Semiannual
Report |
June 30, 2021
Vanguard
U.S. Stock Index Funds Large-Capitalization Portfolios
| Vanguard Growth Index Fund |
| Vanguard Value Index Fund |
| Vanguard Large-Cap Index Fund |
Contents
|
Results of Proxy Voting
|
1 |
|
About Your Fund’s Expenses
|
2 |
|
Growth Index Fund
|
4 |
|
Value Index Fund
|
24 |
|
Large-Cap Index Fund
|
45 |
|
Trustees Approve Advisory Arrangements
|
66 |
|
Liquidity Risk Management
|
68 |
Results
of Proxy Voting
At
a special meeting held on January 22, 2021, shareholders of the U.S. Value Fund
(the “Acquired Fund”) approved the following proposal:
Proposal-
Approval of Agreement and Plan of Reorganization.
Approval
of an agreement and plan of reorganization providing for (i) the transfer of
substantially all of the assets of the Acquired Fund to Vanguard Value Index
Fund (the "Value Index Fund") in exchange for shares of beneficial interest of
the Value Index Fund; (ii) the assumption by the Value Index Fund of the
liabilities of the Acquired Fund; and (iii) the distribution of Value Index Fund
shares to the shareholders of the Acquired Fund in complete liquidation of the
Acquired Fund. The purpose of the transaction was to consolidate the assets of
the two funds, placing the Acquired Fund shareholders in a comparable fund with
better historical long-term investment performance; delivering a large expense
ratio reduction for the Acquired Fund shareholders; and creating a larger
combined fund, which we anticipate, over time, will achieve greater economies of
scale.
| Vanguard Fund | For | Abstain | Against | Broker Non-Votes |
Percentage For |
| U.S. Value Fund | 33,292,112 | 1,490,544 | 1,963,555 | 0 | 90.6% |
1
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.
2
| Six Months Ended June 30, 2021 | |||
| Beginning Account Value 12/31/2020 |
Ending Account Value 6/30/2021 |
Expenses Paid During Period | |
| Based on Actual Fund Return | |||
| Growth Index Fund | |||
| Investor Shares | $1,000.00 | $1,133.00 | $0.90 |
| ETF Shares | 1,000.00 | 1,133.70 | 0.21 |
| Admiral™ Shares | 1,000.00 | 1,133.60 | 0.26 |
| Institutional Shares | 1,000.00 | 1,133.70 | 0.21 |
| Value Index Fund | |||
| Investor Shares | $1,000.00 | $1,167.21 | $0.91 |
| ETF Shares | 1,000.00 | 1,167.97 | 0.22 |
| Admiral Shares | 1,000.00 | 1,168.20 | 0.27 |
| Institutional Shares | 1,000.00 | 1,168.03 | 0.22 |
| Large-Cap Index Fund | |||
| Investor Shares | $1,000.00 | $1,148.60 | $0.91 |
| ETF Shares | 1,000.00 | 1,149.30 | 0.21 |
| Admiral Shares | 1,000.00 | 1,149.20 | 0.27 |
| Institutional Shares | 1,000.00 | 1,149.30 | 0.21 |
| Based on Hypothetical 5% Yearly Return | |||
| Growth Index Fund | |||
| Investor Shares | $1,000.00 | $1,023.95 | $0.85 |
| ETF Shares | 1,000.00 | 1,024.60 | 0.20 |
| Admiral Shares | 1,000.00 | 1,024.55 | 0.25 |
| Institutional Shares | 1,000.00 | 1,024.60 | 0.20 |
| Value Index Fund | |||
| Investor Shares | $1,000.00 | $1,023.95 | $0.85 |
| ETF Shares | 1,000.00 | 1,024.60 | 0.20 |
| Admiral Shares | 1,000.00 | 1,024.55 | 0.25 |
| Institutional Shares | 1,000.00 | 1,024.60 | 0.20 |
| Large-Cap Index Fund | |||
| Investor Shares | $1,000.00 | $1,023.95 | $0.85 |
| ETF Shares | 1,000.00 | 1,024.60 | 0.20 |
| Admiral Shares | 1,000.00 | 1,024.55 | 0.25 |
| Institutional Shares | 1,000.00 | 1,024.60 | 0.20 |
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
Growth Index Fund, 0.17% for Investor Shares, 0.04% for ETF Shares, 0.05% for
Admiral Shares, and 0.04% for Institutional Shares; for the Value Index Fund,
0.17% for Investor Shares, 0.04% for ETF Shares, 0.05% for Admiral Shares, and
0.04% for Institutional Shares; and for the Large-Cap Index Fund, 0.17% for
Investor Shares, 0.04% for ETF Shares, 0.05% for Admiral Shares, and 0.04% 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
(181/365).
