preceded or accompanied by 
the fund’s current prospectus. 
 
All comparative mutual fund data are from Lipper, a 
Thomson Reuters Company, or Morningstar, Inc., unless 
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting 
guidelines by visiting vanguard.com/proxyreporting or by 
calling Vanguard at 800-662-2739. The guidelines are 
also available from the SEC’s website, sec.gov. In 
addition, you may obtain a free report on how your fund 
voted the proxies for securities it owned during the 12 
months ended June 30. To get the report, visit either 
vanguard.com/proxyreporting or sec.gov. 
 
You can review and copy information about your fund at 
the SEC’s Public Reference Room in Washington, D.C. To 
find out more about this public service, call the SEC at 
202-551-8090. Information about your fund is also 
available on the SEC’s website, and you can receive 
copies of this information, for a fee, by sending a 
request in either of two ways: via email addressed to 
publicinfo@sec.gov or via regular mail addressed to the 
Public Reference Section, Securities and Exchange 
Commission, Washington, DC 20549-1520. 
 
  © 2016 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q932 052016

 



Semiannual Report | March 31, 2016

Vanguard Structured Equity Funds

Vanguard Structured Large-Cap Equity Fund

Vanguard Structured Broad Market Fund


 

Vanguard’s Principles for Investing Success

We want to give you the best chance of investment success. These principles, grounded in Vanguard’s research and experience, can put you on the right path.

Goals. Create clear, appropriate investment goals.

Balance. Develop a suitable asset allocation using broadly diversified funds. Cost. Minimize cost.

Discipline. Maintain perspective and long-term discipline.

A single theme unites these principles: Focus on the things you can control.

We believe there is no wiser course for any investor.

Contents 
Your Fund’s Total Returns.1
Chairman’s Letter.2
Advisor’s Report.7
Structured Large-Cap Equity Fund.10
Structured Broad Market Fund.24
About Your Fund’s Expenses.39
Trustees Approve Advisory Arrangements.41
Glossary.42

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: Pictured is a sailing block on the Brilliant, a 1932 schooner docked in Mystic, Connecticut. A type of pulley, the
sailing block helps coordinate the setting of the sails. At Vanguard, the intricate coordination of technology and people allows
us to help millions of clients around the world reach their financial goals.


 

Your Fund’s Total Returns

Six Months Ended March 31, 2016 
 Total
 Returns
Vanguard Structured Large-Cap Equity Fund 
Institutional Shares8.40%
Institutional Plus Shares8.42
S&P 500 Index8.49
Large-Cap Core Funds Average6.23
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company. 
Vanguard Structured Broad Market Fund 
Institutional Shares5.24%
Institutional Plus Shares5.28
Russell 3000 Index7.30
Multi-Cap Core Funds Average4.90

Multi-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Institutional Shares and Institutional Plus Shares are available to certain institutional investors who meet specific administrative, service, and
account-size criteria.

 

Your Fund’s Performance at a Glance   
September 30, 2015, Through March 31, 2016   
   Distributions Per Share
 StartingEndingIncomeCapital
 Share PriceShare PriceDividendsGains
Vanguard Structured Large-Cap Equity Fund    
Institutional Shares$38.29$39.31$0.833$1.348
Institutional Plus Shares75.8077.811.6722.668
Vanguard Structured Broad Market Fund    
Institutional Shares$33.24$31.78$0.727$2.538
Institutional Plus Shares66.4363.531.4635.072

 

1


 

 

 

 

Chairman’s Letter

Dear Shareholder,

Anyone hoping that the financial markets might become a bit more settled after the Federal Reserve’s long-anticipated rate increase—announced December 16—would have been disappointed. Stocks slumped from December through mid-February before rebounding to finish the period higher. These sharp shifts led investors to favor safer assets, a trend that generally benefited larger-capitalization stocks and more defensive sectors.

Vanguard Structured Broad Market Fund, which includes small-, mid-, and large-cap stocks, struggled with the market movements. Institutional Shares returned 5.24%; Institutional Plus Shares, with their lower expense ratio, returned 5.28%. The fund’s results were about 2 percentage points lower than the return of its benchmark, the Russell 3000 Index, but were higher than the average return for its peer group.

Vanguard Structured Large-Cap Equity Fund fared better in navigating the ups and downs. The fund returned 8.40% for Institutional Shares and 8.42% for Institutional Plus Shares. Those performances were just shy of the return of the fund’s benchmark, the S&P 500 Index, and more than 2 percentage points better than the average return for peer funds.

In the benchmark indexes of both funds, returns were positive across all sectors, with telecommunication services and utilities leading the way and health care

2


 

and financials figuring among the laggards. Stock selection in both funds produced mixed results.

Stocks charted an uneven course en route to a solid outcome

The broad U.S. stock market returned about 7% for the six months. The period began and ended strongly, with fluctuations in the middle as China’s economic slowdown and falling oil and commodity prices worried investors.

Stocks rallied in March as investors again seemed encouraged by news about monetary policy, especially after the Fed indicated that it would raise interest rates fewer times in 2016 than previously anticipated. International stocks returned about 3% for the period after surging more than 8% in March. Stocks from emerging markets and from developed Pacific markets outperformed developed European stocks, which were nearly flat. U.S. dollar-based investors benefited as many foreign currencies strengthened against the dollar, a turnabout from the trend of recent years.

Bonds produced gains following a subpar start

The broad U.S. taxable bond market returned 2.44% for the fiscal half year. Returns were weak in the first three months, which culminated with the Fed’s quarter-percentage-point interest rate increase in December.

Market Barometer   
 
 Total Returns
 Periods Ended March 31, 2016
 SixOneFive Years
 MonthsYear(Annualized)
Stocks   
Russell 1000 Index (Large-caps)7.75%0.50%11.35%
Russell 2000 Index (Small-caps)2.02-9.767.20
Russell 3000 Index (Broad U.S. market)7.30-0.3411.01
FTSE All-World ex US Index (International)3.09-8.530.70
 
Bonds   
Barclays U.S. Aggregate Bond Index (Broad taxable market)2.44%1.96%3.78%
Barclays Municipal Bond Index (Broad tax-exempt market)3.203.985.59
Citigroup Three-Month U.S. Treasury Bill Index0.060.080.04
 
CPI   
Consumer Price Index0.08%0.85%1.28%

 

3


 

But with stocks volatile and the Fed indicating it would proceed cautiously with future rate hikes, bonds rallied in the final three months. The yield of the 10-year U.S. Treasury note closed at 1.77% at the end of March, down from 2.05% six months earlier. (Bond prices and yields move in opposite directions.)

Returns for money market funds and savings accounts remained limited by the Fed’s still-low target rate of 0.25%–0.5%.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned almost 7%. Like stocks, international bond returns for U.S.-based

Vanguard’s growth translates into lower costs for you
 
Research indicates that lower-cost investments have tended to outperform higher-cost ones.
So it’s little wonder that funds with lower expense ratios—including those at Vanguard—have
dominated the industry’s cash inflows in recent years.
 
Vanguard has long been a low-cost leader, with expenses well below those of many other
investment management companies. That cost difference remains a powerful advantage for
Vanguard clients. Why? Because a lower expense ratio allows a fund to pass along a greater
share of its returns to its investors.
 
What’s more, as you can see in the chart below, we’ve been able to lower our costs continually
as our assets under management have grown. Our steady growth has not been an explicit
business objective. Rather, we focus on putting our clients’ interests first at all times, and
giving them the best chance for investment success. But economies of scale—the cost
efficiencies that come with our growth—have allowed us to keep lowering our fund costs,
even as we invest in our people and technology.
 
The benefit of economies of scale

Note: Data are for U.S.-based Vanguard funds only.
Source: Vanguard.

 

4


 

investors benefited from dollar weakness. Even in local currencies, however, international bond returns were solidly positive, boosted in part by additional stimulus measures taken in Europe and Asia to combat weak growth and low inflation.

The advisor’s model produced better returns among large-caps

Vanguard Quantitative Equity Group (QEG), the funds’ advisor, uses a disciplined, data-driven process to assess the relative attractiveness of stocks—with the goal of providing long-term returns that are greater than those of their benchmarks while tightly controlling risk. Similar to a traditional fund manager, QEG analyzes several criteria that research has shown can contribute to long-term outperformance, including valuation, revenue and earnings growth, dividend policy, reinvestment decisions, and balance sheet quality.

A proprietary computer model helps QEG systematically screen and rank stocks within each of the industry groups that make up the investable universe of each fund—roughly 3,000 stocks in the case of the Broad Market Fund and about 500 for the Large-Cap Equity Fund. This investment process has been developed and refined over more than three decades, and is supported by an experienced in-house research team.

QEG generally keeps each fund’s sector exposures aligned closely with those of the index; it doesn’t favor or shun a particular sector significantly in the attempt to improve performance relative to the benchmark. Positioning within industry subgroups can make a difference, but what often matters more is how the holdings in the funds perform.

The Broad Market Fund has had above-benchmark returns for each of the last five fiscal years, while the Large-Cap Equity Fund beat its benchmark in four of those years. However, as with any active investment strategy, it works better under some market conditions than others. For the six months under review, investors’ concerns about global macroeconomic factors seemed to take precedence over company-specific fundamentals. In this environment, the Large-Cap Equity Fund performed in line with its index, while the Broad Market Fund fell behind its benchmark.

Compared with the benchmark, the Broad Market Fund’s health care holdings were a bright spot. The screening process here led to outperformance in biotechnology and pharmaceuticals by helping the fund sidestep some of the poorest performers in those segments. Overall, however, stock selection in the fund proved subpar, with notable pockets of underperformance in information technology, financials, and consumer discretionary.

