Semiannual Report | February 29, 2020
   
   
  Vanguard Russell 1000 Index Funds
   
   
   
   
   
   
   
   
  Vanguard Russell 1000 Index Fund
   
  Vanguard Russell 1000 Value Index Fund
   
  Vanguard Russell 1000 Growth Index Fund
   
   
   
   
   
   
   
   
   
  See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.
   
   

 

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

Contents

 

About Your Fund’s Expenses 1
   
Russell 1000 Index Fund 3
   
Russell 1000 Value Index Fund 17
   
Russell 1000 Growth Index Fund 31

  

 

 

 

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.

 

1

 

 

Six Months Ended February 29, 2020

 

  Beginning Ending Expenses
  Account Value Account Value Paid During
  8/31/2019 2/29/2020 Period
Based on Actual Fund Return      
Russell 1000 Index Fund      
ETF Shares $1,000.00 $1,019.33 $0.40
Institutional Shares 1,000.00 1,019.46 0.35
Russell 1000 Value Index Fund      
ETF Shares $1,000.00 $982.76 $0.39
Institutional Shares 1,000.00 982.85 0.35
Russell 1000 Growth Index Fund      
ETF Shares $1,000.00 $1,053.53 $0.41
Institutional Shares 1,000.00 1,053.62 0.36
Based on Hypothetical 5% Yearly Return      
Russell 1000 Index Fund      
ETF Shares $1,000.00 $1,024.47 $0.40
Institutional Shares 1,000.00 1,024.52 0.35
Russell 1000 Value Index Fund      
ETF Shares $1,000.00 $1,024.47 $0.40
Institutional Shares 1,000.00 1,024.52 0.35
Russell 1000 Growth Index Fund      
ETF Shares $1,000.00 $1,024.47 $0.40
Institutional Shares 1,000.00 1,024.52 0.35

  

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 Russell 1000 Index Fund, 0.08% for ETF Shares and 0.07% for Institutional Shares; for the Russell 1000 Value Index Fund, 0.08% for ETF Shares and 0.07% for Institutional Shares; and for the Russell 1000 Growth Index Fund, 0.08% for ETF Shares and 0.07% for Institutional 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 (182/366).

 

2

 

 

Russell 1000 Index Fund

 

Sector Diversification 

As of February 29, 2020

 

Consumer Discretionary     14.7 %
Consumer Staples     6.0  
Energy     3.4  
Financial Services     20.1  
Health Care     13.3  
Materials & Processing     3.0  
Producer Durables     9.4  
Technology     24.8  
Utilities     5.3  
The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Russell Global Sectors (“RGS”), except for the “Other” category (if applicable), which includes securities that have not been provided a RGS classification as of the effective reporting period.
 
The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking their target index as closely as possible.

  

3

 

 

Russell 1000 Index Fund

 

Financial Statements (unaudited)

 

Schedule of Investments—Investments Summary 

As of February 29, 2020

 

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) four times in each fiscal year. For the second and fourth quarters the complete list of the fund’s holdings is available on vanguard.com and on Form N-CSR, or you can have it mailed to you without charge by calling 800-662-7447. For the first and third quarters of each fiscal year, the complete list of the fund’s holdings is available as an exhibit to its reports on Form N-PORT. The fund’s Form N-CSR and Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

            Market     Percentage  
            Value     of Net  
        Shares     ($000)     Assets  
Common Stocks                        
Consumer Discretionary                        
* Amazon.com Inc.     54,177       102,056       2.8%  
  Home Depot Inc.     144,367       31,449       0.9%  
  Walt Disney Co.     228,476       26,880       0.7%  
  Comcast Corp.     590,673       23,881       0.7%  
* Netflix Inc.     55,252       20,390       0.6%  
  Walmart Inc.     184,194       19,834       0.6%  
  McDonald’s Corp.     98,635       19,152       0.5%  
  Costco Wholesale Corp.     57,557       16,182       0.4%  
  Consumer Discretionary—Other †             264,765       7.4%  
                524,589       14.6%  
Consumer Staples                        
  Procter & Gamble Co.     323,536       36,634       1.0%  
  Coca-Cola Co.     502,160       26,861       0.8%  
  PepsiCo Inc.     183,528       24,231       0.7%  
  Philip Morris International Inc.     203,476       16,659       0.5%  
  Consumer Staples—Other †             109,030       3.0%  
                213,415       6.0%  
Energy                        
  Exxon Mobil Corp.     554,432       28,520       0.8%  
  Chevron Corp.     249,905       23,326       0.7%  
  Energy—Other †             69,017       1.9%  
                120,863       3.4%  
Financial Services                        
* Berkshire Hathaway Inc.     255,901       52,803       1.5%  
  JPMorgan Chase & Co.     408,221       47,399       1.3%  
  Visa Inc.     224,377       40,783       1.1%  
  Mastercard Inc.     116,164       33,717       0.9%  
  Bank of America Corp.     1,066,379       30,392       0.9%  
  Wells Fargo & Co.     498,771       20,375       0.6%  

 

4

 

 

Russell 1000 Index Fund      

 

            Market     Percentage  
            Value     of Net  
        Shares     ($000)     Assets  
  Citigroup Inc.     286,274       18,167       0.5%  
* PayPal Holdings Inc.     154,137       16,645       0.5%  
  Financial Services—Other †             457,740       12.8%  
                718,021       20.1%  
Health Care                        
  Johnson & Johnson     347,843       46,778       1.3%  
  UnitedHealth Group Inc.     123,731       31,546       0.9%  
  Merck & Co. Inc.     333,425       25,527       0.7%  
  Pfizer Inc.     728,675       24,352       0.7%  
  Bristol-Myers Squibb Co.     306,501       18,102       0.5%  
  Medtronic plc     175,666       17,684       0.5%  
  Abbott Laboratories     225,745       17,389       0.5%  
  AbbVie Inc.     193,897       16,619       0.5%  
  Amgen Inc.     78,565       15,692       0.4%  
  Thermo Fisher Scientific Inc.     52,299       15,209       0.4%  
  Health Care—Other †             244,466       6.8%  
                473,364       13.2%  
                         