3
Growth
Index Fund
Fund
Allocation
As
of June 30, 2021
| Basic Materials | 1.2% |
| Consumer Discretionary | 23.4 |
| Consumer Staples | 1.0 |
| Energy | 0.5 |
| Financials | 2.1 |
| Health Care | 7.8 |
| Industrials | 12.7 |
| Real Estate | 2.6 |
| Technology | 47.6 |
| Telecommunications | 1.0 |
| Utilities | 0.1 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Industry Classification
Benchmark (“ICB”), except for the “Other” category (if applicable), which
includes securities that have not been provided an ICB 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 its target index as closely as possible.
The
Industry Classification Benchmark (“ICB”) is owned by FTSE. FTSE does not accept
any liability to any person for any loss or damage arising out of any error or
omission in the ICB.
4
Growth
Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of June 30, 2021
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.
5
Growth
Index Fund
6
Growth
Index Fund
7
Growth
Index Fund
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 500 Index | September 2021 | 266 | 57,038 | 635 |
8
Growth
Index Fund
| 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) |
| Netflix Inc. | 8/31/21 | BOANA | 52,821 | 0.064 | 3 | — |
| Visa Inc. | 8/31/21 | BOANA | 104,050 | 0.014 | 143 | — |
| 146 | — | |||||
| 1 | Based on 1M USD London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/paid monthly. |
| 1M—1-month. | |
| BOANA—Bank of America, N.A. |
At
June 30, 2021, the counterparties had deposited in segregated accounts
securities with a value of $5,815,000 and cash of $1,390,000 in connection with
open over-the-counter swap contracts.
See
accompanying Notes, which are an integral part of the Financial
Statements.
9
Growth
Index Fund
Statement
of Assets and Liabilities
As
of June 30, 2021
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $67,085,170) | 165,432,666 |
| Affiliated Issuers (Cost $478,514) | 478,568 |
| Total Investments in Securities | 165,911,234 |
| Investment in Vanguard | 5,416 |
| Cash Collateral Pledged—Futures Contracts | 2,935 |
| Receivables for Investment Securities Sold | 30,234 |
| Receivables for Accrued Income | 25,560 |
| Receivables for Capital Shares Issued | 48,020 |
| Variation Margin Receivable—Futures Contracts | 88 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | 146 |
| Total Assets | 166,023,633 |
| Liabilities | |
| Due to Custodian | 24,791 |
| Payables for Investment Securities Purchased | 678 |
| Collateral for Securities on Loan | 300,686 |
| Payables for Capital Shares Redeemed | 62,634 |
| Payables to Vanguard | 2,966 |
| Total Liabilities | 391,755 |
| Net Assets | 165,631,878 |
10
Growth
Index Fund
| Statement of Assets and Liabilities (continued)
| |
| At June 30, 2021, net assets consisted of: | |
| ($000s, except shares and per-share amounts) | Amount |
| Paid-in Capital | 65,939,847 |
| Total Distributable Earnings (Loss) | 99,692,031 |
| Net Assets | 165,631,878 |
| Investor Shares—Net Assets | |
| Applicable
to 4,993,343 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
736,657 |
| Net Asset Value Per Share—Investor Shares | $147.53 |
| ETF Shares—Net Assets | |
| Applicable
to 275,612,804 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
78,966,613 |
| Net Asset Value Per Share—ETF Shares | $286.51 |
| Admiral Shares—Net Assets | |
| Applicable
to 416,350,341 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
61,404,292 |
| Net Asset Value Per Share—Admiral Shares | $147.48 |
| Institutional Shares—Net Assets | |
| Applicable
to 166,277,835 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
24,524,316 |
| Net Asset Value Per Share—Institutional Shares | $147.49 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
11
Growth
Index Fund
Statement
of Operations
| Six
Months Ended June 30, 2021 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 431,018 |
| Interest1 | 100 |
| Securities Lending—Net | 1,309 |
| Total Income | 432,427 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 2,038 |
| Management and Administrative—Investor Shares | 585 |
| Management and Administrative—ETF Shares | 11,202 |
| Management and Administrative—Admiral Shares | 12,139 |
| Management and Administrative—Institutional Shares | 3,882 |
| Marketing and Distribution—Investor Shares | 17 |
| Marketing and Distribution—ETF Shares | 865 |
| Marketing and Distribution—Admiral Shares | 799 |
| Marketing and Distribution—Institutional Shares | 258 |
| Custodian Fees | 400 |
