Vanguard® S&P Mid-Cap 400 Value Index Fund
Schedule of Investments (unaudited)
As of May 31, 2022
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
Shares | Market Value ($000) | |||||
Common Stocks (99.7%) | ||||||
Communication Services (1.3%) | ||||||
Cable One Inc. | 1,656 | 2,158 | ||||
TEGNA Inc. | 98,323 | 2,153 | ||||
New York Times Co. Class A | 55,835 | 1,926 | ||||
* | Iridium Communications Inc. | 49,320 | 1,830 | |||
* | TripAdvisor Inc. | 45,516 | 1,131 | |||
John Wiley & Sons Inc. Class A | 17,284 | 915 | ||||
World Wrestling Entertainment Inc. Class A | 13,221 | 883 | ||||
* | Yelp Inc. Class A | 27,822 | 818 | |||
11,814 | ||||||
Consumer Discretionary (12.6%) | ||||||
Lithia Motors Inc. Class A | 24,052 | 7,323 | ||||
Lear Corp. | 47,421 | 6,684 | ||||
Macy's Inc. | 237,855 | 5,625 | ||||
Murphy USA Inc. | 18,204 | 4,535 | ||||
Toll Brothers Inc. | 89,339 | 4,509 | ||||
Kohl's Corp. | 110,585 | 4,459 | ||||
Leggett & Platt Inc. | 105,847 | 4,146 | ||||
Travel + Leisure Co. | 68,482 | 3,500 | ||||
Thor Industries Inc. | 44,175 | 3,356 | ||||
Hanesbrands Inc. | 277,793 | 3,297 | ||||
* | Goodyear Tire & Rubber Co. | 223,539 | 2,888 | |||
* | Taylor Morrison Home Corp. Class A | 97,546 | 2,826 | |||
* | Grand Canyon Education Inc. | 31,439 | 2,803 | |||
Marriott Vacations Worldwide Corp. | 18,633 | 2,752 | ||||
Polaris Inc. | 25,827 | 2,752 | ||||
Gentex Corp. | 88,321 | 2,745 | ||||
* | Adient plc | 75,279 | 2,664 | |||
Carter's Inc. | 33,535 | 2,584 | ||||
* | Visteon Corp. | 22,212 | 2,492 | |||
H&R Block Inc. | 70,536 | 2,486 | ||||
KB Home | 68,180 | 2,352 | ||||
Nordstrom Inc. | 88,734 | 2,345 | ||||
Foot Locker Inc. | 69,302 | 2,286 | ||||
* | Skechers U.S.A. Inc. Class A | 56,921 | 2,243 | |||
* | Capri Holdings Ltd. | 45,682 | 2,227 | |||
* | Ollie's Bargain Outlet Holdings Inc. | 46,550 | 2,186 | |||
Wyndham Hotels & Resorts Inc. | 25,845 | 2,071 | ||||
* | Callaway Golf Co. | 92,978 | 2,019 | |||
* | AutoNation Inc. | 16,816 | 2,011 | |||
Graham Holdings Co. Class B | 3,166 | 1,941 | ||||
Cracker Barrel Old Country Store Inc. | 18,728 | 1,910 |
Shares | Market Value ($000) | |||||
Dana Inc. | 114,514 | 1,896 | ||||
Gap Inc. | 169,405 | 1,869 | ||||
Harley-Davidson Inc. | 52,321 | 1,841 | ||||
Texas Roadhouse Inc. Class A | 22,125 | 1,725 | ||||
Wendy's Co. | 70,243 | 1,309 | ||||
* | Victoria's Secret & Co. | 29,479 | 1,215 | |||
* | Urban Outfitters Inc. | 51,918 | 1,093 | |||
Choice Hotels International Inc. | 8,322 | 1,064 | ||||
Columbia Sportswear Co. | 12,872 | 1,001 | ||||
* | Six Flags Entertainment Corp. | 31,241 | 917 | |||
American Eagle Outfitters Inc. | 70,494 | 854 | ||||
112,801 | ||||||
Consumer Staples (5.6%) | ||||||
* | BJ's Wholesale Club Holdings Inc. | 108,020 | 6,251 | |||