For the Large-Cap Equity Fund, areas of relative strength included stocks of apparel makers, internet retailers, and auto parts companies in the consumer discretionary sector, as well as insurance and consumer finance companies in the financial sector. The fund’s successes were offset, however, by underperformance elsewhere,

5


 

including health care providers and services. Holdings in energy and industrials were significant detractors as well.

For more information about the advisor’s approach and the funds’ positioning during the year, please see the Advisor’s Report that follows this letter.

Consider rebalancing to manage your risk

Let’s say you’ve taken the time to carefully create an appropriate asset allocation for your investment portfolio. Your efforts have produced a diversified mix of stock, bond, and money market funds tailored to your goals, time horizon, and risk tolerance.

But what should you do when your portfolio drifts from its original asset allocation as the financial markets rise or fall? Consider rebalancing to bring it back to the proper mix.

Just one year of outsized returns can throw your allocation out of whack. Take 2013 as an example. That year, the broad stock market (as measured by the Russell 3000 Index) returned 33.55% and the broad taxable bond market (as measured by the Barclays U.S. Aggregate Bond Index) returned –2.02%. A hypothetical portfolio that tracked the broad domestic market indexes and started the year with 60% stocks and 40% bonds would have ended with a more aggressive mix of 67% stocks and 33% bonds.

Rebalancing to bring your portfolio back to its original targets would require you to shift assets away from areas that have been performing well toward those that have been falling behind. That isn’t easy or intuitive. It’s a way to minimize risk rather than maximize returns and to stick with your investment plan through different types of markets. (You can read more about our approach in Best Practices for Portfolio Rebalancing at vanguard.com/research.)

It’s not necessary to check your portfolio every day or every month, much less rebalance it that frequently. It may be more appropriate to monitor it annually or semiannually and rebalance when your allocation swings 5 percentage points or more from its target.

It’s important, of course, to be aware of the tax implications. You’ll want to consult with your tax advisor, but generally speaking, it may be a good idea to make any asset changes within a tax-advantaged retirement account or to direct new cash flows into the underweighted asset class.

However you go about it, keeping your asset allocation from drifting too far off target can help you stay on track with the investment plan you’ve crafted to meet your financial goals.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
April 13, 2016

6


 

Advisor’s Report

For the fiscal half year ended March 31, 2016, Vanguard Structured Large-Cap Equity Fund returned 8.40% for Institutional Shares, underperforming the return of its benchmark, the S&P 500 Index, by 0.09 percentage point. Vanguard Structured Broad Market Fund returned 5.24% for Institutional Shares, underperforming its benchmark, the Russell 3000 Index, by 2.06 percentage points.

Over the period, U.S. equities produced strong returns, but experienced heavy volatility. The broad U.S. equity market, as measured by the Russell 3000 Index, was up 7.30%. Large-capitalization stocks performed better than smaller-caps, and value-oriented stocks outpaced growth stocks. Globally, the U.S. equity market outperformed international markets, while emerging markets outpaced developed markets.

All ten sector groups in the broad U.S. equity market generated positive returns. Results were best in telecommunication services, utilities, and materials. Energy, financials, and health care were the laggards.

In late 2015, the U.S. economy continued to grow, but at a slower pace. Fourth-quarter real GDP came in at 1.4%, compared with 2.0% in the third quarter, with the deceleration attributed primarily to downturns in nonresidential fixed investment, exports, and state and local government spending. Corporate profits decreased 8.1% in the final quarter of 2015, reflecting the largest quarterly decline since the first quarter of 2011. However, the U.S. job market improved further. In March, total nonfarm payrolls rose by 215,000, and the unemployment rate stood at 5.0%.

Oil prices declined significantly in the first quarter of 2016 but have since recovered, increasing over 40% from their mid-February low. This volatility spilled over into the global stock markets, as they saw similar price movements in the same quarter. The U.S. Federal Reserve raised interest rates in December, after keeping rates near zero since 2008. Additional interest rate hikes are expected later this year, but changes are likely to be gradual and will depend on global economic data. Meanwhile, several of the world’s central banks, including the European Central Bank and the Bank of Japan, are experimenting with negative interest rates in an attempt to spur economic growth.

Although we seek to understand the impact of macroeconomic factors on portfolio performance, our investment process is centered on specific stock fundamentals. We use a disciplined, quantitative approach, not technical analysis of stock price movements. Our model aims to systematically identify stocks within each industry group in our investment universe that are more likely to exhibit long-term outperformance.

Our model focuses on five key themes that we believe attractive stocks tend to exhibit: high quality (healthy balance sheets and consistent cash flow generation); effective management decisions regarding the use of capital (sound investment policies that favor internal over external

7


 

funding); consistent earnings growth (a demonstrated ability to increase earnings year after year); strong momentum (a market confirmation of our view); and reasonable valuations (we try to avoid overpriced stocks).

This framework helps us to identify and take advantage of inefficiencies in the market caused by persistent biases in investor behavior. Using the results of our model, we then construct and review our portfolio daily with the goal of maximizing expected return while minimizing exposure to risks that our research indicates do not improve returns, such as deviations from sector weightings relative to the benchmark.

The management decisions and valuation components of our model were able to produce positive relative performance for both the Structured Broad Market Fund and Structured Large-Cap Equity Fund. Unfortunately, the momentum and quality components did not perform as expected.

The model’s effectiveness over the period across sectors was mixed. The Structured Large-Cap Equity Fund produced positive stock selection results in four of the ten sectors in the benchmark, benefiting the most from the strong stock selection in consumer discretionary, financials, and telecommunication services. We underper-formed in health care and energy.

The Structured Broad Market Fund also produced positive stock selection results in four of ten sectors, with the strongest results coming from health care and telecommunication services. We underperformed in consumer discretionary, financials, and information technology.

Structured Large-Cap Equity Fund

At the individual stock level, the largest contributors came from overweight positions in Nasdaq (+25.5%), CenturyLink (+32.0%), and Avery Dennison (+28.9%). In addition, when comparing the portfolio’s performance with that of its benchmark, we benefited from underweighting or avoiding poorly performing stocks such as American Express (–16.5%) and Morgan Stanley (–19.8%).

Unfortunately, we were not able to avoid all poor performers. Overweight positions in Express Scripts Holding Co. (–15.2%) and Eli Lilly (–12.8%) directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as General Electric (+28.0%) and Philip Morris International (+26.4%), hurt our overall outperformance relative to our benchmark.

Structured Broad Market Fund

At the individual stock level, the largest contributors came from overweight positions in Trinseo (+45.8%), Verizon Communications (+27.5%), and Hawaiian Holdings (+91.2%). In addition, when comparing the portfolio’s performance with that of its benchmark, we benefited from underweighting or avoiding poor performers such as Biogen (–10.8%) and Kinder Morgan (–33.8%).

8


 

Overweight positions in Santander Consumer USA Holdings (–48.6%) and Fitbit (–59.8%) directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as McDonald’s (+29.5%) and Microsoft (+26.5%), hurt our overall performance relative to our benchmark.

Although we recognize that risk can reward or punish us in the near term, we continue to believe that constructing a portfolio that emphasizes the key fundamentals within our model will benefit investors over the long term. We feel that the Structured Equity Funds offer a strong mix of stocks with attractive valuation and growth characteristics relative to their underlying benchmarks.

We thank you for your investment and look forward to the second half of the fiscal year.

Portfolio Managers:

James P. Stetler, Principal

Michael R. Roach, CFA

Anatoly Shtekhman, CFA

Binbin Guo, Principal, Head of Equity
Research and Portfolio Strategies

Vanguard Quantitative Equity Group

April 19, 2016

9


 

Structured Large-Cap Equity Fund

Fund Profile
As of March 31, 2016

Share-Class Characteristics 
 InstitutionalInstitutional
 SharesPlus Shares
Ticker SymbolVSLIXVSLPX
Expense Ratio10.20%0.16%
30-Day SEC Yield1.96%2.00%

 

Portfolio Characteristics  
   DJ
   U.S. Total
  S&P 500Market
 FundIndexFA Index
Number of Stocks1765043,900
Median Market Cap$33.0B$79.4B$52.5B
Price/Earnings Ratio17.7x20.5x21.8x
Price/Book Ratio2.6x2.8x2.7x
Return on Equity17.7%18.5%17.5%
Earnings Growth   
Rate8.4%7.6%8.0%
Dividend Yield2.2%2.2%2.1%
Foreign Holdings0.0%0.0%0.0%
Turnover Rate   
(Annualized)75%
Short-Term Reserves-0.3%

 

Sector Diversification (% of equity exposure)
   DJ
   U.S. Total
  S&P 500Market
 FundIndex FA Index
Consumer   
Discretionary13.0%12.9%13.6%
Consumer Staples10.410.49.2
Energy6.76.86.1
Financials15.615.617.4
Health Care14.414.313.7
Industrials10.110.110.7
Information   
Technology20.820.820.1
Materials2.82.83.2
Telecommunication   
Services2.82.82.5
Utilities3.43.53.5

 

Volatility Measures  
  DJ
  U.S. Total
 S&P 500Market
 IndexFA Index
R-Squared0.980.98
Beta1.000.98

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc.Technology 
 Hardware, Storage & 
 Peripherals2.8%
Alphabet Inc.Internet Software & 
 Services2.3
Johnson & JohnsonPharmaceuticals2.2
General Electric Co.Industrial 
 Conglomerates2.2
Microsoft Corp.Systems Software1.9
Exxon Mobil Corp.Integrated Oil & Gas1.4
Verizon Communications Integrated 
Inc.Telecommunication 
 Services1.3
Amazon.com Inc.Internet Retail1.3
Gilead Sciences Inc.Biotechnology1.2
JPMorgan Chase & Co.Diversified Banks1.2
Top Ten 17.8%

The holdings listed exclude any temporary cash investments and equity index products.