Materials & Processing †             105,652       2.9%  
                         
Producer Durables                        
  Boeing Co.     69,354       19,080       0.6%  
  Honeywell International Inc.     94,695       15,357       0.4%  
  Accenture plc Class A     83,436       15,068       0.4%  
  Union Pacific Corp.     91,193       14,574       0.4%  
  Producer Durables—Other †             269,287       7.5%  
                333,366       9.3%  
Technology                        
  Microsoft Corp.     990,540       160,477       4.5%  
  Apple Inc.     582,168       159,141       4.4%  
* Facebook Inc.     313,068       60,256       1.7%  
* Alphabet Inc. Class A     39,298       52,630       1.5%  
* Alphabet Inc. Class C     39,196       52,496       1.5%  
  Intel Corp.     570,158       31,655       0.9%  
  Cisco Systems Inc.     561,920       22,437       0.6%  
* Adobe Inc.     63,810       22,022       0.6%  
  NVIDIA Corp.     76,486       20,657       0.6%  
* salesforce.com Inc.     108,931       18,562       0.5%  
  International Business Machines Corp.     116,261       15,131       0.4%  
  Technology—Other †             267,478       7.5%  
                882,942       24.7%  
Utilities                          
  AT&T Inc.     956,486       33,687       0.9%  
  Verizon Communications Inc.     542,133       29,362       0.8%  
  NextEra Energy Inc.     63,949       16,164       0.5%  
  Utilities—Other †             110,275       3.1%  
                189,488       5.3%  
Total Common Stocks (Cost $2,736,932)             3,561,700       99.5%  

 

5

 

 

Russell 1000 Index Fund        

 

                Market     Percentage  
                Value     of Net  
      Coupon       Shares     ($000)     Assets  
Temporary Cash Investments                                
Money Market Fund                                
1,2 Vanguard Market Liquidity Fund     1.706 %     117,281       11,732       0.4%  
                                 
3 U.S. Government and Agency Obligations †                     868       0.0%  
Total Temporary Cash Investments (Cost $12,598)                     12,600       0.4%  
4 Total Investments (Cost $2,749,530)                     3,574,300       99.9%  
2 Other Assets and Liabilities—Net                     4,496       0.1%  
Net Assets                     3,578,796       100.0%  

Cost rounded to $000.

See Note A in Notes to Financial Statements.

* Non-income-producing security.

Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.

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.

2 Collateral of $1,215,000 was received for securities on loan.

3 Securities with a value of $789,000 have been segregated as initial margin for open futures contracts.

4 The total value of securities on loan is $1,159,000.

 

Derivative Financial Instruments Outstanding as of Period End                        
                         
Futures Contracts                                
                          ($000 )
                              Value and  
              Number of               Unrealized  
              Long (Short)       Notional       Appreciation  
      Expiration       Contracts       Amount       (Depreciation)  
Long Futures Contracts                                
E-mini S&P 500 Index     March 2020       118       17,411       (1,681 )

 

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

 

6

 

 

Russell 1000 Index Fund

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $2,737,800) 3,562,568
Affiliated Issuers (Cost $11,730) 11,732
Total Investments in Securities 3,574,300
Investment in Vanguard 175
Cash 4
Receivables for Accrued Income 6,705
Receivables for Capital Shares Issued 52
Total Assets 3,581,236
Liabilities  
Payables for Investment Securities Purchased 18
Collateral for Securities on Loan 1,215
Payables for Capital Shares Redeemed 765
Payables to Vanguard 408
Variation Margin Payable—Futures Contracts 34
Total Liabilities 2,440
Net Assets 3,578,796
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 2,727,447
Total Distributable Earnings (Loss) 851,349
Net Assets 3,578,796
   
ETF Shares—Net Assets  
Applicable to 9,250,000 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 1,255,085
Net Asset Value Per Share—ETF Shares $135.68
   
Institutional Shares—Net Assets  
Applicable to 8,840,770 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 2,323,711
Net Asset Value Per Share—Institutional Shares $262.84

 

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

 

7

 

 

Russell 1000 Index Fund

 

Statement of Operations

 

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends 35,699
Interest1 126
Securities Lending—Net 90
Total Income 35,915
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 287
Management and Administrative—ETF Shares 344
Management and Administrative—Institutional Shares 609
Marketing and Distribution—ETF Shares 43
Marketing and Distribution—Institutional Shares 38
Custodian Fees 68
Shareholders’ Reports—ETF Shares 7
Shareholders’ Reports—Institutional Shares 1
Trustees’ Fees and Expenses 1
Total Expenses 1,398
Net Investment Income 34,517
Realized Net Gain (Loss)  
Investment Securities Sold1,2 53,291
Futures Contracts 1,632
Realized Net Gain (Loss) 54,923
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 (13,992)
Futures Contracts (1,683)
Change in Unrealized Appreciation (Depreciation) (15,675)
Net Increase (Decrease) in Net Assets Resulting from Operations 73,765
1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $118,000, $3,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.
2 Includes $55,913,000 of net gain (loss) resulting from in-kind redemptions.