Casey's General Stores Inc. | 29,483 | 6,178 | ||||
* | Performance Food Group Co. | 122,995 | 5,331 | |||
Ingredion Inc. | 52,863 | 5,006 | ||||
Flowers Foods Inc. | 157,650 | 4,351 | ||||
* | Post Holdings Inc. | 45,245 | 3,720 | |||
* | Grocery Outlet Holding Corp. | 69,265 | 2,649 | |||
* | Sprouts Farmers Market Inc. | 89,136 | 2,415 | |||
* | BellRing Brands Inc. | 88,605 | 2,317 | |||
* | Coty Inc. Class A | 272,602 | 1,933 | |||
* | Hain Celestial Group Inc. | 72,660 | 1,915 | |||
Nu Skin Enterprises Inc. Class A | 39,566 | 1,846 | ||||
Sanderson Farms Inc. | 8,937 | 1,783 | ||||
Energizer Holdings Inc. | 52,124 | 1,563 | ||||
* | Pilgrim's Pride Corp. | 38,653 | 1,288 | |||
* | Boston Beer Co. Inc. Class A | 2,976 | 1,057 | |||
Lancaster Colony Corp. | 8,166 | 995 | ||||
50,598 | ||||||
Energy (3.9%) | ||||||
EQT Corp. | 238,974 | 11,404 | ||||
NOV Inc. | 311,971 | 6,239 | ||||
HF Sinclair Corp. | 118,768 | 5,831 | ||||
DT Midstream Inc. | 44,487 | 2,585 | ||||
Equitrans Midstream Corp. | 323,256 | 2,544 | ||||
* | Range Resources Corp. | 61,462 | 2,087 | |||
ChampionX Corp. | 85,003 | 1,978 | ||||
* | CNX Resources Corp. | 85,225 | 1,851 | |||
34,519 | ||||||
Financials (17.2%) | ||||||
First Horizon Corp. | 423,961 | 9,679 | ||||
* | Alleghany Corp. | 10,878 | 9,070 | |||
Reinsurance Group of America Inc. | 53,353 | 6,714 | ||||
Unum Group | 162,401 | 5,919 | ||||
Voya Financial Inc. | 85,815 | 5,888 | ||||
Old Republic International Corp. | 226,807 | 5,425 | ||||
RenaissanceRe Holdings Ltd. | 34,950 | 5,366 | ||||
Prosperity Bancshares Inc. | 73,221 | 5,308 | ||||
Valley National Bancorp | 335,102 | 4,259 | ||||
Hanover Insurance Group Inc. | 28,279 | 4,146 | ||||
Webster Financial Corp. | 84,325 | 4,139 | ||||
United Bankshares Inc. | 108,266 | 4,066 | ||||
Cadence Bank | 149,777 | 4,004 | ||||
American Financial Group Inc. | 27,905 | 3,943 | ||||
Selective Insurance Group Inc. | 47,750 | 3,787 |
Shares | Market Value ($000) | |||||
Essent Group Ltd. | 87,683 | 3,752 | ||||
Old National Bancorp | 234,320 | 3,726 | ||||
New York Community Bancorp Inc. | 369,200 | 3,685 | ||||
MGIC Investment Corp. | 254,455 | 3,545 | ||||
FNB Corp. | 270,136 | 3,282 | ||||
Commerce Bancshares Inc. | 43,949 | 3,040 | ||||
* | Brighthouse Financial Inc. | 61,775 | 3,034 | |||
Synovus Financial Corp. | 69,217 | 2,952 | ||||
First American Financial Corp. | 47,018 | 2,849 | ||||
Kemper Corp. | 47,631 | 2,516 | ||||
Cullen/Frost Bankers Inc. | 19,906 | 2,488 | ||||
Associated Banc-Corp | 119,004 | 2,463 | ||||
FirstCash Holdings Inc. | 31,997 | 2,389 | ||||
* | Texas Capital Bancshares Inc. | 40,148 | 2,270 | |||
Bank OZK | 50,900 | 2,111 | ||||
Janus Henderson Group plc | 72,355 | 2,034 | ||||
Fulton Financial Corp. | 127,923 | 2,028 | ||||
SEI Investments Co. | 34,222 | 2,000 | ||||