| Shareholders’ Reports—Investor Shares | 1 |
| Shareholders’ Reports—ETF Shares | 962 |
| Shareholders’ Reports—Admiral Shares | 195 |
| Shareholders’ Reports—Institutional Shares | 39 |
| Trustees’ Fees and Expenses | 21 |
| Total Expenses | 33,403 |
| Net Investment Income | 399,024 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 4,501,075 |
| Futures Contracts | 20,263 |
| Swap Contracts | 14,473 |
| Realized Net Gain (Loss) | 4,535,811 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | 14,505,087 |
| Futures Contracts | 387 |
| Swap Contracts | (8,724) |
| Change in Unrealized Appreciation (Depreciation) | 14,496,750 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 19,431,585 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $98,000, less than $1,000, and ($19,000), respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $4,380,322,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
12
Growth
Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended June 30, 2021 |
Year
Ended December 31, 2020 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 399,024 | 959,207 | |
| Realized Net Gain (Loss) | 4,535,811 | 6,085,082 | |
| Change in Unrealized Appreciation (Depreciation) | 14,496,750 | 35,082,887 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 19,431,585 | 42,127,176 | |
| Distributions | |||
| Investor Shares | (1,582) | (4,183) | |
| ETF Shares | (205,297) | (453,408) | |
| Admiral Shares | (158,650) | (351,474) | |
| Institutional Shares | (65,121) | (152,514) | |
| Total Distributions | (430,650) | (961,579) | |
| Capital Share Transactions | |||
| Investor Shares | (99,602) | (29,849) | |
| ETF Shares | 1,525,326 | 2,591,427 | |
| Admiral Shares | 395,012 | 742,741 | |
| Institutional Shares | (922,923) | (319,460) | |
| Net Increase (Decrease) from Capital Share Transactions | 897,813 | 2,984,859 | |
| Total Increase (Decrease) | 19,898,748 | 44,150,456 | |
| Net Assets | |||
| Beginning of Period | 145,733,130 | 101,582,674 | |
| End of Period | 165,631,878 | 145,733,130 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
13
Growth
Index Fund
Financial
Highlights
| Investor Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $130.50 | $93.87 | $69.10 | $72.36 | $57.32 | $54.78 |
| Investment Operations | ||||||
| Net Investment Income | .2711 | .7281 | .7461 | .8231 | .7501 | .720 |
| Net Realized and Unrealized Gain (Loss) on Investments | 17.058 | 36.631 | 24.802 | (3.271) | 15.037 | 2.548 |
| Total from Investment Operations | 17.329 | 37.359 | 25.548 | (2.448) | 15.787 | 3.268 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.299) | (.729) | (.778) | (.812) | (.747) | (.728) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.299) | (.729) | (.778) | (.812) | (.747) | (.728) |
| Net Asset Value, End of Period | $147.53 | $130.50 | $93.87 | $69.10 | $72.36 | $57.32 |
| Total Return2 | 13.30% | 40.01% | 37.08% | -3.46% | 27.65% | 5.99% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $737 | $750 | $572 | $2,654 | $3,210 | $2,938 |
| Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.17% | 0.17% | 0.17% | 0.18% |
| Ratio of Net Investment Income to Average Net Assets | 0.40% | 0.69% | 0.92% | 1.08% | 1.15% | 1.31% |
| Portfolio Turnover Rate3 | 6% | 6% | 11% | 11% | 8% | 11% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
14
Growth
Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $253.44 | $182.31 | $134.21 | $140.55 | $111.33 | $106.40 |
| Investment Operations | ||||||
| Net Investment Income | .7011 | 1.6831 | 1.7731 | 1.8071 | 1.6261 | 1.528 |
| Net Realized and Unrealized Gain (Loss) on Investments | 33.124 | 71.131 | 48.065 | (6.373) | 29.200 | 4.949 |
| Total from Investment Operations | 33.825 | 72.814 | 49.838 | (4.566) | 30.826 | 6.477 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.755) | (1.684) | (1.738) | (1.774) | (1.606) | (1.547) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.755) | (1.684) | (1.738) | (1.774) | (1.606) | (1.547) |
| Net Asset Value, End of Period | $286.51 | $253.44 | $182.31 | $134.21 | $140.55 | $111.33 |
| Total Return | 13.37% | 40.16% | 37.26% | -3.32% | 27.80% | 6.13% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $78,967 | $68,474 | $46,481 | $32,489 | $31,399 | $23,040 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 0.53% | 0.81% | 1.09% | 1.21% | 1.27% | 1.43% |
| Portfolio Turnover Rate2 | 6% | 6% | 11% | 11% | 8% | 11% |
| 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.