 

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

 

8

 

 

Russell 1000 Index Fund

 

Statement of Changes in Net Assets

 

  Six Months Ended   Year Ended
  February 29,   August 31,
  2020   2019
  ($000)   ($000)
Increase (Decrease) in Net Assets      
Operations      
Net Investment Income 34,517   58,249
Realized Net Gain (Loss) 54,923   148,119
Change in Unrealized Appreciation (Depreciation) (15,675)   (95,786)
Net Increase (Decrease) in Net Assets Resulting from Operations 73,765   110,582
Distributions1      
ETF Shares (11,959)   (18,678)
Institutional Shares (23,325)   (38,353)
Total Distributions (35,284)   (57,031)
Capital Share Transactions      
ETF Shares 53,597   157,814
Institutional Shares (32,259)   165,134
Net Increase (Decrease) from Capital Share Transactions 21,338   322,948
Total Increase (Decrease) 59,819   376,499
Net Assets      
Beginning of Period 3,518,977   3,142,478
End of Period 3,578,796   3,518,977

1 Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

9

 

 

Russell 1000 Index Fund

 

Financial Highlights

 

ETF Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $134.37 $133.57 $113.60 $99.81 $91.37 $92.70  
Investment Operations                  
Net Investment Income   1.2931 2.3951 2.2091 2.0541 1.892 1.679  
Net Realized and Unrealized Gain (Loss)                
on Investments   1.350 .759 19.896 13.753 8.383 (1.355)  
Total from Investment Operations   2.643 3.154 22.105 15.807 10.275 .324  
Distributions                  
Dividends from Net Investment Income (1.333) (2.354) (2.135) (2.017) (1.835) (1.654)  
Distributions from Realized Capital Gains    
Total Distributions   (1.333) (2.354) (2.135) (2.017) (1.835) (1.654)  
Net Asset Value, End of Period   $135.68 $134.37 $133.57 $113.60 $99.81 $91.37  
                 
Total Return   1.93% 2.45% 19.68% 16.02% 11.41% 0.29%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $1,255 $1,196 $1,008 $724 $679 $514  
Ratio of Total Expenses to                  
Average Net Assets   0.08% 0.08% 0.12% 0.12% 0.12% 0.12%  
Ratio of Net Investment Income to                  
Average Net Assets   1.80% 1.85% 1.78% 1.94% 2.05% 1.84%  
Portfolio Turnover Rate2   3% 6% 9% 11% 9% 4%  

The expense ratio and net investment income ratio for the current period have been annualized.

1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

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

 

10

 

 

Russell 1000 Index Fund

 

Financial Highlights

 

Institutional Shares

 

  Six Months              
    Ended       Year Ended August 31,  
For a Share Outstanding February 29,        
Throughout Each Period   2020   2019 2018 2017 2016 2015  
Net Asset Value, Beginning of Period $260.26 $258.75 $220.06 $193.36 $176.99 $179.58  
Investment Operations                  
Net Investment Income   2.5141 4.6451 4.3451 4.0801 3.732 3.329  
Net Realized and Unrealized Gain (Loss)                
on Investments   2.631 1.483 38.573 26.609 16.259 (2.641)  
Total from Investment Operations   5.145 6.128 42.918 30.689 19.991 .688  
Distributions                  
Dividends from Net Investment Income (2.565) (4.618) (4.228) (3.989) (3.621) (3.278)  
Distributions from Realized Capital Gains    
Total Distributions   (2.565) (4.618) (4.228) (3.989) (3.621) (3.278)  
Net Asset Value, End of Period   $262.84 $260.26 $258.75 $220.06 $193.36 $176.99  
                 
Total Return   1.95% 2.45% 19.72% 16.06% 11.47% 0.33%  
                 
Ratios/Supplemental Data                  
Net Assets, End of Period (Millions)   $2,324 $2,323 $2,134 $2,014 $1,549 $1,251  
Ratio of Total Expenses to                  
Average Net Assets   0.07% 0.07% 0.08% 0.08% 0.08% 0.08%  
Ratio of Net Investment Income to                  
Average Net Assets   1.81% 1.86% 1.82% 1.98% 2.09% 1.88%  
Portfolio Turnover Rate2   3% 6% 9% 11% 9% 4%  

The expense ratio and net investment income ratio for the current period have been annualized.

1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

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

 

11

 

 

Russell 1000 Index Fund

 

Notes to Financial Statements

 

Vanguard Russell 1000 Index 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: ETF Shares and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.

 

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 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.

 

2. 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 counter-party 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 assets pledged as initial margin for open contracts are noted in the Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities 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 February 29, 2020, 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 the notional amounts at each quarter-end during the period.

 

12

 

 

Russell 1000 Index Fund

 

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 (August 31, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

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 before the opening of the market 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 event 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 Assets and Liabilities 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. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

13

 

 

Russell 1000 Index Fund

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) 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.

 

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 Assets and Liabilities. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 29, 2020, the fund had contributed to Vanguard capital in the amount of $175,000, representing less than 0.01% of the fund’s net assets and 0.07% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

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

 

Level 1—Quoted prices in active markets for identical securities. 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.

 

14

 

 

Russell 1000 Index Fund

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

  Level 1 Level 2 Level 3 Total
  ($000) ($000) ($000) ($000)
Investments        
Assets        
Common Stocks 3,561,700 3,561,700
Temporary Cash Investments 11,732 868 12,600
Total 3,573,432 868 3,574,300
Derivative Financial Instruments        
Liabilities        
Futures Contracts1 34 34

1 Represents variation margin on the last day of the reporting period.

 

D. As of February 29, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

  Amount
  ($000)
Tax Cost 2,749,530
Gross Unrealized Appreciation 1,044,405
Gross Unrealized Depreciation (221,316)
Net Unrealized Appreciation (Depreciation) 823,089

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2019, the fund had available capital losses totaling $39,003,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E. During the six months ended February 29, 2020, the fund purchased $237,249,000 of investment securities and sold $220,732,000 of investment securities, other than temporary cash investments. Purchases and sales include $85,007,000 and $110,138,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

15

 

 

Russell 1000 Index Fund

 

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

 

    Six Months Ended       Year Ended
    February 29, 2020   August 31, 2019
    Amount   Shares   Amount   Shares
    ($000 )     (000 )   ($000 )     (000 )
ETF Shares                                
Issued     165,071       1,125       478,030       3,800  
Issued in Lieu of Cash Distributions                        
Redeemed     (111,474 )     (775 )     (320,216 )     (2,450 )
Net Increase (Decrease)—ETF Shares     53,597       350       157,814       1,350  
Institutional Shares                                
Issued     163,933       602       501,900       2,013  
Issued in Lieu of Cash Distributions     22,398       82       35,811       143  
Redeemed     (218,590 )     (769 )     (372,577 )     (1,478 )
Net Increase (Decrease)—Institutional Shares     (32,259 )     (85 )     165,134       678  

 

G. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

16

 

 

Russell 1000 Value Index Fund

 

Sector Diversification

As of February 29, 2020

 

Consumer Discretionary 11.0%
   
Consumer Staples 8.9
   
Energy 7.0
   
Financial Services 29.1
   
Health Care 12.7
   
Materials & Processing 4.4
   
Producer Durables 9.0
   
Technology 6.7
   
Utilities 11.2

 

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Russell Global Sectors (“RGS”), except for the “Other” category (if applicable), which includes securities that have not been provided a RGS classification as of the effective reporting period.