Wintrust Financial Corp. | 22,615 | 1,976 | ||||
CNO Financial Group Inc. | 95,446 | 1,963 | ||||
Umpqua Holdings Corp. | 108,275 | 1,911 | ||||
Hancock Whitney Corp. | 37,903 | 1,889 | ||||
International Bancshares Corp. | 42,274 | 1,773 | ||||
Home BancShares Inc. | 75,398 | 1,703 | ||||
Washington Federal Inc. | 51,835 | 1,682 | ||||
Interactive Brokers Group Inc. Class A | 26,387 | 1,624 | ||||
RLI Corp. | 12,691 | 1,537 | ||||
Cathay General Bancorp | 36,743 | 1,510 | ||||
Primerica Inc. | 11,933 | 1,504 | ||||
Bank of Hawaii Corp. | 18,575 | 1,476 | ||||
Federated Hermes Inc. Class B | 40,620 | 1,380 | ||||
Mercury General Corp. | 21,062 | 1,031 | ||||
154,836 | ||||||
Health Care (6.9%) | ||||||
* | Jazz Pharmaceuticals plc | 48,837 | 7,310 | |||
* | Envista Holdings Corp. | 128,242 | 5,520 | |||
Encompass Health Corp. | 79,074 | 5,182 | ||||
* | Acadia Healthcare Co. Inc. | 71,486 | 5,088 | |||
* | United Therapeutics Corp. | 18,620 | 4,289 | |||
Perrigo Co. plc | 106,161 | 4,232 | ||||
* | LHC Group Inc. | 25,130 | 4,188 | |||
* | Amedisys Inc. | 25,871 | 2,999 | |||
* | Haemonetics Corp. | 40,526 | 2,564 | |||
Chemed Corp. | 5,258 | 2,547 | ||||
* | NuVasive Inc. | 41,190 | 2,365 | |||
Patterson Cos. Inc. | 68,791 | 2,173 | ||||
* | Exelixis Inc. | 118,135 | 2,165 | |||
* | Integra LifeSciences Holdings Corp. | 28,347 | 1,776 | |||
* | Globus Medical Inc. Class A | 25,109 | 1,672 | |||
* | ICU Medical Inc. | 8,387 | 1,523 | |||
* | Enovis Corp. | 21,226 | 1,408 | |||
* | HealthEquity Inc. | 21,976 | 1,375 | |||
* | LivaNova plc | 16,851 | 1,147 | |||
* | R1 RCM Inc. | 44,461 | 955 | |||
* | Neogen Corp. | 35,873 | 949 | |||
* | Progyny Inc. | 20,984 | 663 | |||
62,090 |
Shares | Market Value ($000) | |||||
Industrials (18.7%) | ||||||
AECOM | 112,300 | 7,844 | ||||
Owens Corning | 79,821 | 7,629 | ||||
Knight-Swift Transportation Holdings Inc. Class A | 131,797 | 6,411 | ||||
AGCO Corp. | 48,750 | 6,246 | ||||
* | CACI International Inc. Class A | 18,537 | 5,197 | |||
Woodward Inc. | 50,123 | 5,093 | ||||
Oshkosh Corp. | 52,926 | 4,917 | ||||
EMCOR Group Inc. | 42,417 | 4,481 | ||||
Curtiss-Wright Corp. | 31,189 | 4,428 | ||||
MDU Resources Group Inc. | 161,595 | 4,425 | ||||
* | Sunrun Inc. | 164,279 | 4,291 | |||
* | XPO Logistics Inc. | 78,423 | 4,191 | |||
* | Univar Solutions Inc. | 135,624 | 4,166 | |||
Science Applications International Corp. | 45,180 | 3,911 | ||||
Regal Rexnord Corp. | 31,247 | 3,904 | ||||
ManpowerGroup Inc. | 43,036 | 3,857 | ||||
Hexcel Corp. | 66,596 | 3,826 | ||||
Hubbell Inc. Class B | 19,862 | 3,771 | ||||
* | Stericycle Inc. | 72,890 | 3,685 | |||
Graco Inc. | 54,009 | 3,419 | ||||
Ryder System Inc. | 42,691 | 3,416 | ||||
Timken Co. | 54,768 | 3,345 | ||||
Flowserve Corp. | 103,499 | 3,260 | ||||