Investment Focus

 

1 The expense ratios shown are from the prospectus dated January 26, 2016. For the six months ended March 31, 2016, the annualized expense
ratios were 0.18% for Institutional Shares and 0.14% for Institutional Plus Shares.

10


 

Structured Large-Cap Equity Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

Fiscal-Year Total Returns (%): May 16, 2006, Through March 31, 2016

Note: For 2016, performance data reflect the six months ended March 31, 2016.
 
Average Annual Total Returns: Periods Ended March 31, 2016   
 
 InceptionOneFiveSince
 DateYearYearsInception
Institutional Shares5/16/20062.64%12.99%7.38%
Institutional Plus Shares5/15/20062.6613.057.44

 

See Financial Highlights for dividend and capital gains information.

11


 

Structured Large-Cap Equity Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

   Market
   Value
  Shares($000)
Common Stocks (99.7%)1  
Consumer Discretionary (13.0%) 
*Amazon.com Inc.11,6886,938
 Target Corp.54,6774,499
 Walt Disney Co.38,0343,777
 Carnival Corp.70,8003,736
*O’Reilly Automotive Inc.13,1993,612
 Omnicom Group Inc.41,6683,468
 Marriott International Inc.  
 Class A47,6723,393
 Leggett & Platt Inc.66,4933,218
^Nordstrom Inc.56,0093,204
 Staples Inc.290,4043,203
 Best Buy Co. Inc.94,9703,081
 Darden Restaurants Inc.46,3003,070
*Discovery Communications  
 Inc. Class A104,1422,982
 GameStop Corp. Class A92,1082,923
 News Corp. Class B215,6002,857
 Goodyear Tire & Rubber Co.81,6712,693
 Home Depot Inc.17,4442,328
 PVH Corp.23,3722,315
 General Motors Co.73,5002,310
 Interpublic Group of  
 Cos. Inc.86,1801,978
 Comcast Corp. Class A29,0361,774
 DR Horton Inc.56,0521,694
*Michael Kors Holdings Ltd.21,9591,251
 McDonald’s Corp.5,457686
*Discovery  
 Communications Inc.8,000216
   71,206
Consumer Staples (10.3%)  
 Wal-Mart Stores Inc.89,0896,102
 Procter & Gamble Co.50,0794,122
 General Mills Inc.62,7143,973
 Kroger Co.100,1703,831
 ConAgra Foods Inc.79,1243,531
 Tyson Foods Inc. Class A52,5023,500
 Kimberly-Clark Corp.25,1183,379
 Campbell Soup Co.51,7473,301
 Dr Pepper Snapple  
 Group Inc.35,5673,180
 Coca-Cola Enterprises Inc.62,5453,174
 Clorox Co.25,0893,163
 Altria Group Inc.46,0262,884
 Sysco Corp.59,3502,773
 Coca-Cola Co.56,5762,625
 Hershey Co.25,3822,337
 PepsiCo Inc.18,0921,854
 Philip Morris  
 International Inc.17,0411,672
 Colgate-Palmolive Co.8,542603
 CVS Health Corp.5,300550
 Estee Lauder Cos. Inc.  
 Class A2,750259
 Archer-Daniels-Midland Co.1,74463
   56,876
Energy (6.7%)  
 Exxon Mobil Corp.94,3967,890
 Phillips 6647,5314,116
 Valero Energy Corp.59,7493,832
 Tesoro Corp.35,6583,067
*,^Southwestern Energy Co.374,3913,021
^Transocean Ltd.302,5992,766
 Ensco plc Class A265,0312,748
 Spectra Energy Corp.81,7112,500
 Chevron Corp.26,0562,486
 Noble Corp. plc220,1002,278
 Devon Energy Corp.69,4821,907
*Cameron International Corp.4,200282
   36,893
Financials (15.5%)  
 JPMorgan Chase & Co.113,2196,705
 Citigroup Inc.157,3486,569
 Wells Fargo & Co.86,8144,198
 Travelers Cos. Inc.34,7954,061
 Bank of New York  
 Mellon Corp.107,0463,943
 Prudential Financial Inc.54,1453,910

 

12


 

Structured Large-Cap Equity Fund

   Market
   Value
  Shares($000)
 Prologis Inc.84,5453,735
 McGraw Hill Financial Inc.37,3983,702
 Capital One Financial Corp.53,0003,674
 Fifth Third Bancorp191,8693,202
 Bank of America Corp.236,4883,197
 Host Hotels & Resorts Inc.190,3463,179
 Nasdaq Inc.47,7683,171
 Unum Group100,5863,110
 Navient Corp.252,5603,023
 Macerich Co.37,7742,993
 Discover Financial Services58,2142,964
 Regions Financial Corp.369,4432,900
*Berkshire Hathaway Inc.  
 Class B20,2052,867
 Aflac Inc.44,7472,825
 AvalonBay Communities Inc.12,6002,397
*Berkshire Hathaway Inc.  
 Class A112,348
 SunTrust Banks Inc.52,1461,881
 Kimco Realty Corp.64,9001,868
 Public Storage3,600993
 HCP Inc.21,500701
 Ameriprise Financial Inc.4,499423
 Essex Property Trust Inc.1,531358
 Hartford Financial Services  
 Group Inc.6,188285
 Realty Income Corp.2,730171
 Northern Trust Corp.32221
   85,374
Health Care (14.3%)  
 Johnson & Johnson111,11612,023
 Gilead Sciences Inc.73,6336,764
 Bristol-Myers Squibb Co.94,8006,056
 Amgen Inc.35,5325,327
 Eli Lilly & Co.65,2874,701
*Express Scripts Holding Co.59,6684,099
*Biogen Inc.15,4774,029
 Anthem Inc.27,2063,781
 AbbVie Inc.64,8683,705
*HCA Holdings Inc.47,3433,695
 Cardinal Health Inc.44,3003,630
 McKesson Corp.23,0003,617
 AmerisourceBergen Corp.  
 Class A36,9913,202
 Zoetis Inc.70,0463,105
 Pfizer Inc.94,8002,810
 Merck & Co. Inc.34,4561,823
 CR Bard Inc.8,5041,724
 Aetna Inc.11,6571,310
*Hologic Inc.28,9861,000
 UnitedHealth Group Inc.5,754742
*Allergan plc2,131571
 Medtronic plc6,500487
 Cigna Corp.3,100425
 Baxter International Inc.5,616231
   78,857
Industrials (10.1%)  
 General Electric Co.378,12612,021
 Northrop Grumman Corp.20,0943,977
 General Dynamics Corp.29,6653,897
 Southwest Airlines Co.86,1303,859
*United Continental  
 Holdings Inc.61,1293,659
 PACCAR Inc.64,8603,547
 Masco Corp.105,7893,327
 Delta Air Lines Inc.65,3113,179
*Quanta Services Inc.137,3253,098
*United Rentals Inc.49,7373,093
 Cintas Corp.32,6962,936
 Fluor Corp.51,2232,751
 Rockwell Automation Inc.17,2001,957
 Stanley Black & Decker Inc.16,8691,775
 American Airlines Group Inc.32,1001,316
 Equifax Inc.5,245599
 Pitney Bowes Inc.19,845428
 3M Co.1,400233
   55,652
Information Technology (20.8%) 
 Apple Inc.142,68615,551
 Microsoft Corp.191,24810,563
*Alphabet Inc. Class A11,1058,472
 Accenture plc Class A45,2185,218
*Facebook Inc. Class A44,4815,075
 Broadcom Ltd.29,4004,542
*Alphabet Inc. Class C5,6474,207
 Intuit Inc.37,0553,854
 Intel Corp.116,9323,783
 HP Inc.296,9283,658
 NVIDIA Corp.100,4943,581
*Fiserv Inc.34,1503,503
 Xerox Corp.306,4963,421
*Citrix Systems Inc.43,3983,410
 Motorola Solutions Inc.44,7113,385
*Electronic Arts Inc.51,0273,373
 Lam Research Corp.40,2113,321
 Western Union Co.166,3933,210
 CSRA Inc.116,2103,126
 Hewlett Packard  
 Enterprise Co.169,9273,013
*Teradata Corp.112,1002,942
 Total System Services Inc.55,8062,655
*F5 Networks Inc.24,2462,566
 Computer Sciences Corp.50,4001,733
 Visa Inc. Class A21,7121,661
 Cisco Systems Inc.47,8781,363
 Juniper Networks Inc.40,6601,037
 International Business  
 Machines Corp.6,587998
 Oracle Corp.23,888977
 Texas Instruments Inc.111
   114,199

 

13


 

Structured Large-Cap Equity Fund

  Market
  Value
 Shares($000)
Materials (2.8%)  
Dow Chemical Co.92,3234,695
LyondellBasell Industries  
NV Class A45,3393,880
Sealed Air Corp.67,6883,250
Avery Dennison Corp.44,2143,188
Sherwin-Williams Co.1,640467
  15,480
Telecommunication Services (2.8%) 
Verizon  
Communications Inc.136,3107,372
AT&T Inc.113,4564,444
CenturyLink Inc.109,2473,491
  15,307
Utilities (3.4%)  
Exelon Corp.110,1023,948
PPL Corp.95,8243,648
FirstEnergy Corp.94,5873,402
Entergy Corp.40,8023,235
Public Service Enterprise  
Group Inc.59,2742,794
American Electric Power  
Co. Inc.26,6001,766
NiSource Inc.3,19676
  18,869
Total Common Stocks  
(Cost $463,883) 548,713
Temporary Cash Investments (0.5%)1 
Money Market Fund (0.4%)  
2,3 Vanguard Market  
Liquidity Fund, 0.495%2,326,0002,326
 