 

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, at-tempting to remain fully invested and tracking their target index as closely as possible.

 

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Russell 1000 Value Index Fund

  

Financial Statements (unaudited)

 

Schedule of Investments—Investments Summary

As of February 29, 2020

 

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

  

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) four times in each fiscal year. For the second and fourth quarters the complete list of the fund’s holdings is available on vanguard.com and on Form N-CSR, or you can have it mailed to you without charge by calling 800-662-7447. For the first and third quarters of each fiscal year, the complete list of the fund’s holdings is available as an exhibit to its reports on Form N-PORT. The fund’s Form N-CSR and Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

      Market Percentage
      Value of Net
    Shares ($000) Assets
Common Stocks      
Consumer Discretionary      
  Walt Disney Co. 517,086 60,835 1.6%
  Walmart Inc. 415,664 44,759 1.2%
  McDonald’s Corp. 187,211 36,351 1.0%
  Home Depot Inc. 140,416 30,588 0.8%
  Comcast Corp. 707,311 28,597 0.8%
  Consumer Discretionary—Other †   210,804 5.6%
      411,934 11.0%
Consumer Staples      
  Procter & Gamble Co. 689,629 78,087 2.1%
  Philip Morris International Inc. 460,396 37,693 1.0%
  CVS Health Corp. 384,530 22,756 0.6%
  Mondelez International Inc. 421,260 22,243 0.6%
  Coca-Cola Co. 361,427 19,333 0.5%
  Colgate-Palmolive Co. 248,746 16,808 0.5%
  Consumer Staples—Other †   136,938 3.6%
      333,858 8.9%
Energy      
  Exxon Mobil Corp. 1,254,140 64,513 1.7%
  Chevron Corp. 564,651 52,705 1.4%
  ConocoPhillips 325,439 15,758 0.4%
  Energy—Other †   130,877 3.5%
      263,853 7.0%
Financial Services      
* Berkshire Hathaway Inc. 578,994 119,470 3.2%
  JPMorgan Chase & Co. 923,249 107,198 2.9%
  Bank of America Corp. 2,410,079 68,687 1.8%
  Wells Fargo & Co. 1,128,898 46,116 1.2%
  Citigroup Inc. 646,424 41,022 1.1%
  CME Group Inc. 104,877 20,852 0.6%
  US Bancorp 423,655 19,675 0.5%

 

18

 

 

Russell 1000 Value Index Fund      
         
      Market Percentage
      Value of Net
    Shares ($000) Assets
  Chubb Ltd. 133,525 19,365 0.5%
  Goldman Sachs Group Inc. 94,337 18,940 0.5%
  Prologis Inc. 217,007 18,289 0.5%
  Truist Financial Corp. 395,982 18,271 0.5%
  PNC Financial Services Group Inc. 129,624 16,385 0.4%
  BlackRock Inc. 35,033 16,221 0.4%
  Morgan Stanley 344,582 15,517 0.4%
  Financial Services—Other †   545,396 14.5%
      1,091,404 29.0%
Health Care      
  Johnson & Johnson 667,947 89,826 2.4%
  Pfizer Inc. 1,648,242 55,084 1.5%
  Medtronic plc 397,367 40,003 1.1%
  Danaher Corp. 172,804 24,984 0.7%
  Gilead Sciences Inc. 323,108 22,411 0.6%
  Abbott Laboratories 289,209 22,278 0.6%
  Allergan plc 97,186 18,530 0.5%
  Becton Dickinson and Co. 72,468 17,234 0.4%
  Bristol-Myers Squibb Co. 286,299 16,909 0.4%
  Health Care—Other †   168,835 4.5%
      476,094 12.7%
Materials & Processing      
  Linde plc 159,102 30,390 0.8%
  Materials & Processing—Other †   134,149 3.6%
      164,539 4.4%
Producer Durables      
  United Technologies Corp. 240,094 31,354 0.8%
  General Electric Co. 2,563,110 27,887 0.7%
  Caterpillar Inc. 146,164 18,159 0.5%
  Honeywell International Inc. 108,922 17,664 0.5%
  Producer Durables—Other †   242,174 6.5%
      337,238 9.0%
Technology      
  Intel Corp. 1,289,448 71,590 1.9%
* Micron Technology Inc. 327,089 17,192 0.4%
  Technology—Other †   160,757 4.3%
      249,539 6.6%
Utilities      
  AT&T Inc. 2,162,392 76,159 2.0%
  Verizon Communications Inc. 1,225,558 66,376 1.8%
  NextEra Energy Inc. 144,322 36,479 1.0%
  Duke Energy Corp. 215,854 19,794 0.5%
  Dominion Energy Inc. 243,508 19,037 0.5%
  Southern Co. 308,161 18,601 0.5%
  Utilities—Other †   185,441 4.9%
      421,887 11.2%
Total Common Stocks (Cost $3,778,866)   3,750,346 99.8%

 

19

 

 

Russell 1000 Value Index Fund        
         
        Market Percentage
        Value of Net
    Coupon Shares ($000) Assets
Temporary Cash Investments        
Money Market Fund        
1,2   Vanguard Market Liquidity Fund 1.706% 14,693 1,470 0.1%
           
3 U.S. Government and Agency Obligations †     449 0.0%
Total Temporary Cash Investments (Cost $1,918)     1,919 0.1%
4 Total Investments (Cost $3,780,784)     3,752,265 99.9%
2 Other Assets and Liabilities—Net     4,570 0.1%
Net Assets     3,756,835 100.0%

Cost rounded to $000.