15
Growth
Index Fund
Financial
Highlights
| Admiral Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $130.46 | $93.84 | $69.09 | $72.35 | $57.31 | $54.77 |
| Investment Operations | ||||||
| Net Investment Income | .3541 | .8551 | .9071 | .9211 | .8361 | .786 |
| Net Realized and Unrealized Gain (Loss) on Investments | 17.047 | 36.621 | 24.728 | (3.274) | 15.032 | 2.550 |
| Total from Investment Operations | 17.401 | 37.476 | 25.635 | (2.353) | 15.868 | 3.336 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.381) | (.856) | (.885) | (.907) | (.828) | (.796) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.381) | (.856) | (.885) | (.907) | (.828) | (.796) |
| Net Asset Value, End of Period | $147.48 | $130.46 | $93.84 | $69.09 | $72.35 | $57.31 |
| Total Return2 | 13.36% | 40.19% | 37.23% | -3.34% | 27.80% | 6.12% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $61,404 | $53,928 | $38,103 | $25,609 | $26,013 | $18,617 |
| Ratio of Total Expenses to Average Net Assets | 0.05% | 0.05% | 0.05% | 0.05% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 0.52% | 0.80% | 1.08% | 1.20% | 1.27% | 1.43% |
| Portfolio Turnover Rate3 | 6% | 6% | 11% | 11% | 8% | 11% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
16
Growth
Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $130.47 | $93.85 | $69.09 | $72.35 | $57.31 | $54.77 |
| Investment Operations | ||||||
| Net Investment Income | .3601 | .8671 | .9121 | .9281 | .8411 | .792 |
| Net Realized and Unrealized Gain (Loss) on Investments | 17.048 | 36.620 | 24.742 | (3.274) | 15.032 | 2.549 |
| Total from Investment Operations | 17.408 | 37.487 | 25.654 | (2.346) | 15.873 | 3.341 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.388) | (.867) | (.894) | (.914) | (.833) | (.801) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.388) | (.867) | (.894) | (.914) | (.833) | (.801) |
| Net Asset Value, End of Period | $147.49 | $130.47 | $93.85 | $69.09 | $72.35 | $57.31 |
| Total Return | 13.37% | 40.20% | 37.26% | -3.33% | 27.81% | 6.13% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $24,524 | $22,582 | $16,426 | $12,400 | $12,495 | $9,733 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% |
| Ratio of Net Investment Income to Average Net Assets | 0.53% | 0.82% | 1.09% | 1.21% | 1.28% | 1.44% |
| Portfolio Turnover Rate2 | 6% | 6% | 11% | 11% | 8% | 11% |
| 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.
17
Growth
Index Fund
Notes
to Financial Statements
Vanguard
Growth Index Fund is registered under the Investment Company Act of 1940 as an
open-end investment company, or mutual fund. The fund offers four classes of
shares: Investor Shares, ETF Shares, Admiral 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 NYSE Arca; they can be purchased and sold through a
broker.
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.
| 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 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. The notional
amounts of the contracts are not recorded in the Statement of Assets and
Liabilities. 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 gains (losses) on futures
contracts.
18
Growth
Index Fund
During
the six months ended June 30, 2021, 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.
3.
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.
The
notional amounts of swap contracts are not recorded in the Statement of Assets
and Liabilities. Swaps are valued daily based on market quotations received from
independent pricing services or recognized dealers and the change in value is
recorded in the Statement of Assets and Liabilities as an asset (liability) and
in the Statement of Operations as unrealized appreciation (depreciation) until
periodic payments are made or the termination of the swap, at which time
realized gain (loss) is recorded.