 Face 
 Amount 
 ($000) 
U.S. Government and Agency Obligations (0.1%)
4,5 Federal Home Loan Bank  
Discount Notes,  
0.411%, 6/2/16200200
Total Temporary Cash Investments 
(Cost $2,526) 2,526
Total Investments (100.2%)  
(Cost $466,409) 551,239
 Amount
 ($000)
Other Assets and Liabilities (-0.2%) 
Other Assets 
Investments in Vanguard47
Receivables for Investment Securities Sold2,106
Receivables for Accrued Income755
Receivables for Capital Shares Issued1,000
Total Other Assets3,908
Liabilities 
Payables for Investment Securities 
Purchased(1,000)
Collateral for Securities on Loan(2,326)
Payables for Capital Shares Redeemed(93)
Payables to Vanguard(515)
Other Liabilities(834)
Total Liabilities(4,768)
Net Assets (100%)550,379

 

14


 

Structured Large-Cap Equity Fund

At March 31, 2016, net assets consisted of:
 Amount
 ($000)
Paid-in Capital453,790
Undistributed Net Investment Income2,388
Accumulated Net Realized Gains9,339
Unrealized Appreciation (Depreciation) 
Investment Securities84,830
Futures Contracts32
Net Assets550,379
 
 
Institutional Shares—Net Assets 
Applicable to 2,278,481 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)89,558
Net Asset Value Per Share— 
Institutional Shares$39.31
 
 
Institutional Plus Shares—Net Assets 
Applicable to 5,922,060 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)460,821
Net Asset Value Per Share— 
Institutional Plus Shares$77.81

• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $2,224,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.2%, respectively, of
net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
3 Includes $2,326,000 of collateral received for securities on loan.
4 Securities with a value of $200,000 have been segregated as initial margin for open futures contracts.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
See accompanying Notes, which are an integral part of the Financial Statements.

15


 

Structured Large-Cap Equity Fund

Statement of Operations

 Six Months Ended
 March 31, 2016
 ($000)
Investment Income 
Income 
Dividends6,891
Interest13
Securities Lending40
Total Income6,934
Expenses 
The Vanguard Group—Note B 
Investment Advisory Services225
Management and Administrative—Institutional Shares39
Management and Administrative—Institutional Plus Shares130
Marketing and Distribution—Institutional Shares1
Marketing and Distribution—Institutional Plus Shares3
Custodian Fees6
Shareholders’ Reports—Institutional Shares1
Shareholders’ Reports—Institutional Plus Shares
Total Expenses405
Net Investment Income6,529
Realized Net Gain (Loss) 
Investment Securities Sold11,849
Futures Contracts53
Realized Net Gain (Loss)11,902
Change in Unrealized Appreciation (Depreciation) 
Investment Securities25,572
Futures Contracts48
Change in Unrealized Appreciation (Depreciation)25,620
Net Increase (Decrease) in Net Assets Resulting from Operations44,051
1 Interest income from an affiliated company of the fund was $1,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

16


 

Structured Large-Cap Equity Fund

Statement of Changes in Net Assets

 Six Months EndedYear Ended
 March 31,September 30,
 20162015
 ($000)($000)
Increase (Decrease) in Net Assets  
Operations  
Net Investment Income6,52911,535
Realized Net Gain (Loss)11,902101,772
Change in Unrealized Appreciation (Depreciation)25,620(100,461)
Net Increase (Decrease) in Net Assets Resulting from Operations44,05112,846
Distributions  
Net Investment Income  
Institutional Shares(1,885)(1,797)
Institutional Plus Shares(10,088)(11,950)
Realized Capital Gain  
Institutional Shares(3,050)
Institutional Plus Shares(16,098)
Total Distributions(31,121)(13,747)
Capital Share Transactions  
Institutional Shares46331,286
Institutional Plus Shares(7,810)(223,798)
Net Increase (Decrease) from Capital Share Transactions(7,347)(192,512)
Total Increase (Decrease)5,583(193,413)
Net Assets  
Beginning of Period544,796738,209
End of Period1550,379544,796
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $2,388,000 and $7,832,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

17


 

Structured Large-Cap Equity Fund

Financial Highlights

Institutional Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$38.29$38.88$32.42$27.83$21.49$20.97
Investment Operations       
Net Investment Income . 457.7731.710.618.531.4281
Net Realized and Unrealized Gain (Loss)      
on Investments 2.744(.355)6.3634.5426.306.458
Total from Investment Operations 3.201.4187.0735.1606.837.886
Distributions       
Dividends from Net Investment Income(. 833)(1.008)(. 613)(. 570)(. 497)(. 366)
Distributions from Realized Capital Gains(1.348)
Total Distributions (2.181)(1.008)(.613)(.570)(.497)(.366)
Net Asset Value, End of Period $39.31$38.29$38.88$32.42$27.83$21.49
 
Total Return 8.40%1.03%22.08%18.93%32.32%4.14%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$90$87$58$52$15$12
Ratio of Total Expenses to       
Average Net Assets 0.18%0.20%0.24%0.24%0.24%0.24%
Ratio of Net Investment Income to      
Average Net Assets 2.21%1.93%1.86%2.09%2.10%1.95%
Portfolio Turnover Rate 75%73%68%62%64%67%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.

See accompanying Notes, which are an integral part of the Financial Statements.

18


 

Structured Large-Cap Equity Fund

Financial Highlights

Institutional Plus Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$75.80$76.94$64.10$55.02$42.48$41.98
Investment Operations       
Net Investment Income . 9181.55011.4551.2071.084.9101
Net Realized and Unrealized Gain (Loss)      
on Investments 5.432(.703)12.5869.03712.466.906
Total from Investment Operations 6.350.84714.04110.24413.5501.816
Distributions       
Dividends from Net Investment Income(1.672)(1.987)(1.201)(1.164)(1.010)(1.316)
Distributions from Realized Capital Gains(2.668)
Total Distributions (4.340)(1.987)(1.201)(1.164)(1.010)(1.316)
Net Asset Value, End of Period $77.81$75.80$76.94$64.10$55.02$42.48
 
Total Return 8.42%1.05%22.17%19.02%32.42%4.18%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$461$458$680$612$497$379
Ratio of Total Expenses to       
Average Net Assets 0.14%0.16%0.17%0.17%0.17%0.17%
Ratio of Net Investment Income to      
Average Net Assets 2.25%1.97%1.93%2.16%2.17%2.02%
Portfolio Turnover Rate 75%73%68%62%64%67%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.

See accompanying Notes, which are an integral part of the Financial Statements.

19


 

Structured Large-Cap Equity Fund

Notes to Financial Statements

Vanguard Structured Large-Cap Equity Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus Shares are designed for investors who meet certain administrative, service, and account-size criteria.

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

20


 

Structured Large-Cap Equity Fund

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

21


 

Structured Large-Cap Equity Fund

B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $47,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1Quoted prices in active markets for identical securities.
Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:

 Level 1Level 2Level 3
Investments($000)($000)($000)
Common Stocks548,713
Temporary Cash Investments2,326200
Futures Contracts—Liabilities1(3)
Total551,036200
1 Represents variation margin on the last day of the reporting period.   

 

D. At March 31, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

   ($000)
   Aggregate 
  Number ofSettlementUnrealized
  Long (Short)ValueAppreciation
Futures ContractsExpirationContractsLong (Short)(Depreciation)
E-mini S&P 500 IndexJune 2016171,74432

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

22


 

Structured Large-Cap Equity Fund

E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

At March 31, 2016, the cost of investment securities for tax purposes was $466,409,000. Net unrealized appreciation of investment securities for tax purposes was $84,830,000, consisting of unrealized gains of $101,086,000 on securities that had risen in value since their purchase and $16,256,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the six months ended March 31, 2016, the fund purchased $206,350,000 of investment securities and sold $238,946,000 of investment securities, other than temporary cash investments.

G. Capital share transactions for each class of shares were:

 Six Months EndedYear Ended
 March 31, 2016September 30, 2015
 AmountSharesAmountShares
 ($000)(000)($000)(000)
Institutional Shares    
Issued6,05715583,3812,068
Issued in Lieu of Cash Distributions3,786971,27233
Redeemed(9,380)(242)(53,367)(1,328)
Net Increase (Decrease)—Institutional Shares4631031,286773
Institutional Plus Shares    
Issued65392,27928
Issued in Lieu of Cash Distributions16,131209
Redeemed(24,594)(337)(226,077)(2,825)
Net Increase (Decrease)—Institutional Plus Shares(7,810)(119)(223,798)(2,797)

 

At March 31, 2016, one shareholder was the record or beneficial owner of 83% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

H. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

23


 

Structured Broad Market Fund

Fund Profile
As of March 31, 2016

Share-Class Characteristics 
 InstitutionalInstitutional
 SharesPlus Shares
Ticker SymbolVSBMXVSBPX
Expense Ratio10.20%0.16%
30-Day SEC Yield1.92%1.99%

 

Portfolio Characteristics  
   DJ
  RussellU.S. Total
  3000Market
 FundIndexFA Index
Number of Stocks2502,9793,900
Median Market Cap$27.6B$52.6B$52.5B
Price/Earnings Ratio16.6x21.7x21.8x
Price/Book Ratio2.5x2.7x2.7x
Return on Equity17.2%17.6%17.5%
Earnings Growth   
Rate9.8%8.0%8.0%
Dividend Yield2.2%2.1%2.1%
Foreign Holdings0.0%0.0%0.0%
Turnover Rate   
(Annualized)77%
Short-Term Reserves-0.5%

 

Sector Diversification (% of equity exposure)
   DJ
  RussellU.S. Total
  3000Market
 FundIndexFA Index
Consumer   
Discretionary13.5%13.6%13.6%
Consumer Staples9.19.29.2
Energy6.16.16.1
Financials17.217.317.4
Health Care13.713.713.7
Industrials11.010.910.7
Information   
Technology20.120.020.1
Materials3.23.23.2
Telecommunication   
Services2.52.52.5
Utilities3.63.53.5

 

Volatility Measures  
  DJ
 RussellU.S. Total
 3000Market
 IndexFA Index
R-Squared0.970.97
Beta0.990.99

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc.Technology 
 Hardware, Storage & 
 Peripherals2.4%
Alphabet Inc.Internet Software & 
 Services2.3
Johnson & JohnsonPharmaceuticals1.9
Verizon Communications Integrated 
Inc.Telecommunication 
 Services1.6
Microsoft Corp.Systems Software1.5
JPMorgan Chase & Co.Diversified Banks1.5
Berkshire Hathaway Inc. Multi-Sector Holdings1.5
Amazon.com Inc.Internet Retail1.3
Exxon Mobil Corp.Integrated Oil & Gas1.1
Gilead Sciences Inc.Biotechnology1.1
Top Ten 16.2%

The holdings listed exclude any temporary cash investments and equity index products.