* | Kirby Corp. | 47,683 | 3,220 | |||
MSC Industrial Direct Co. Inc. Class A | 37,388 | 3,175 | ||||
* | Fluor Corp. | 112,198 | 3,167 | |||
GATX Corp. | 28,229 | 3,047 | ||||
* | JetBlue Airways Corp. | 252,363 | 2,710 | |||
* | Mercury Systems Inc. | 45,125 | 2,699 | |||
Lincoln Electric Holdings Inc. | 19,723 | 2,679 | ||||
Donaldson Co. Inc. | 48,153 | 2,518 | ||||
* | Middleby Corp. | 15,919 | 2,411 | |||
Brink's Co. | 39,074 | 2,377 | ||||
Lennox International Inc. | 11,226 | 2,345 | ||||
Watsco Inc. | 8,933 | 2,284 | ||||
EnerSys | 32,821 | 2,223 | ||||
ITT Inc. | 29,862 | 2,204 | ||||
Terex Corp. | 55,380 | 1,960 | ||||
KBR Inc. | 38,955 | 1,938 | ||||
nVent Electric plc | 54,747 | 1,938 | ||||
Crane Holdings Co. | 20,190 | 1,931 | ||||
Werner Enterprises Inc. | 47,495 | 1,927 | ||||
* | IAA Inc. | 49,242 | 1,922 | |||
* | MasTec Inc. | 22,898 | 1,914 | |||
Kennametal Inc. | 65,979 | 1,830 | ||||
MillerKnoll Inc. | 60,088 | 1,815 | ||||
MSA Safety Inc. | 14,187 | 1,809 | ||||
Landstar System Inc. | 10,488 | 1,588 | ||||
* | Clean Harbors Inc. | 16,304 | 1,523 | |||
* | Dycom Industries Inc. | 14,568 | 1,356 | |||
* | Esab Corp. | 21,277 | 1,064 | |||
Trinity Industries Inc. | 32,417 | 806 | ||||
168,093 | ||||||
Information Technology (10.1%) | ||||||
* | Arrow Electronics Inc. | 54,066 | 6,523 | |||
Western Union Co. | 312,994 | 5,678 | ||||
Jabil Inc. | 63,880 | 3,930 |
Shares | Market Value ($000) | |||||
Avnet Inc. | 78,660 | 3,811 | ||||
* | NCR Corp. | 104,737 | 3,633 | |||
Vontier Corp. | 134,438 | 3,606 | ||||
* | Fair Isaac Corp. | 8,764 | 3,589 | |||
* | WEX Inc. | 20,313 | 3,459 | |||
TD SYNNEX Corp. | 32,945 | 3,421 | ||||
* | Euronet Worldwide Inc. | 27,725 | 3,359 | |||
* | Wolfspeed Inc. | 44,129 | 3,320 | |||
* | II-VI Inc. | 43,881 | 2,743 | |||
* | Lumentum Holdings Inc. | 31,518 | 2,713 | |||
CDK Global Inc. | 49,011 | 2,669 | ||||
Cognex Corp. | 51,933 | 2,515 | ||||
MKS Instruments Inc. | 19,815 | 2,447 | ||||
* | Viasat Inc. | 59,093 | 2,334 | |||
* | Ciena Corp. | 45,524 | 2,314 | |||
* | First Solar Inc. | 32,138 | 2,269 | |||
Bread Financial Holdings Inc. | 39,465 | 2,175 | ||||
Vishay Intertechnology Inc. | 105,251 | 2,151 | ||||
Belden Inc. | 35,625 | 2,051 | ||||
Genpact Ltd. | 46,064 | 2,044 | ||||
Littelfuse Inc. | 7,432 | 2,008 | ||||
* | Cirrus Logic Inc. | 23,639 | 1,928 | |||
Xerox Holdings Corp. | 97,435 | 1,834 | ||||
* | Kyndryl Holdings Inc. | 142,409 | 1,757 | |||
National Instruments Corp. | 49,197 | 1,738 | ||||
* | Envestnet Inc. | 20,445 | 1,362 | |||
* | ACI Worldwide Inc. | 49,634 | 1,322 | |||
CMC Materials Inc. | 7,463 | 1,320 | ||||
* | Semtech Corp. | 17,554 | 1,125 | |||
* | Sabre Corp. | 133,073 | 999 | |||
Amkor Technology Inc. | 46,976 | 960 | ||||
* | Blackbaud Inc. | 12,451 | 793 | |||