During
the six months ended June 30, 2021, the fund’s average amounts of investments in
total return swaps represented less than 1% of net assets, based on the average
of notional amounts at each quarter-end during the period.
4. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. The fund’s tax returns are
open to examination by the relevant tax authorities until expiration of the
applicable statute of limitations, which is
19
Growth
Index Fund
generally
three years after the filing of the tax return. Management has analyzed the
fund’s tax positions taken for all open federal and state income tax years, and
has concluded that no provision for income tax is required in the fund’s
financial statements.
5. 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.
6. 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. Collateral investments in Vanguard
Market Liquidity Fund are subject to market appreciation or depreciation.
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.
7. Credit
Facilities 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 and an uncommitted credit facility provided by Vanguard. Both
facilities may be renewed annually. Each fund is individually liable for its
borrowings, if any, under the credit facilities. Borrowings may be utilized for
temporary or emergency purposes, subject to the fund’s regulatory and
contractual borrowing restrictions. With respect to the committed credit
facility, the participating funds are charged administrative fees and an annual
commitment fee of 0.10% of the undrawn committed 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 either facility bear interest at a
rate based upon the higher of the one-month London Interbank Offered Rate (or an
acceptable alternate rate, if necessary), federal funds effective rate, or
overnight bank funding rate plus an agreed-upon spread, except that borrowings
under the uncommitted credit facility may bear interest based upon an alternate
rate agreed to by the fund and Vanguard.
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
20
Growth
Index Fund
borrowings
normally extend overnight, but can have a maximum duration of seven days. Loans
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 June 30, 2021, the fund did not utilize the credit
facilities or the Interfund Lending Program.
8. Other:
Dividend income is recorded on the ex-dividend date. Non-cash dividends included
in income, if any, are recorded at the fair value of the securities received.
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 and 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 June 30, 2021, the fund had contributed to Vanguard
capital in the amount of $5,416,000, representing less than 0.01% of the fund’s
net assets and 2.17% 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 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.
21
Growth
Index Fund
The
following table summarizes the market value of the fund’s investments and
derivatives as of June 30, 2021, based on the inputs used to value them:
| Level
1 ($000) |
Level
2 ($000) |
Level
3 ($000) |
Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks | 165,432,666 | — | — | 165,432,666 |
| Temporary Cash Investments | 478,568 | — | — | 478,568 |
| Total | 165,911,234 | — | — | 165,911,234 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Futures Contracts1 | 635 | — | — | 635 |
| Swap Contracts | — | 146 | — | 146 |
| Total | 635 | 146 | — | 781 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
| D. | As of June 30, 2021, 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 | 67,565,733 |
| Gross Unrealized Appreciation | 98,805,438 |
| Gross Unrealized Depreciation | (459,301) |
| Net Unrealized Appreciation (Depreciation) | 98,346,137 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at December 31, 2020, the fund had available
capital losses totaling $3,183,303,000 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
December 31, 2021; 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 June 30, 2021, the fund purchased $16,158,945,000 of investment securities and sold $15,177,966,000 of investment securities, other than temporary cash investments. Purchases and sales include $7,587,356,000 and $6,672,654,000, respectively, in connection with in-kind purchases and redemptions of the fund's capital shares. |
The
fund purchased securities from and sold securities to other Vanguard funds or
accounts managed by Vanguard or its affiliates, in accordance with procedures
adopted by the board of trustees in compliance with Rule 17a-7 of the Investment
Company Act of 1940. For the six months ended ended June 30, 2021, such
purchases and sales were $2,748,268,000 and $1,083,303,000, respectively; these
amounts, other than temporary cash investments, are included in the purchases
and sales of investment securities noted above.