See Note A in Notes to Financial Statements.
* Non-income-producing security.
Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.
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.

2 Collateral of $1,464,000 was received for securities on loan.

3 Securities with a value of $271,000 have been segregated as initial margin for open futures contracts.

4 The total value of securities on loan is $1,107,000.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Futures Contracts

 

 

        ($000)
        Value and
    Number of   Unrealized
    Long (Short) Notional Appreciation
  Expiration Contracts Amount (Depreciation)
Long Futures Contracts        
E-mini S&P 500 Index March 2020 40 5,902 (640)

 

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

 

20

 

 

Russell 1000 Value Index Fund

  

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts) Amount
Assets  
Investments in Securities, at Value  
Unaffiliated Issuers (Cost $3,779,315) 3,750,795
Affiliated Issuers (Cost $1,469) 1,470
Total Investments in Securities 3,752,265
Investment in Vanguard 180
Receivables for Accrued Income 10,263
Receivables for Capital Shares Issued 2,512
Total Assets 3,765,220
Liabilities  
Due to Custodian 3,697
Payables for Investment Securities Purchased 4
Collateral for Securities on Loan 1,464
Payables for Capital Shares Redeemed 2,790
Payables to Vanguard 418
Variation Margin Payable—Futures Contracts 12
Total Liabilities 8,385
Net Assets 3,756,835
   
At February 29, 2020, net assets consisted of:  
   
Paid-in Capital 3,782,054
Total Distributable Earnings (Loss) (25,219)
Net Assets 3,756,835
   
ETF Shares—Net Assets  
Applicable to 19,350,000 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 2,049,753
Net Asset Value Per Share—ETF Shares $105.93
   
Institutional Shares—Net Assets  
Applicable to 8,252,878 outstanding $.001 par value shares of  
beneficial interest (unlimited authorization) 1,707,082
Net Asset Value Per Share—Institutional Shares $206.85

 

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

 

21

 

 

Russell 1000 Value Index Fund

 

Statement of Operations

  

  Six Months Ended
  February 29, 2020
  ($000)
Investment Income  
Income  
Dividends 53,075
Interest1 29
Securities Lending—Net 170
Total Income 53,274
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 307
Management and Administrative—ETF Shares 538
Management and Administrative—Institutional Shares 421
Marketing and Distribution—ETF Shares 72
Marketing and Distribution—Institutional Shares 40
Custodian Fees 141
Shareholders’ Reports—ETF Shares 16
Shareholders’ Reports—Institutional Shares 1
Trustees’ Fees and Expenses 1
Total Expenses 1,537
Net Investment Income 51,737
Realized Net Gain (Loss)  
Investment Securities Sold1,2 65,874
Futures Contracts 1,151
Realized Net Gain (Loss) 67,025
Change in Unrealized Appreciation (Depreciation)  
Investment Securities1 (180,538)
Futures Contracts (651)
Change in Unrealized Appreciation (Depreciation) (181,189)
Net Increase (Decrease) in Net Assets Resulting from Operations (62,427)
1 Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $23,000, $1,000, and $1,000, respectively. Purchases and sales are for temporary cash investment purposes.
2 Includes $67,685,000 of net gain (loss) resulting from in-kind redemptions.

 

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

 

22

 

 

Russell 1000 Value Index Fund

 

Statement of Changes in Net Assets

 

  Six Months Ended   Year Ended
  February 29,   August 31,
  2020   2019
  ($000)   ($000)
Increase (Decrease) in Net Assets      
Operations      
Net Investment Income 51,737   86,224
Realized Net Gain (Loss) 67,025   224,418
Change in Unrealized Appreciation (Depreciation) (181,189)   (270,040)
Net Increase (Decrease) in Net Assets Resulting from Operations (62,427)   40,602
Distributions1      
ETF Shares (28,564)   (41,769)
Institutional Shares (25,596)   (39,827)
Total Distributions (54,160)   (81,596)
Capital Share Transactions      
ETF Shares 209,938   447,077
Institutional Shares (139,509)   306,866
Net Increase (Decrease) from Capital Share Transactions 70,429   753,943
Total Increase (Decrease) (46,158)   712,949
Net Assets      
Beginning of Period 3,802,993   3,090,044
End of Period 3,756,835   3,802,993
1 Certain prior period numbers have been reclassified to conform with current period presentation.

 

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

 

23

 

 

Russell 1000 Value Index Fund

  

Financial Highlights

  

ETF Shares

 

    Six Months                                
    Ended                                
For a Share Outstanding   February 29,                 Year Ended August 31,  
Throughout Each Period   2020     2019     2018     2017     2016     2015  
Net Asset Value, Beginning of Period   $ 109.22     $ 111.20     $ 101.32     $ 93.14     $ 84.77     $ 89.83  
Investment Operations                                                
Net Investment Income     1.469 1     2.713 1     2.522 1     2.437 1     2.205       1.990  
Net Realized and Unrealized Gain (Loss) on Investments     (3.231 )     (2.107 )     9.836       8.109       8.312       (5.097 )
Total from Investment Operations     (1.762 )     .606       12.358       10.546       10.517       (3.107 )
Distributions                                                
Dividends from Net Investment Income     (1.528 )     (2.586 )     (2.478 )     (2.366 )     (2.147 )     (1.953 )
Distributions from Realized Capital Gains                                    
Total Distributions     (1.528 )     (2.586 )     (2.478 )     (2.366 )     (2.147 )     (1.953 )
Net Asset Value, End of Period   $ 105.93     $ 109.22     $ 111.20     $ 101.32     $ 93.14     $ 84.77  
                                                 
Total Return     -1.72 %     0.60 %     12.36 %     11.45 %     12.65 %     -3.59 %
                                                 
Ratios/Supplemental Data                                                
Net Assets, End of Period (Millions)   $ 2,050     $ 1,914     $ 1,487     $ 1,153     $ 668     $ 407  
Ratio of Total Expenses to Average Net Assets     0.08 %     0.08 %     0.12 %     0.12 %     0.12 %     0.12 %
Ratio of Net Investment Income to Average Net Assets     2.52 %     2.51 %     2.35 %     2.48 %     2.58 %     2.26 %
Portfolio Turnover Rate2     3 %     17 %     16 %     22 %     18 %     18 %

The expense ratio and net investment income ratio for the current period have been annualized.