Investment Focus


1 The expense ratios shown are from the prospectus dated January 26, 2016. For the six months ended March 31, 2016, the annualized expense
ratios were 0.19% for Institutional Shares and 0.14% for Institutional Plus Shares.

24


 

Structured Broad Market Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.

Fiscal-Year Total Returns (%): November 30, 2006, Through March 31, 2016

 
Note: For 2016, performance data reflect the six months ended March 31, 2016.
 
Average Annual Total Returns: Periods Ended March 31, 2016   
 
 InceptionOneFiveTen
 DateYearYearsYears
Institutional Shares11/30/2006-0.11%12.63%6.71%1
Institutional Plus Shares5/3/2004-0.0612.707.25

The fund commenced operations as a registered investment company on October 3, 2006. The fund’s performance before that date includes
the performance of a predecessor trust, Vanguard Fiduciary Trust Company Structured Broad Market Trust.
1 Return since inception.

See Financial Highlights for dividend and capital gains information.

25


 

Structured Broad Market Fund

Financial Statements (unaudited)

Statement of Net Assets
As of March 31, 2016

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms N-Q on the SEC’s website at sec.gov. Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room (see the back cover of this report for further information).

   Market
   Value
  Shares($000)
Common Stocks (99.5%)1  
Consumer Discretionary (13.4%) 
*Amazon.com Inc.12,4797,408
 Walt Disney Co.59,3465,894
 Home Depot Inc.39,8815,321
 Comcast Corp. Class A76,0284,644
 NIKE Inc. Class B73,0334,489
 Lowe’s Cos. Inc.58,1574,405
 Target Corp.52,7094,337
 Carnival Corp.68,9733,640
*O’Reilly Automotive Inc.13,2103,615
 Darden Restaurants Inc.46,9593,113
 Marriott International Inc.  
 Class A40,6622,894
^Outerwall Inc.77,0002,848
 Cooper Tire & Rubber Co.72,4822,683
*Smith & Wesson Holding  
 Corp.73,3661,953
 General Motors Co.58,8841,851
 News Corp. Class B131,9041,748
 Omnicom Group Inc.20,8801,738
*Isle of Capri Casinos Inc.116,3991,630
*Boyd Gaming Corp.75,5001,560
*American Axle &  
 Manufacturing  
 Holdings Inc.79,3001,220
^World Wrestling  
 Entertainment Inc. Class A67,5011,192
 Sinclair Broadcast Group Inc.  
 Class A31,300963
 Sturm Ruger & Co. Inc.12,948885
 Leggett & Platt Inc.14,327693
 New York Times Co. Class A48,377603
*Discovery Communications  
 Inc. Class A20,807596
 Abercrombie & Fitch Co.13,768434
*Penn National Gaming Inc.25,671429
 Whirlpool Corp.2,279411
 McDonald’s Corp.3,074386
 DR Horton Inc.10,975332
*Michael Kors Holdings Ltd.5,591319
*Cooper-Standard Holding Inc.3,889279
 Nordstrom Inc.4,761272
   74,785
Consumer Staples (9.1%)  
 Altria Group Inc.91,9485,761
 Wal-Mart Stores Inc.82,1885,629
 Kroger Co.97,6303,734
 Tyson Foods Inc. Class A51,9503,463
^Cal-Maine Foods Inc.57,0382,961
 Universal Corp.52,0002,954
 Procter & Gamble Co.34,5512,844
 Dr Pepper Snapple  
 Group Inc.31,6022,826
 Dean Foods Co.150,2192,602
*,^Herbalife Ltd.40,5132,494
 Bunge Ltd.42,5492,411
^Coty Inc. Class A62,1521,730
 Ingles Markets Inc. Class A41,5561,558
 Coca-Cola Co.33,3651,548
 Energizer Holdings Inc.35,8091,451
 ConAgra Foods Inc.27,9321,246
 PepsiCo Inc.11,4051,169
*USANA Health Sciences Inc.9,1001,105
 Philip Morris International Inc.8,815865
 SpartanNash Co.24,140732
*Omega Protein Corp.29,100493
^Natural Health Trends Corp.12,550416
 CVS Health Corp.3,107322
   50,314
Energy (6.1%)  
 Exxon Mobil Corp.75,5826,318
 Valero Energy Corp.58,5003,752
 Tesoro Corp.33,9502,920
 PBF Energy Inc. Class A85,5722,841
 Noble Corp. plc243,5862,521
^Ship Finance  
 International Ltd.177,5412,466

 

26


 

Structured Broad Market Fund

   Market
   Value
  Shares($000)
 Rowan Cos. plc Class A150,3042,420
^Nordic American  
 Tankers Ltd.158,4592,233
 Chevron Corp.17,7651,695
^Frontline Ltd.159,6001,336
 Western Refining Inc.44,9451,307
 Teekay Tankers Ltd.  
 Class A280,7491,030
 Phillips 6611,6781,011
 Marathon Petroleum Corp.15,317570
 Ensco plc Class A39,261407
*FMC Technologies Inc.10,970300
 HollyFrontier Corp.8,296293
 Scorpio Tankers Inc.46,735273
 DHT Holdings Inc.44,603257
   33,950
Financials (17.1%)  
 JPMorgan Chase & Co.141,6368,388
*Berkshire Hathaway Inc.  
 Class B57,5008,158
 Citigroup Inc.144,7006,041
 Bank of America Corp.419,2005,668
 Wells Fargo & Co.102,3264,948
 Travelers Cos. Inc.33,8253,948
 MSCI Inc. Class A41,2533,056
 Gaming and Leisure  
 Properties Inc.95,7302,960
 Assured Guaranty Ltd.115,3002,917
*Walker & Dunlop Inc.108,3892,631
 Ameriprise Financial Inc.27,9002,623
 Hospitality Properties Trust93,5122,484
^Universal Insurance  
 Holdings Inc.136,7182,434
 American Express Co.37,2722,288
*MGIC Investment Corp.296,0002,270
 Lazard Ltd. Class A57,7782,242
 Heritage Insurance  
 Holdings Inc.138,0132,204
 Lamar Advertising Co.  
 Class A35,7122,196
 Prudential Financial Inc.28,9982,094
 Digital Realty Trust Inc.22,5001,991
 CoreSite Realty Corp.27,9001,953
 Bank of New York Mellon  
 Corp.45,8751,690
 Government Properties  
 Income Trust89,1181,591
 Simon Property Group Inc.7,0581,466
 CBL & Associates  
 Properties Inc.120,0001,428
 Communications Sales  
 & Leasing Inc.58,4531,301
 Ryman Hospitality  
 Properties Inc.23,4001,205
 AvalonBay Communities Inc.5,6871,082
^Apple Hospitality REIT Inc.53,5001,060
 Capital One Financial Corp.15,0941,046
 DuPont Fabros  
 Technology Inc.24,500993
 Mack-Cali Realty Corp.42,228992
 Unum Group29,048898
 Everest Re Group Ltd.3,900770
 SunTrust Banks Inc.16,865608
 Nelnet Inc. Class A14,966589
 Weingarten Realty Investors14,841557
 Fifth Third Bancorp26,364440
 Discover Financial Services8,617439
 Monmouth Real Estate  
 Investment Corp.35,585423
 Hartford Financial Services  
 Group Inc.8,100373
 Xenia Hotels & Resorts Inc.23,626369
*INTL. FCStone Inc.13,772368
 Navient Corp.29,933358
*E*TRADE Financial Corp.14,240349
 OM Asset Management plc24,747330
*KCG Holdings Inc. Class A25,512305
*Ally Financial Inc.15,460289
 Nasdaq Inc.4,287285
   95,098
Health Care (13.6%)  
 Johnson & Johnson97,03310,499
 Gilead Sciences Inc.68,5516,297
 Bristol-Myers Squibb Co.85,2005,443
 Amgen Inc.29,9004,483
 Eli Lilly & Co.61,7204,445
*Express Scripts Holding Co.55,8353,835
 Anthem Inc.25,9003,600
 Cardinal Health Inc.39,6953,253
 Aetna Inc.28,8613,243
 UnitedHealth Group Inc.24,5233,161
 AmerisourceBergen Corp.  
 Class A35,9003,107
*Charles River Laboratories  
 International Inc.39,8003,022
*INC Research Holdings Inc.  
 Class A69,1622,850
 Merck & Co. Inc.53,2312,816
*PRA Health Sciences Inc.62,8282,687
*Amsurg Corp.30,1002,246
 Pfizer Inc.62,1251,841
*HCA Holdings Inc.19,2041,499
*Quintiles Transnational  
 Holdings Inc.18,7001,217
*Hologic Inc.28,419980
 McKesson Corp.6,000944
 AbbVie Inc.16,009914
 Cigna Corp.6,500892
*Infinity  
 Pharmaceuticals Inc.155,500820