22
Growth
Index Fund
| F. | Capital share transactions for each class of shares were: |
| Six Months Ended June 30, 2021 |
Year Ended December 31, 2020 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| Investor Shares | |||||
| Issued | 39,413 | 283 | 111,192 | 1,046 | |
| Issued in Lieu of Cash Distributions | 1,582 | 12 | 4,183 | 41 | |
| Redeemed | (140,597) | (1,048) | (145,224) | (1,439) | |
| Net Increase (Decrease)—Investor Shares | (99,602) | (753) | (29,849) | (352) | |
| ETF Shares | |||||
| Issued | 8,253,532 | 30,486 | 13,029,182 | 63,516 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (6,728,206) | (25,050) | (10,437,755) | (48,300) | |
| Net Increase (Decrease)—ETF Shares | 1,525,326 | 5,436 | 2,591,427 | 15,216 | |
| Admiral Shares | |||||
| Issued | 5,299,016 | 39,271 | 10,835,142 | 105,463 | |
| Issued in Lieu of Cash Distributions | 140,610 | 1,028 | 311,604 | 3,035 | |
| Redeemed | (5,044,614) | (37,318) | (10,404,005) | (101,164) | |
| Net Increase (Decrease)—Admiral Shares | 395,012 | 2,981 | 742,741 | 7,334 | |
| Institutional Shares | |||||
| Issued | 1,756,182 | 13,009 | 3,743,543 | 35,924 | |
| Issued in Lieu of Cash Distributions | 62,207 | 455 | 141,051 | 1,375 | |
| Redeemed | (2,741,312) | (20,270) | (4,204,054) | (39,249) | |
| Net Increase (Decrease)—Institutional Shares | (922,923) | (6,806) | (319,460) | (1,950) | |
| G. | Management has determined that no events or transactions occurred subsequent to June 30, 2021, that would require recognition or disclosure in these financial statements. |
23
Value
Index Fund
Fund
Allocation
As
of June 30, 2021
| Basic Materials | 2.4% |
| Consumer Discretionary | 6.5 |
| Consumer Staples | 10.0 |
| Energy | 5.6 |
| Financials | 21.7 |
| Health Care | 18.7 |
| Industrials | 13.9 |
| Real Estate | 2.9 |
| Technology | 6.2 |
| Telecommunications | 6.2 |
| Utilities | 5.9 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Industry Classification
Benchmark (“ICB”), except for the “Other” category (if applicable), which
includes securities that have not been provided an ICB 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 its target index as closely as possible.
The
Industry Classification Benchmark (“ICB”) is owned by FTSE. FTSE does not accept
any liability to any person for any loss or damage arising out of any error or
omission in the ICB.
24
Value
Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of June 30, 2021
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.
25
Value
Index Fund
26
Value
Index Fund
27
Value
Index Fund
28
Value
Index Fund
| Shares | Market Value• ($000) | ||
| Temporary Cash Investments (0.1%) | |||
| Money Market Fund (0.1%) | |||
| 2,3 | Vanguard Market Liquidity Fund, 0.056% (Cost $97,159) | 971,719 | 97,172 |
| Total Investments (99.9%) (Cost $90,817,649) | 125,703,367 | ||
| Other Assets and Liabilities— Net (0.1%) | 97,406 | ||
| Net Assets (100%) | 125,800,773 | ||
| Cost is in $000. | |||
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $26,576,000. |
| 2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 3 | Collateral of $27,721,000 was received for securities on loan, of which $26,765,000 is held in Vanguard Market Liquidity Fund and $956,000 is held in cash. |
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 500 Index | September 2021 | 514 | 110,217 | 733 |
| 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) |
| Charles Schwab Corp. | 8/31/21 | BOANA | 50,968 | (0.086) | — | (4) |
| Keurig Dr Pepper Inc. | 8/31/21 | BOANA | 17,620 | (0.086) | 93 | — |
| Kroger Co. | 1/31/22 | GSI | 37,870 | (0.082) | 439 | — |
| 532 | (4) | |||||
| 1 | Based on 1M USD London Interbank Offered Rate (LIBOR) as of the most recent payment date. Floating interest payment received/paid monthly. |
| 1M—1-month. | |
| BOANA—Bank of America, N.A. | |
| GSI—Goldman Sachs International. |
At
June 30, 2021, the counterparties had deposited in segregated accounts
securities with a value of $1,346,000 in connection with open over-the-counter
swap contracts.
See
accompanying Notes, which are an integral part of the Financial
Statements.