1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

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

 

24

 

 

Russell 1000 Value Index Fund

  

Financial Highlights

 

Institutional Shares

 

    Six Months                                
    Ended                                
For a Share Outstanding   February 29,                 Year Ended August 31,  
Throughout Each Period   2020     2019     2018     2017     2016     2015  
Net Asset Value, Beginning of Period   $ 213.25     $ 217.14     $ 197.85     $ 181.86     $ 165.50     $ 175.38  
Investment Operations                                                
Net Investment Income     2.869 1     5.294 1     4.978 1     4.850 1     4.359       3.946  
Net Realized and Unrealized Gain (Loss) on Investments     (6.295 )     (4.087 )     19.227       15.821       16.249       (9.955 )
Total from Investment Operations     (3.426 )     1.207       24.205       20.671       20.608       (6.009 )
Distributions                                                
Dividends from Net Investment Income     (2.974 )     (5.097 )     (4.915 )     (4.681 )     (4.248 )     (3.871 )
Distributions from Realized Capital Gains                                    
Total Distributions     (2.974 )     (5.097 )     (4.915 )     (4.681 )     (4.248 )     (3.871 )
Net Asset Value, End of Period   $ 206.85     $ 213.25     $ 217.14     $ 197.85     $ 181.86     $ 165.50  
                                                 
Total Return     -1.71 %     0.61 %     12.39 %     11.49 %     12.72 %     -3.55 %
                                                 
Ratios/Supplemental Data                                                
Net Assets, End of Period (Millions)   $ 1,707     $ 1,889     $ 1,603     $ 1,541     $ 1,485     $ 1,283  
Ratio of Total Expenses to Average Net Assets     0.07 %     0.07 %     0.08 %     0.08 %     0.08 %     0.08 %
Ratio of Net Investment Income to Average Net Assets     2.52 %     2.52 %     2.39 %     2.52 %     2.62 %     2.30 %
Portfolio Turnover Rate2     3 %     17 %     16 %     22 %     18 %     18 %

The expense ratio and net investment income ratio for the current period have been annualized.

1 Calculated based on average shares outstanding.
2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

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

 

25

 

  

Russell 1000 Value Index Fund

  

Notes to Financial Statements

 

Vanguard Russell 1000 Value Index 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: ETF Shares and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on Nasdaq; they can be purchased and sold through a broker.

 

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 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.

 

2. 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 assets pledged as initial margin for open contracts are noted in the Schedule of Investments.

 

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Schedule of Investments. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities 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 February 29, 2020, 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 the notional amounts at each quarter-end during the period.

 

26

 

 

Russell 1000 Value Index Fund

 

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 (August 31, 2016–2019), and for the period ended February 29, 2020, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

 

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 before the opening of the market 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 event 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 Assets and Liabilities 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. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

 

6. Credit Facility and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $4.3 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.

 

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans

 

27

 

 

Russell 1000 Value Index Fund

 

may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.

 

For the six months ended February 29, 2020, the fund did not utilize the credit facility or the Interfund Lending Program.

 

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 are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) 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.

 

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 Assets and Liabilities. All other costs of operations payable to Vanguard are generally settled twice a month.

 

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At February 29, 2020, the fund had contributed to Vanguard capital in the amount of $180,000, representing less than 0.01% of the fund’s net assets and 0.07% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

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

 

Level 1—Quoted prices in active markets for identical securities. 

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.

 

28

 

 

Russell 1000 Value Index Fund

 

The following table summarizes the market value of the fund’s investments and derivatives as of February 29, 2020, based on the inputs used to value them:

 

    Level 1     Level 2     Level 3     Total  
    ($000)     ($000)     ($000)     ($000)  
Investments                                
Assets                                
Common Stocks     3,750,346                   3,750,346  
Temporary Cash Investments     1,470       449             1,919  
Total     3,751,816       449             3,752,265  
Derivative Financial Instruments                                
Liabilities                                
Futures Contracts1     12                   12  
1 Represents variation margin on the last day of the reporting period.

 

D. As of February 29, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

    Amount  
    ($000)  
Tax Cost     3,780,784  
Gross Unrealized Appreciation     406,267  
Gross Unrealized Depreciation     (435,426 )
Net Unrealized Appreciation (Depreciation)     (29,159 )

 

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2019, the fund had available capital losses totaling $81,313,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2020; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

 

E. During the six months ended February 29, 2020, the fund purchased $420,091,000 of investment securities and sold $354,514,000 of investment securities, other than temporary cash investments. Purchases and sales include $302,214,000 and $245,647,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

29

 

 

Russell 1000 Value Index Fund

  

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

 

    Six Months Ended           Year Ended  
    February 29, 2020     August 31, 2019  
    Amount     Shares     Amount     Shares  
    ($000)     (000)     ($000)     (000)  
ETF Shares                                
Issued     456,981       3,950       1,270,748       11,700  
Issued in Lieu of Cash Distributions                        
Redeemed     (247,043 )     (2,125 )     (823,671 )     (7,550 )
Net Increase (Decrease)—ETF Shares     209,938       1,825       447,077       4,150  
Institutional Shares                                
Issued     125,951       564       634,913       3,030  
Issued in Lieu of Cash Distributions     22,134       98       36,445       173  
Redeemed     (287,594 )     (1,267 )     (364,492 )     (1,727 )
Net Increase (Decrease)—Institutional Shares     (139,509 )     (605 )     306,866       1,476  

 

G. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance. Management is continuing to monitor this development and evaluate its impact on the fund.