 

27


 

Structured Broad Market Fund

   Market
   Value
  Shares($000)
*ICU Medical Inc.5,757599
*Amedisys Inc.9,697469
*Prestige Brands  
 Holdings Inc.7,853419
 Bruker Corp.11,751329
   75,910
Industrials (10.9%)  
 General Electric Co.164,4255,227
 Northrop Grumman Corp.20,0203,962
 General Dynamics Corp.28,4003,731
*Hawaiian Holdings Inc.68,0753,213
 Huntington Ingalls  
 Industries Inc.23,4003,204
 PACCAR Inc.57,9893,171
*Wabash National Corp.232,8913,074
 BWX Technologies Inc.89,9123,017
*Spirit AeroSystems  
 Holdings Inc. Class A66,4113,012
 Global Brass & Copper  
 Holdings Inc.118,1632,948
*JetBlue Airways Corp.119,4002,522
 Cintas Corp.26,4042,371
 Boeing Co.17,8842,270
*United Continental  
 Holdings Inc.35,6512,134
 Southwest Airlines Co.47,2582,117
 Owens Corning39,0751,848
 Alaska Air Group Inc.19,6301,610
 Briggs & Stratton Corp.66,0681,580
 Ennis Inc.77,6681,518
 Comfort Systems USA Inc.41,9181,332
 SkyWest Inc.49,001980
 Interface Inc. Class A49,792923
 Masco Corp.29,067914
 Herman Miller Inc.25,971802
*Quanta Services Inc.33,754762
 B/E Aerospace Inc.14,616674
 Insteel Industries Inc.13,625417
 Trinity Industries Inc.18,819345
 Fluor Corp.6,076326
 General Cable Corp.26,187320
 Steelcase Inc. Class A21,040314
   60,638
Information Technology (20.0%) 
 Apple Inc.121,50513,243
 Microsoft Corp.155,2978,577
*Alphabet Inc. Class A9,6907,392
*Alphabet Inc. Class C7,0475,250
 Accenture plc Class A43,0454,967
*Facebook Inc. Class A30,1613,441
 CDW Corp.77,2003,204
 Booz Allen Hamilton  
 Holding Corp. Class A103,7003,140
*Aspen Technology Inc.84,4923,053
*Tech Data Corp.39,3773,023
*Sykes Enterprises Inc.96,1822,903
 CSG Systems  
 International Inc.63,1842,853
*GoDaddy Inc. Class A85,9232,778
*Cirrus Logic Inc.75,5542,751
*Manhattan Associates Inc.48,3252,748
 Intel Corp.82,5242,670
 EarthLink Holdings Corp.465,9122,642
 CSRA Inc.96,3202,591
 Computer Sciences Corp.73,4772,527
*Sigma Designs Inc.350,2002,381
*Electronic Arts Inc.35,6232,355
 Broadcom Ltd.13,9422,154
 Avnet Inc.47,2362,093
 SYNNEX Corp.22,0712,043
 International Business  
 Machines Corp.12,6861,921
 Jabil Circuit Inc.90,7711,749
 HP Inc.125,0001,540
 Texas Instruments Inc.24,4081,401
*Extreme Networks Inc.445,7951,386
 Leidos Holdings Inc.26,0491,311
*ON Semiconductor Corp.132,0001,266
*Advanced Micro  
 Devices Inc.433,7051,236
 Broadridge Financial  
 Solutions Inc.19,1001,133
*Gigamon Inc.30,198937
*Cadence Design  
 Systems Inc.39,326927
 Visa Inc. Class A11,820904
 Cisco Systems Inc.23,383666
 Intuit Inc.6,342660
*NeoPhotonics Corp.46,000646
*Wix.com Ltd.26,000527
*Benchmark Electronics Inc.18,020415
*NCR Corp.12,568376
 NVIDIA Corp.9,364334
*First Data Corp. Class A24,423316
 Oracle Corp.7,398303
 DST Systems Inc.2,590292
   111,025
Materials (3.2%)  
 Dow Chemical Co.86,2004,384
 LyondellBasell Industries  
 NV Class A41,2233,528
*,^Trinseo SA79,8182,938
 Sealed Air Corp.56,8082,727
 Avery Dennison Corp.23,6251,704
*Chemtura Corp.54,7861,446
 International Paper Co.16,128662
 AEP Industries Inc.7,500495
   17,884

 

28


 

Structured Broad Market Fund

   Market
   Value
  Shares($000)
Telecommunication Services (2.5%) 
 Verizon  
 Communications Inc.160,2038,664
 AT&T Inc.78,2453,065
 CenturyLink Inc.50,6861,620
*Cincinnati Bell Inc.175,505679
   14,028
Utilities (3.6%)  
 Exelon Corp.107,1003,841
 Public Service Enterprise  
 Group Inc.76,6773,615
 FirstEnergy Corp.94,4953,399
 UGI Corp.79,1763,190
 American Electric Power  
 Co. Inc.42,2002,802
 WGL Holdings Inc.19,9681,445
 Entergy Corp.13,4951,070
 PPL Corp.13,565516
   19,878
Total Common Stocks  
(Cost $462,514) 553,510
Temporary Cash Investments (1.9%)1 
Money Market Fund (1.8%)  
2,3Vanguard Market  
 Liquidity Fund, 0.495%10,540,90210,541
 
  Face 
  Amount 
  ($000) 
U.S. Government and Agency Obligations (0.1%)
4,5Federal Home Loan Bank  
 Discount Notes,  
 0.572%, 6/22/16200200
5,6Freddie Mac Discount Notes, 
 0.220%, 4/15/16100100
   300
Total Temporary Cash Investments 
(Cost $10,840) 10,841
Total Investments (101.4%)  
(Cost $473,354) 564,351
 Amount
 ($000)
Other Assets and Liabilities (-1.4%) 
Other Assets 
Investment in Vanguard48
Receivables for Investment Securities Sold3,303
Receivables for Accrued Income558
Total Other Assets3,909
Liabilities 
Payables for Investment Securities 
Purchased(843)
Collateral for Securities on Loan(10,541)
Payables to Vanguard(331)
Other Liabilities(25)
Total Liabilities(11,740)
Net Assets (100%)556,520

 

29


 

Structured Broad Market Fund

At March 31, 2016, net assets consisted of:
 Amount
 ($000)
Paid-in Capital449,388
Undistributed Net Investment Income2,493
Accumulated Net Realized Gains13,586
Unrealized Appreciation (Depreciation) 
Investment Securities90,997
Futures Contracts56
Net Assets556,520
 
 
Institutional Shares—Net Assets 
Applicable to 1,147,331 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)36,468
Net Asset Value Per Share— 
Institutional Shares$31.78
 
 
Institutional Plus Shares—Net Assets 
Applicable to 8,185,541 outstanding 
$.001 par value shares of beneficial 
interest (unlimited authorization)520,052
Net Asset Value Per Share— 
Institutional Plus Shares$63.53

• See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $10,167,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 1.4%, respectively, of
net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
3 Includes $10,541,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full
faith and credit of the U.S. government.
5 Securities with a value of $300,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for
senior preferred stock.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.

30


 

Structured Broad Market Fund

Statement of Operations

 Six Months Ended
 March 31, 2016
 ($000)
Investment Income 
Income 
Dividends6,623
Interest15
Securities Lending368
Total Income6,996
Expenses 
The Vanguard Group—Note B 
Investment Advisory Services229
Management and Administrative—Institutional Shares17
Management and Administrative—Institutional Plus Shares147
Marketing and Distribution—Institutional Shares
Marketing and Distribution—Institutional Plus Shares4
Custodian Fees6
Shareholders’ Reports—Institutional Shares
Shareholders’ Reports—Institutional Plus Shares
Total Expenses403
Net Investment Income6,593
Realized Net Gain (Loss) 
Investment Securities Sold13,452
Futures Contracts133
Realized Net Gain (Loss)13,585
Change in Unrealized Appreciation (Depreciation) 
Investment Securities7,789
Futures Contracts103
Change in Unrealized Appreciation (Depreciation)7,892
Net Increase (Decrease) in Net Assets Resulting from Operations28,070
1 Interest income from an affiliated company of the fund was $4,000.

 

See accompanying Notes, which are an integral part of the Financial Statements.

31


 

Structured Broad Market Fund

Statement of Changes in Net Assets

 Six Months EndedYear Ended
 March 31,September 30,
 20162015
 ($000)($000)
Increase (Decrease) in Net Assets  
Operations  
Net Investment Income6,59310,839
Realized Net Gain (Loss)13,58548,798
Change in Unrealized Appreciation (Depreciation)7,892(44,242)
Net Increase (Decrease) in Net Assets Resulting from Operations28,07015,395
Distributions  
Net Investment Income  
Institutional Shares(640)(434)
Institutional Plus Shares(11,581)(9,024)
Realized Capital Gain1  
Institutional Shares(2,234)(3,078)
Institutional Plus Shares(40,149)(61,848)
Total Distributions(54,604)(74,384)
Capital Share Transactions  
Institutional Shares13,6081,642
Institutional Plus Shares19,03065,576
Net Increase (Decrease) from Capital Share Transactions32,63867,218
Total Increase (Decrease)6,1048,229
Net Assets  
Beginning of Period550,416542,187
End of Period2556,520550,416

1 Includes fiscal 2016 and 2015 short-term gain distributions totaling $251,000 and $16,777,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $2,493,000 and $8,121,000.

See accompanying Notes, which are an integral part of the Financial Statements.