29
Value
Index Fund
Statement
of Assets and Liabilities
As
of June 30, 2021
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $90,720,490) | 125,606,195 |
| Affiliated Issuers (Cost $97,159) | 97,172 |
| Total Investments in Securities | 125,703,367 |
| Investment in Vanguard | 4,393 |
| Cash | 26,233 |
| Cash Collateral Pledged—Futures Contracts | 4,951 |
| Cash Collateral Pledged—Over-the-Counter Swap Contracts | 1,530 |
| Receivables for Investment Securities Sold | 10,935 |
| Receivables for Accrued Income | 142,521 |
| Receivables for Capital Shares Issued | 35,566 |
| Variation Margin Receivable—Futures Contracts | 147 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | 532 |
| Total Assets | 125,930,175 |
| Liabilities | |
| Payables for Investment Securities Purchased | 45,862 |
| Collateral for Securities on Loan | 27,721 |
| Payables for Capital Shares Redeemed | 53,617 |
| Payables to Vanguard | 2,198 |
| Unrealized Depreciation—Over-the-Counter Swap Contracts | 4 |
| Total Liabilities | 129,402 |
| Net Assets | 125,800,773 |
30
Value
Index Fund
| Statement of Assets and Liabilities (continued)
| |
| At June 30, 2021, net assets consisted of: | |
| ($000s, except shares and per-share amounts) | Amount |
| Paid-in Capital | 92,490,635 |
| Total Distributable Earnings (Loss) | 33,310,138 |
| Net Assets | 125,800,773 |
| Investor Shares—Net Assets | |
| Applicable
to 5,130,206 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
275,200 |
| Net Asset Value Per Share—Investor Shares | $53.64 |
| ETF Shares—Net Assets | |
| Applicable
to 594,573,438 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
81,733,733 |
| Net Asset Value Per Share—ETF Shares | $137.47 |
| Admiral Shares—Net Assets | |
| Applicable
to 547,817,786 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
29,377,795 |
| Net Asset Value Per Share—Admiral Shares | $53.63 |
| Institutional Shares—Net Assets | |
| Applicable
to 268,794,764 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
14,414,045 |
| Net Asset Value Per Share—Institutional Shares | $53.62 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
31
Value
Index Fund
Statement
of Operations
| Six
Months Ended June 30, 2021 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 1,334,903 |
| Interest1 | 73 |
| Securities Lending—Net | 2,594 |
| Total Income | 1,337,570 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 1,789 |
| Management and Administrative—Investor Shares | 225 |
| Management and Administrative—ETF Shares | 10,660 |
| Management and Administrative—Admiral Shares | 5,679 |
| Management and Administrative—Institutional Shares | 2,200 |
| Marketing and Distribution—Investor Shares | 7 |
| Marketing and Distribution—ETF Shares | 1,042 |
| Marketing and Distribution—Admiral Shares | 412 |
| Marketing and Distribution—Institutional Shares | 170 |
| Custodian Fees | 373 |
| Shareholders’ Reports—Investor Shares | 1 |
| Shareholders’ Reports—ETF Shares | 1,385 |
| Shareholders’ Reports—Admiral Shares | 114 |
| Shareholders’ Reports—Institutional Shares | 49 |
| Trustees’ Fees and Expenses | 15 |
| Total Expenses | 24,121 |
| Net Investment Income | 1,313,449 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 1,798,865 |
| Futures Contracts | 22,141 |
| Swap Contracts | 26,571 |
| Realized Net Gain (Loss) | 1,847,577 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | 13,818,695 |
| Futures Contracts | (193) |
| Swap Contracts | (3,791) |
| Change in Unrealized Appreciation (Depreciation) | 13,814,711 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 16,975,737 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $71,000, $17,000, and ($17,000), respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $1,644,736,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
32
Value
Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended June 30, 2021 |
Year
Ended December 31, 2020 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 1,313,449 | 2,385,409 | |
| Realized Net Gain (Loss) | 1,847,577 | 999,499 | |
| Change in Unrealized Appreciation (Depreciation) | 13,814,711 | (862,492) | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 16,975,737 | 2,522,416 | |
| Distributions | |||