 

Management has determined that no other events or transactions occurred subsequent to February 29, 2020, that would require recognition or disclosure in these financial statements.

 

30

 

 

Russell 1000 Growth Index Fund

 

Sector Diversification

As of February 29, 2020

 

Consumer Discretionary     18.0 %
Consumer Staples     3.5  
Energy     0.2  
Financial Services     12.4  
Health Care     13.8  
Materials & Processing     1.7  
Producer Durables     9.7  
Technology     40.5  
Utilities     0.2  

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Russell Global Sectors (“RGS”), except for the “Other” category (if applicable), which includes securities that have not been provided a RGS classification as of the effective reporting period.

  

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, at-tempting to remain fully invested and tracking their target index as closely as possible.

 

31

 

 

Russell 1000 Growth Index Fund

 

Financial Statements (unaudited)

 

Schedule of Investments—Investments Summary

As of February 29, 2020

 

This Statement summarizes the fund’s holdings by asset type. Details are reported for each of the fund’s 50 largest individual holdings and for investments that, in total for any issuer, represent more than 1% of the fund’s net assets. The total value of smaller holdings is reported as a single amount within each category.

 

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) four times in each fiscal year. For the second and fourth quarters the complete list of the fund’s holdings is available on vanguard.com and on Form N-CSR, or you can have it mailed to you without charge by calling 800-662-7447. For the first and third quarters of each fiscal year, the complete list of the fund’s holdings is available as an exhibit to its reports on Form N-PORT. The fund’s Form N-CSR and Form N-PORT reports are available on the SEC’s website at www.sec.gov.

 

 

 

 

Market

Percentage

 

 

 

Value

of Net

 

 

Shares

($000)

Assets

Common Stocks

 

 

 

Consumer Discretionary

 

 

 

*

Amazon.com Inc.

178,953

337,103

5.3%

*

Netflix Inc.

182,155

67,221

1.1%

 

Home Depot Inc.

271,653

59,177

0.9%

 

Costco Wholesale Corp.

189,982

53,412

0.8%

 

NIKE Inc.

533,451

47,680

0.8%

*

Tesla Inc.

62,446

41,713

0.7%

 

Starbucks Corp.

510,486

40,037

0.6%

 

Comcast Corp.

915,604

37,018

0.6%

 

Lowe’s Cos. Inc.

334,042

35,599

0.6%

 

TJX Cos. Inc.

525,044

31,398

0.5%

*

Booking Holdings Inc.

18,055

30,615

0.5%

 

Consumer Discretionary—Other †

 

349,803

5.6%

 

 

 

1,130,776

18.0%

Consumer Staples

 

 

 

 

PepsiCo Inc.

509,065

67,212

1.1%

 

Coca-Cola Co.

1,131,674

60,533

0.9%

 

Consumer Staples—Other †

 

89,521

1.4%

 

 

 

217,266

3.4%

         

Energy

 

13,842

0.2%

       

Financial Services

 

 

 

 

Visa Inc.

741,504

134,776

2.1%

 

Mastercard Inc.

383,723

111,376

1.8%

*

PayPal Holdings Inc.

508,046

54,864

0.9%

 

American Tower Corp.

189,885

43,066

0.7%

 

S&P Global Inc.

106,389

28,290

0.4%

*

Fiserv Inc.

243,795

26,661

0.4%

 

Financial Services—Other †

 

377,869

6.0%

 

 

 

776,902

12.3%

 

32

 

 

 

 

Russell 1000 Growth Index Fund

 

 

 

 

 

 

Market

Percentage

 

 

 

Value

of Net

 

 

Shares

($000)

Assets

Health Care

 

 

 

 

UnitedHealth Group Inc.

409,069

104,296

1.7%

 

Merck & Co. Inc.

1,045,526

80,045

1.3%

 

AbbVie Inc.

639,505

54,812

0.9%

 

Amgen Inc.

238,557

47,647

0.8%

 

Eli Lilly & Co.

367,823

46,394

0.7%

 

Bristol-Myers Squibb Co.

593,588

35,057

0.6%

 

Thermo Fisher Scientific Inc.

117,383

34,135

0.5%

 

Stryker Corp.

148,243

28,254

0.4%

 

Zoetis Inc.

207,092

27,591

0.4%

 

Health Care—Other †

 

409,413

6.5%

 

 

 

867,644

13.8%

         

Materials & Processing †

 

108,514

1.7%

       

Producer Durables

 

 

 

 

Boeing Co.

228,858

62,961

1.0%

 

Accenture plc Class A

275,791

49,805

0.8%

 

Union Pacific Corp.

300,281

47,988

0.8%

 

Lockheed Martin Corp.

106,969

39,565

0.6%

 

Automatic Data Processing Inc.

188,009

29,093

0.5%

 

3M Co.

185,125

27,628

0.4%

 

United Parcel Service Inc.

301,937

27,322

0.4%

 

Producer Durables—Other †

 

324,055

5.2%

 

 

 

608,417

9.7%

Technology

 

 

 

 

Microsoft Corp.

3,271,585

530,030

8.4%

 

Apple Inc.

1,922,958

525,660

8.3%

*

Facebook Inc.

1,033,868

198,989

3.2%

*

Alphabet Inc. Class C

130,202

174,383

2.8%

*

Alphabet Inc. Class A

129,033

172,807

2.7%

 

Cisco Systems Inc.

1,852,340

73,964

1.2%

*

Adobe Inc.

210,497

72,647

1.1%

 

NVIDIA Corp.

252,247

68,124

1.1%

*

salesforce.com Inc.

358,916

61,159

1.0%

 

Texas Instruments Inc.

406,080

46,350

0.7%

 

Broadcom Inc.

166,958

45,516

0.7%

 

Oracle Corp.

887,832

43,912

0.7%

 

QUALCOMM Inc.

493,788

38,664

0.6%

 

International Business Machines Corp.

231,958

30,189

0.5%

 

Intuit Inc.