* | CommVault Systems Inc. | 12,399 | 756 | |||
90,656 | ||||||
Materials (6.8%) | ||||||
Reliance Steel & Aluminum Co. | 49,769 | 9,675 | ||||
Chemours Co. | 127,148 | 5,479 | ||||
Alcoa Corp. | 87,773 | 5,417 | ||||
United States Steel Corp. | 207,312 | 5,197 | ||||
Sonoco Products Co. | 78,130 | 4,568 | ||||
RPM International Inc. | 50,517 | 4,451 | ||||
Commercial Metals Co. | 96,445 | 3,832 | ||||
Cabot Corp. | 45,003 | 3,403 | ||||
AptarGroup Inc. | 28,194 | 3,019 | ||||
Silgan Holdings Inc. | 66,561 | 2,916 | ||||
Ashland Global Holdings Inc. | 24,009 | 2,569 | ||||
Royal Gold Inc. | 20,834 | 2,356 | ||||
NewMarket Corp. | 5,432 | 1,790 | ||||
Minerals Technologies Inc. | 26,452 | 1,753 | ||||
Greif Inc. Class A | 21,161 | 1,258 | ||||
Sensient Technologies Corp. | 14,319 | 1,252 | ||||
Worthington Industries Inc. | 25,807 | 1,204 | ||||
* | Ingevity Corp. | 14,353 | 1,000 | |||
61,139 | ||||||
Real Estate (10.7%) | ||||||
Medical Properties Trust Inc. | 474,065 | 8,808 | ||||
Omega Healthcare Investors Inc. | 189,910 | 5,654 |
Shares | Market Value ($000) | |||||
STORE Capital Corp. | 195,073 | 5,382 | ||||
Kilroy Realty Corp. | 83,487 | 5,068 | ||||
Spirit Realty Capital Inc. | 101,332 | 4,255 | ||||
Cousins Properties Inc. | 118,218 | 4,084 | ||||
* | Jones Lang LaSalle Inc. | 20,420 | 4,029 | |||
Kite Realty Group Trust | 173,790 | 3,643 | ||||
National Retail Properties Inc. | 76,654 | 3,396 | ||||
Park Hotels & Resorts Inc. | 187,670 | 3,389 | ||||
Highwoods Properties Inc. | 83,290 | 3,272 | ||||
Physicians Realty Trust | 175,038 | 3,247 | ||||
American Campus Communities Inc. | 49,749 | 3,234 | ||||
SL Green Realty Corp. | 50,875 | 3,143 | ||||
EPR Properties | 59,360 | 3,042 | ||||
Apartment Income REIT Corp. Class A | 66,134 | 2,967 | ||||
Brixmor Property Group Inc. | 106,596 | 2,599 | ||||
Sabra Health Care REIT Inc. | 181,434 | 2,547 | ||||
Corporate Office Properties Trust | 89,328 | 2,469 | ||||
Hudson Pacific Properties Inc. | 120,972 | 2,409 | ||||
Pebblebrook Hotel Trust | 104,539 | 2,353 | ||||
JBG SMITH Properties | 90,799 | 2,344 | ||||
Lamar Advertising Co. Class A | 23,475 | 2,299 | ||||
Douglas Emmett Inc. | 75,111 | 2,123 | ||||
Macerich Co. | 169,394 | 1,990 | ||||
Rayonier Inc. | 46,143 | 1,902 | ||||
Healthcare Realty Trust Inc. | 62,130 | 1,806 | ||||
First Industrial Realty Trust Inc. | 32,078 | 1,705 | ||||
PotlatchDeltic Corp. | 30,736 | 1,612 | ||||
PS Business Parks Inc. | 5,904 | 1,108 | ||||
95,879 | ||||||
Utilities (5.9%) | ||||||
UGI Corp. | 166,616 | 7,121 | ||||
Southwest Gas Holdings Inc. | 52,355 | 4,876 | ||||
IDACORP Inc. | 40,142 | 4,376 | ||||
OGE Energy Corp. | 100,060 | 4,132 | ||||
Black Hills Corp. | 50,659 | 3,884 | ||||
Hawaiian Electric Industries Inc. | 86,793 | 3,747 | ||||