32


 

Structured Broad Market Fund

Financial Highlights

Institutional Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$33.24$37.28$32.59$27.10$21.03$20.70
Investment Operations       
Net Investment Income . 384. 662. 632. 573. 544. 3851
Net Realized and Unrealized Gain (Loss)      
on Investments 1.421.3945.9965.4925.973.338
Total from Investment Operations 1.8051.0566.6286.0656.517.723
Distributions       
Dividends from Net Investment Income(.727)(. 630)(. 564)(. 575)(. 447)(. 393)
Distributions from Realized Capital Gains(2.538)(4.466)(1.374)
Total Distributions (3.265)(5.096)(1.938)(.575)(.447)(.393)
Net Asset Value, End of Period $31.78$33.24$37.28$32.59$27.10$21.03
 
Total Return 5.24%2.80%21.10%22.85%31.43%3.37%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$36$25$26$16$7$6
Ratio of Total Expenses to       
Average Net Assets 0.19%0.20%0.24%0.24%0.24%0.24%
Ratio of Net Investment Income to      
Average Net Assets 2.20%1.86%1.67%1.94%2.19%1.64%
Portfolio Turnover Rate 77%66%60%63%58%56%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.

See accompanying Notes, which are an integral part of the Financial Statements.

33


 

Structured Broad Market Fund

Financial Highlights

Institutional Plus Shares       
 Six Months     
  Ended     
For a Share OutstandingMarch 31,Year Ended September 30,
Throughout Each Period 201620152014201320122011
Net Asset Value, Beginning of Period$66.43$74.52$65.15$54.17$42.02$41.36
Investment Operations       
Net Investment Income .7671.3551.3031.1861.122.7961
Net Realized and Unrealized Gain (Loss)      
on Investments 2.868.78111.98110.98011.951.672
Total from Investment Operations 3.6352.13613.28412.16613.0731.468
Distributions       
Dividends from Net Investment Income(1.463)(1.302)(1.169)(1.186)(.923)(.808)
Distributions from Realized Capital Gains(5.072)(8.924)(2.745)
Total Distributions (6.535)(10.226)(3.914)(1.186)(.923)(.808)
Net Asset Value, End of Period $63.53$66.43$74.52$65.15$54.17$42.02
 
Total Return 5.28%2.84%21.16%22.95%31.56%3.43%
 
Ratios/Supplemental Data       
Net Assets, End of Period (Millions)$520$526$516$465$379$290
Ratio of Total Expenses to       
Average Net Assets 0.14%0.16%0.17%0.17%0.17%0.17%
Ratio of Net Investment Income to      
Average Net Assets 2.25%1.90%1.74%2.01%2.26%1.71%
Portfolio Turnover Rate 77%66%60%63%58%56%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.
1 Calculated based on average shares outstanding.

See accompanying Notes, which are an integral part of the Financial Statements.

34


 

Structured Broad Market Fund

Notes to Financial Statements

Vanguard Structured Broad Market Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: Institutional Shares and Institutional Plus Shares. Institutional Shares and Institutional Plus Shares are designed for investors who meet certain administrative, service, and account-size criteria.

A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been materially affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the board of trustees to represent fair value. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objective of maintaining full exposure to the stock market while maintaining liquidity. The fund may purchase or sell futures contracts to achieve a desired level of investment, whether to accommodate portfolio turnover or cash flows from capital share transactions. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract.

Futures contracts are valued at their quoted daily settlement prices. The aggregate settlement values of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized futures gains (losses).

During the six months ended March 31, 2016, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (September 30, 2012–2015), and for the period ended March 31, 2016, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

35


 

Structured Broad Market Fund

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date.

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread

The fund had no borrowings outstanding at March 31, 2016, or at any time during the period then ended.

7. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities purchased are amortized and accreted, respectively, to interest income over the lives of the respective securities. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

36


 

Structured Broad Market Fund

B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At March 31, 2016, the fund had contributed to Vanguard capital in the amount of $48,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

Level 1Quoted prices in active markets for identical securities.
Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of March 31, 2016, based on the inputs used to value them:

 Level 1Level 2Level 3
Investments($000)($000)($000)
Common Stocks553,510
Temporary Cash Investments10,541300
Futures Contracts—Liabilities1(5)
Total564,046300
1 Represents variation margin on the last day of the reporting period.

 

D. At March 31, 2016, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

 

   ($000)
   Aggregate 
  Number ofSettlementUnrealized
  Long (Short)ValueAppreciation
Futures ContractsExpirationContractsLong (Short)(Depreciation)
E-mini S&P 500 IndexJune 2016292,97556

 

Unrealized appreciation (depreciation) on open futures contracts is required to be treated as realized gain (loss) for tax purposes.

37


 

Structured Broad Market Fund

E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year.

At March 31, 2016, the cost of investment securities for tax purposes was $473,473,000. Net unrealized appreciation of investment securities for tax purposes was $90,878,000, consisting of unrealized gains of $108,972,000 on securities that had risen in value since their purchase and $18,094,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the six months ended March 31, 2016, the fund purchased $217,505,000 of investment securities and sold $232,544,000 of investment securities, other than temporary cash investments.

G. Capital share transactions for each class of shares were:

 Six Months EndedYear Ended
 March 31, 2016September 30, 2015
 AmountSharesAmountShares
 ($000)(000)($000)(000)
Institutional Shares    
Issued11,933357
Issued in Lieu of Cash Distributions1,675521,64249
Redeemed
Net Increase (Decrease)—Institutional Shares13,6084091,64249
Institutional Plus Shares    
Issued4,998883,00045
Issued in Lieu of Cash Distributions41,15863562,576940
Redeemed(27,126)(453)
Net Increase (Decrease)—Institutional Plus Shares19,03027065,576985

 

At March 31, 2016, one shareholder was the record or beneficial owner of 93% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

H. Management has determined that no material events or transactions occurred subsequent to March 31, 2016, that would require recognition or disclosure in these financial statements.

38


 

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

39


 

Six Months Ended March 31, 2016   
 BeginningEndingExpenses
 Account ValueAccount ValuePaid During
 9/30/20153/31/2016Period
Based on Actual Fund Return   
Structured Large-Cap Equity Fund   
Institutional Shares$1,000.00$1,084.01$0.94
Institutional Plus Shares1,000.001,084.170.73
Structured Broad Market Fund   
Institutional Shares$1,000.00$1,052.39$0.97
Institutional Plus Shares1,000.001,052.840.72
Based on Hypothetical 5% Yearly Return   
Structured Large-Cap Equity Fund   
Institutional Shares$1,000.00$1,024.10$0.91
Institutional Plus Shares1,000.001,024.300.71
Structured Broad Market Fund   
Institutional Shares$1,000.00$1,024.05$0.96
Institutional Plus Shares1,000.001,024.300.71

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that
period are: for the Structured Large-Cap Equity Fund, 0.18% for Institutional Shares and 0.14% for Institutional Plus Shares; for the Structured
Broad Market Fund, 0.19% for Institutional Shares and 0.14% for Institutional Plus Shares. The dollar amounts shown as “Expenses Paid” are
equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most
recent six-month period, then divided by the number of days in the most recent 12-month period (183/366).

40


 

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard Structured Large-Cap Equity and Structured Broad Market Funds has renewed each fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard)—through its Quantitative Equity Group. The board determined that continuing each fund’s internalized management structure was in the best interests of the funds and their shareholders.

The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. The trustees considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board reviewed the quality of each fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of the advisor. The board considered that Vanguard has been managing investments for more than three decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.

The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangements.

Investment performance

The board considered the performance of the funds since their inceptions, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about each fund’s most recent performance can be found in the Performance Summary pages of this report.

Cost

The board concluded that the funds’ expense ratios were well below the average expense ratios charged by funds in their respective peer groups and that the funds’ advisory fee rates were also well below their peer-group averages. Information about the funds’ expenses appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements sections.

The board does not conduct a profitability analysis of Vanguard, because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees, and produces “profits” only in the form of reduced expenses for fund shareholders.

The benefit of economies of scale

The board concluded that the funds’ at-cost arrangements with Vanguard ensures that the funds will realize economies of scale as they grow, with the cost to shareholders declining as fund assets increase.

The board will consider whether to renew the advisory arrangements again after a one-year period.

41


 

Glossary

30-Day SEC Yield. A fund’s 30-day SEC yield is derived using a formula specified by the U.S. Securities and Exchange Commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (for bonds), its actual income (for asset-backed securities), or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Beta. A measure of the magnitude of a fund’s past share-price fluctuations in relation to the ups and downs of a given market index. The index is assigned a beta of 1.00. Compared with a given index, a fund with a beta of 1.20 typically would have seen its share price rise or fall by 12% when the index rose or fell by 10%. For this report, beta is based on returns over the past 36 months for both the fund and the index. Note that a fund’s beta should be reviewed in conjunction with its R-squared (see definition). The lower the R-squared, the less correlation there is between the fund and the index, and the less reliable beta is as an indicator of volatility.

Dividend Yield. Dividend income earned by stocks, expressed as a percentage of the aggregate market value (or of net asset value, for a fund). The yield is determined by dividing the amount of the annual dividends by the aggregate value (or net asset value) at the end of the period. For a fund, the dividend yield is based solely on stock holdings and does not include any income produced by other investments.

Earnings Growth Rate. The average annual rate of growth in earnings over the past five years for the stocks now in a fund.

Equity Exposure. A measure that reflects a fund’s investments in stocks and stock futures. Any holdings in short-term reserves are excluded.

Expense Ratio. A fund’s total annual operating expenses expressed as a percentage of the fund’s average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.

Foreign Holdings. The percentage of a fund represented by securities or depositary receipts of companies based outside the United States.

Median Market Cap. An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a fund’s stocks, weighted by the proportion of the fund’s assets invested in each stock. Stocks representing half of the fund’s assets have market capitalizations above the median, and the rest are below it.