107,544

28,591

0.5%

 

Technology—Other †

 

441,003

7.0%

 

 

 

2,551,988

40.5%

         

Utilities †

 

9,802

0.2%

Total Common Stocks (Cost $4,599,825)

 

6,285,151

99.8%

33

 

 

Russell 1000 Growth Index Fund

 

 

 

 

 

 

 

Market

Percentage

 

 

 

Value

of Net

 

Coupon

Shares

($000)

Assets

Temporary Cash Investments

 

 

 

 

Money Market Fund

 

 

 

 

1,2  Vanguard Market Liquidity Fund

1.706%

107,219

10,725

0.2%

         

3 U.S. Government and Agency Obligations †

 

 

819

0.0%

Total Temporary Cash Investments (Cost $11,542)

 

 

11,544

0.2%

4 Total Investments (Cost $4,611,367)

 

 

6,296,695

100.0%

2 Other Assets and Liabilities—Net

 

 

(2,018)

(0.0%)

Net Assets

 

 

6,294,677

100.0%

Cost rounded to $000.

See Note A in Notes to Financial Statements.

* Non-income-producing security.
Represents the aggregate value, by category, of securities that are not among the 50 largest holdings and, in total for any issuer, represent 1% or less of net assets.
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.
2 Collateral of $3,996,000 was received for securities on loan.
3 Securities with a value of $672,000 have been segregated as initial margin for open futures contracts.
4 The total value of securities on loan is $3,869,000.

 

 

Derivative Financial Instruments Outstanding as of Period End

 

 

Futures Contracts

 

 

 

 

 

($000)

 

 

 

 

Value and

 

 

Number of

 

Unrealized

 

 

Long (Short)

Notional

Appreciation

 

Expiration

Contracts

Amount

(Depreciation)

Long Futures Contracts

 

 

 

 

E-mini S&P 500 Index

March 2020

70

10,329

(1,438)

 

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

34

 

 

Russell 1000 Growth Index Fund

 

Statement of Assets and Liabilities

As of February 29, 2020

 

($000s, except shares and per-share amounts)

Amount

Assets

 

Investments in Securities, at Value

 

Unaffiliated Issuers (Cost $4,600,643)

6,285,970

Affiliated Issuers (Cost $10,724)

10,725

Total Investments in Securities

6,296,695

Investment in Vanguard

293

Receivables for Investment Securities Sold

150

Receivables for Accrued Income

6,815

Receivables for Capital Shares Issued

3,565

Total Assets

6,307,518

Liabilities

 

Payables for Investment Securities Purchased

13

Collateral for Securities on Loan

3,996

Payables for Capital Shares Redeemed

8,255

Payables to Vanguard

562

Variation Margin Payable—Futures Contracts

15

Total Liabilities

12,841

Net Assets

6,294,677

 

At February 29, 2020, net assets consisted of:

 

 

 

Paid-in Capital

4,563,498

Total Distributable Earnings (Loss)

1,731,179

Net Assets

6,294,677

 

 

ETF Shares—Net Assets

 

Applicable to 19,376,711 outstanding $.001 par value shares of

 

beneficial interest (unlimited authorization)

3,339,789

Net Asset Value Per Share—ETF Shares

$172.36

 

 

Institutional Shares—Net Assets

 

Applicable to 8,915,738 outstanding $.001 par value shares of

 

beneficial interest (unlimited authorization)

2,954,888

Net Asset Value Per Share—Institutional Shares

$331.42

 

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

35

 

 

Russell 1000 Growth Index Fund

 

Statement of Operations

 

 

Six Months Ended

 

February 29, 2020

 

($000)

Investment Income

 

Income

 

Dividends

38,357

Interest1

87

Securities Lending—Net

46

Total Income

38,490

Expenses

 

The Vanguard Group—Note B

 

Investment Advisory Services

477

Management and Administrative—ETF Shares

869

Management and Administrative—Institutional Shares

763

Marketing and Distribution—ETF Shares

107

Marketing and Distribution—Institutional Shares

60

Custodian Fees

76

Shareholders’ Reports—ETF Shares

37

Shareholders’ Reports—Institutional Shares

3

Trustees’ Fees and Expenses

1

Total Expenses

2,393

Net Investment Income

36,097

Realized Net Gain (Loss)

 

Investment Securities Sold1,2

178,040

Futures Contracts

1,305

Realized Net Gain (Loss)

179,345

Change in Unrealized Appreciation (Depreciation)

 

Investment Securities1

94,551

Futures Contracts

(1,432)

Change in Unrealized Appreciation (Depreciation)

93,119

Net Increase (Decrease) in Net Assets Resulting from Operations

308,561

 

1

Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $82,000, $6,000, and $,000, respectively. Purchases and sales are for temporary cash investment purposes.

2 Includes $172,707,000 of net gain (loss) resulting from in-kind redemptions.

 

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

36

 

 

Russell 1000 Growth Index Fund

 

Statement of Changes in Net Assets

 

 

Six Months Ended

Year Ended

 

February 29,

August 31,

 

2020

2019

 

($000)

($000)

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net Investment Income

36,097

66,842

Realized Net Gain (Loss)

179,345

266,693

Change in Unrealized Appreciation (Depreciation)

93,119

(81,179)

Net Increase (Decrease) in Net Assets Resulting from Operations

308,561

252,356

Distributions1

 

 

ETF Shares

(18,119)

(24,807)

Institutional Shares

(18,054)

(32,305)

Total Distributions

(36,173)

(57,112)

Capital Share Transactions

 

 

ETF Shares

344,884

683,781

Institutional Shares

(270,464)

(195,359)

Net Increase (Decrease) from Capital Share Transactions

74,420

488,422

Total Increase (Decrease)

346,808

683,666

Net Assets

 

 

Beginning of Period

5,947,869

5,264,203

End of Period

6,294,677

5,947,869

1 Certain prior period numbers have been reclassified to conform with current period presentation

 

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

37

 

 

 

Russell 1000 Growth Index Fund

 

Financial Highlights

 

ETF Shares

 

    Six Months
Ended
                               
For a Share Outstanding