ONE Gas Inc. | 42,548 | 3,703 | ||||
New Jersey Resources Corp. | 76,344 | 3,506 | ||||
PNM Resources Inc. | 68,255 | 3,244 | ||||
Spire Inc. | 41,092 | 3,217 | ||||
Essential Utilities Inc. | 67,503 | 3,123 | ||||
ALLETE Inc. | 44,342 | 2,750 | ||||
NorthWestern Corp. | 42,981 | 2,633 | ||||
National Fuel Gas Co. | 34,797 | 2,559 | ||||
52,871 | ||||||
Total Common Stocks (Cost $851,107) | 895,296 |
Coupon | Shares | Market Value ($000) | ||||
Temporary Cash Investments (0.2%) | ||||||
Money Market Fund (0.2%) | ||||||
1 | Vanguard Market Liquidity Fund (Cost $2,035) | 0.854% | 20,351 | 2,035 | ||
Total Investments (99.9%) (Cost $853,142) | 897,331 | |||||
Other Assets and Liabilities—Net (0.1%) | 968 | |||||
Net Assets (100%) | 898,299 |
Cost is in $000. |
* | Non-income-producing security. |
1 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
REIT—Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts | ||||
($000) | ||||
Expiration | Number of Long (Short) Contracts | Notional Amount | Value and Unrealized Appreciation (Depreciation) | |
Long Futures Contracts | ||||
E-mini S&P Mid-Cap 400 Index | June 2022 | 2 | 503 | 9 |
Over-the-Counter Total Return Swaps | ||||||
Reference Entity | Termination Date | Counterparty | Notional Amount ($000) | Floating Interest Rate Received (Paid)1 (%) | Value and Unrealized Appreciation ($000) | Value and Unrealized (Depreciation) ($000) |
Harley-Davidson Inc. | 8/31/22 | BANA | 2,552 | (0.785) | — | (90) |
1 | Based on USD Overnight Bank Funding Rate as of the most recent payment date. Floating interest payment received/paid monthly. |
BANA—Bank of America, N.A. |
A. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been 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.
B. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.
Futures contracts are valued at their quoted daily settlement prices. Fluctuations in the value of the contracts are recorded as an asset (liability).
C. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily
to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded as an asset (liability) and as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
D. Various inputs may be used to determine the value of the fund’s investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments and derivatives as of May 31, 2022, based on the inputs used to value them:
Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
Investments | ||||
Assets | ||||
Common Stocks | 895,296 | — | — | 895,296 |
Temporary Cash Investments | 2,035 | — | — | 2,035 |
Total | 897,331 | — | — | 897,331 |
Derivative Financial Instruments | ||||
Assets | ||||
Futures Contracts1 | 9 | — | — | 9 |
Liabilities | ||||
Swap Contracts | — | 90 | — | 90 |
1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. |