Price/Book Ratio. The share price of a stock divided by its net worth, or book value, per share. For a fund, the weighted average price/book ratio of the stocks it holds.

Price/Earnings Ratio. The ratio of a stock’s current price to its per-share earnings over the past year. For a fund, the weighted average P/E of the stocks it holds. P/E is an indicator of market expectations about corporate prospects; the higher the P/E, the greater the expectations for a company’s future growth.

42


 

R-Squared. A measure of how much of a fund’s past returns can be explained by the returns from the market in general, as measured by a given index. If a fund’s total returns were precisely synchronized with an index’s returns, its R-squared would be 1.00. If the fund’s returns bore no relationship to the index’s returns, its R-squared would be 0. For this report, R-squared is based on returns over the past 36 months for both the fund and the index.

Return on Equity. The annual average rate of return generated by a company during the past five years for each dollar of shareholder’s equity (net income divided by shareholder’s equity). For a fund, the weighted average return on equity for the companies whose stocks it holds.

Short-Term Reserves. The percentage of a fund invested in highly liquid, short-term securities that can be readily converted to cash.

Turnover Rate. An indication of the fund’s trading activity. Funds with high turnover rates incur higher transaction costs and may be more likely to distribute capital gains (which may be taxable to investors). The turnover rate excludes in-kind transactions, which have minimal impact on costs.

43


 

The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them on an at-cost basis.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 198 Vanguard funds.

The following table provides information for each trustee and executive officer of the fund. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

InterestedTrustee1Rajiv L. Gupta
 Born 1945. Trustee Since December 2001.2 Principal
F. William McNabb IIIOccupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman ofExperience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past(retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of theRohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each ofInternational PLC (diversified manufacturing and
the investment companies served by The Vanguardservices), HP Inc. (printer and personal computer
Group, since January 2010; Director of The Vanguardmanufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and(automotive components); Senior Advisor at
President of The Vanguard Group, and of each ofNew Mountain Capital.
the investment companies served by The Vanguard 
Group, since 2008; Director of Vanguard MarketingAmy Gutmann
Corporation; Managing Director of The VanguardBorn 1949. Trustee Since June 2006. Principal
Group (1995–2008).Occupation(s) During the Past Five Years and
 Other Experience: President of the University of
IndependentTrusteesPennsylvania; Christopher H. Browne Distinguished
 Professor of Political Science, School of Arts and
Emerson U. FullwoodSciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. PrincipalSchool for Communication, with secondary faculty
Occupation(s) During the Past Five Years and Otherappointments in the Department of Philosophy, School
Experience: Executive Chief Staff and Marketingof Arts and Sciences, and at the Graduate School of
Officer for North America and Corporate Vice PresidentEducation, University of Pennsylvania; Trustee of the
(retired 2008) of Xerox Corporation (document manage-National Constitution Center; Chair of the Presidential
ment products and services); Executive in ResidenceCommission for the Study of Bioethical Issues.
and 2009–2010 Distinguished Minett Professor at 
the Rochester Institute of Technology; Lead DirectorJoAnn Heffernan Heisen
of SPX FLOW, Inc. (multi-industry manufacturing);Born 1950. Trustee Since July 1998. Principal
Director of the United Way of Rochester, the UniversityOccupation(s) During the Past Five Years and
of Rochester Medical Center, Monroe CommunityOther Experience: Corporate Vice President and
College Foundation, North Carolina A&T University,Chief Global Diversity Officer (retired 2008) and
and Roberts Wesleyan College.Member of the Executive Committee (1997–2008)
 of Johnson & Johnson (pharmaceuticals/medical
 devices/consumer products); Director of Skytop
 Lodge Corporation (hotels) and the Robert Wood
 Johnson Foundation; Member of the Advisory
 Board of the Institute for Women’s Leadership
 at Rutgers University.

 


 

F. Joseph LoughreyExecutive Officers 
Born 1949. Trustee Since October 2009. Principal  
Occupation(s) During the Past Five Years and OtherGlenn Booraem 
Experience: President and Chief Operating OfficerBorn 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery);Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specializedOther Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; DirectorInc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materialsserved by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundationthe investment companies served by The Vanguard
for Education, and the V Foundation for CancerGroup (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for thethe investment companies served by The Vanguard
College of Arts and Letters and of the Advisory BoardGroup (2001–2010). 
to the Kellogg Institute for International Studies, both 
at the University of Notre Dame.Thomas J. Higgins
Born 1957. Chief Financial Officer Since September
Mark Loughridge2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. PrincipalYears and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and OtherGroup, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financialinvestment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technologyTreasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Planby The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical 
Company; Member of the Council on Chicago Booth.Peter Mahoney
Born 1974. Controller Since May 2015. Principal
Scott C. MalpassOccupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. PrincipalOther Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Otherat The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Viceinvestment companies served by The Vanguard Group;
President at the University of Notre Dame; AssistantHead of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College ofGroup (2008–2014). 
Business at Notre Dame; Member of the Notre Dame 
403(b) Investment Committee, the Board of AdvisorsHeidi Stam
for Spruceview Capital Partners, and the InvestmentBorn 1956. Secretary Since July 2005. Principal
Advisory Committee of Major League Baseball; BoardOccupation(s) During the Past Five Years and Other
Member of TIFF Advisory Services, Inc., and CatholicExperience: Managing Director of The Vanguard
Investment Services, Inc. (investment advisors).Group, Inc.; General Counsel of The Vanguard Group;
Secretary of The Vanguard Group and of each of the
André F. Peroldinvestment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. PrincipalDirector and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and OtherMarketing Corporation. 
Experience: George Gund Professor of Finance and  
Banking, Emeritus at the Harvard Business SchoolVanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and ManagingMortimer J. BuckleyJames M. Norris
Partner of HighVista Strategies LLC (private investmentKathleen C. GubanichThomas M. Rampulla
firm); Director of Rand Merchant Bank; Overseer ofMartha G. KingGlenn W. Reed
the Museum of Fine Arts Boston.John T. MarcanteKarin A. Risi
Chris D. McIsaac 
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal  
Occupation(s) During the Past Five Years and OtherChairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer  
(retired 2010) of Corning Incorporated (communications John J. Brennan 
equipment); Trustee of Colby-Sawyer College and Chairman, 1996–2009 
Chairman of its Finance and Enrollment Committee; Chief Executive Officer and President, 1996–2008
Member of the Advisory Board of the Norris Cotton  
Cancer Center.Founder 
 John C. Bogle 
 Chairman and Chief Executive Officer, 1974–1996

 

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.
2 December 2002 for Vanguard Equity Income Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


 

 

  P.O. Box 2600
  Valley Forge, PA 19482-2600
 
 
 
Connect with Vanguard® > vanguard.com
 
 
 
Fund Information > 800-662-7447 CFA® is a registered trademark owned by CFA Institute.
Direct Investor Account Services > 800-662-2739 
Institutional Investor Services > 800-523-1036 
Text Telephone for People  
Who Are Deaf or Hard of Hearing> 800-749-7273 
 
This material may be used in conjunction 
with the offering of shares of any Vanguard 
fund only if preceded or accompanied by 
the fund’s current prospectus. 
 
All comparative mutual fund data are from Lipper, a 
Thomson Reuters Company, or Morningstar, Inc., unless 
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting 
guidelines by visiting vanguard.com/proxyreporting or by 
calling Vanguard at 800-662-2739. The guidelines are 
also available from the SEC’s website, sec.gov. In 
addition, you may obtain a free report on how your fund 
voted the proxies for securities it owned during the 12 
months ended June 30. To get the report, visit either 
vanguard.com/proxyreporting or sec.gov. 
 
You can review and copy information about your fund at 
the SEC’s Public Reference Room in Washington, D.C. To 
find out more about this public service, call the SEC at 
202-551-8090. Information about your fund is also 
available on the SEC’s website, and you can receive 
copies of this information, for a fee, by sending a 
request in either of two ways: via email addressed to 
publicinfo@sec.gov or via regular mail addressed to the 
Public Reference Section, Securities and Exchange 
Commission, Washington, DC 20549-1520. 
 
  © 2016 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q08702 052016

 


Item 2: Code of Ethics.

Not Applicable.

Item 3: Audit Committee Financial Expert.

Not Applicable.

Item 4: Principal Accountant Fees and Services.

(a) Audit Fees.

Not Applicable.

Item 5: Audit Committee of Listed Registrants.

Not Applicable.

Item 6: Investments.

Not Applicable.

Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies.

Not Applicable.

Item 8: Portfolio Managers of Closed-End Management Investment Companies.

Not Applicable.

Item 9: Purchase of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers.

Not Applicable.

Item 10: Submission of Matters to a Vote of Security Holders.

Not Applicable.

Item 11: Controls and Procedures.

     (a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

     (b) Internal Control Over Financial Reporting. There were no significant changes in Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


 

Item 12: Exhibits.

(a) Certifications.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 VANGUARD QUANTITATIVE FUNDS
 
 
BY:/s/ F. WILLIAM MCNABB III*
F. WILLIAM MCNABB III 
CHIEF EXECUTIVE OFFICER 
 
Date: May 18, 2016

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 VANGUARD QUANTITATIVE FUNDS
 
BY:/s/ F. WILLIAM MCNABB III*
 F. WILLIAM MCNABB III
 CHIEF EXECUTIVE OFFICER
Date: May 18, 2016
 VANGUARD QUANTITATIVE FUNDS
 
BY:/s/ THOMAS J. HIGGINS*
 THOMAS J. HIGGINS
CHIEF FINANCIAL OFFICER 
Date: May 18, 2016

 

* By: /s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on April 22, 2014 see file Number 2-17620, Incorporated by Reference.