| Investor Shares | (2,911) | (7,153) | |
| ETF Shares | (830,092) | (1,491,672) | |
| Admiral Shares | (303,080) | (569,513) | |
| Institutional Shares | (150,348) | (322,802) | |
| Total Distributions | (1,286,431) | (2,391,140) | |
| Capital Share Transactions | |||
| Investor Shares | (38,982) | (45,817) | |
| ETF Shares | 10,181,286 | 5,496,388 | |
| Admiral Shares | 3,120,027 | 138,688 | |
| Institutional Shares | (69,483) | 65,298 | |
| Net Increase (Decrease) from Capital Share Transactions | 13,192,848 | 5,654,557 | |
| Total Increase (Decrease) | 28,882,154 | 5,785,833 | |
| Net Assets | |||
| Beginning of Period | 96,918,619 | 91,132,786 | |
| End of Period | 125,800,773 | 96,918,619 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
33
Value
Index Fund
Financial
Highlights
| Investor Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $46.43 | $46.78 | $38.18 | $41.42 | $36.24 | $31.82 |
| Investment Operations | ||||||
| Net Investment Income | .5601 | 1.1421 | 1.0931 | 1.0091 | .9181 | .850 |
| Net Realized and Unrealized Gain (Loss) on Investments | 7.181 | (.362) | 8.623 | (3.261) | 5.166 | 4.415 |
| Total from Investment Operations | 7.741 | .780 | 9.716 | (2.252) | 6.084 | 5.265 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.531) | (1.130) | (1.116) | (.988) | (.904) | (.845) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.531) | (1.130) | (1.116) | (.988) | (.904) | (.845) |
| Net Asset Value, End of Period | $53.64 | $46.43 | $46.78 | $38.18 | $41.42 | $36.24 |
| Total Return2 | 16.72% | 2.18% | 25.67% | -5.55% | 16.99% | 16.75% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $275 | $273 | $328 | $1,381 | $1,626 | $1,587 |
| Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.17% | 0.17% | 0.17% | 0.18% |
| Ratio of Net Investment Income to Average Net Assets | 2.19% | 2.75% | 2.58% | 2.43% | 2.40% | 2.64% |
| Portfolio Turnover Rate3 | 5% | 10% | 12% | 8% | 9% | 7% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
34
Value
Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $118.98 | $119.90 | $97.84 | $106.14 | $92.87 | $81.56 |
| Investment Operations | ||||||
| Net Investment Income | 1.5171 | 3.0551 | 3.0461 | 2.7221 | 2.4731 | 2.282 |
| Net Realized and Unrealized Gain (Loss) on Investments | 18.421 | (.935) | 22.014 | (8.352) | 13.234 | 11.301 |
| Total from Investment Operations | 19.938 | 2.120 | 25.060 | (5.630) | 15.707 | 13.583 |
| Distributions | ||||||
| Dividends from Net Investment Income | (1.448) | (3.040) | (3.000) | (2.670) | (2.437) | (2.273) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (1.448) | (3.040) | (3.000) | (2.670) | (2.437) | (2.273) |
| Net Asset Value, End of Period | $137.47 | $118.98 | $119.90 | $97.84 | $106.14 | $92.87 |
| Total Return | 16.80% | 2.23% | 25.85% | -5.39% | 17.12% | 16.88% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $81,734 | $61,580 | $55,909 | $41,510 | $36,560 | $27,126 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 2.31% | 2.87% | 2.76% | 2.56% | 2.52% | 2.76% |
| Portfolio Turnover Rate2 | 5% | 10% | 12% | 8% | 9% | 7% |
| 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.
35
Value
Index Fund
Financial
Highlights
| Admiral Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $46.41 | $46.77 | $38.17 | $41.41 | $36.23 | $31.82 |
| Investment Operations | ||||||
| Net Investment Income | .5891 | 1.1881 | 1.1851 | 1.0591 | .9651 | .890 |
| Net Realized and Unrealized Gain (Loss) on Investments | 7.193 | (.367) | 8.581 | (3.261) | 5.165 | 4.407 |
| Total from Investment Operations | 7.782 | .821 | 9.766 | (2.202) | 6.130 | 5.297 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.562) | (1.181) | (1.166) | (1.038) | (.950) | (.887) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.562) | (1.181) | (1.166) | (1.038) | (.950) | (.887) |
| Net Asset Value, End of Period | $53.63 | $46.41 | $46.77 | $38.17 | $41.41 | $36.23 |
| Total Return2 | 16.82% | 2.29% | 25.82% | -5.43% | 17.13% | 16.86% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $29,378 | $22,486 | $22,414 | $16,522 | $16,778 | $13,424 |
| Ratio of Total Expenses to Average Net Assets | 0.05% | 0.05% | 0.05% | 0.05% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 2.30% | 2.86% | 2.75% | 2.55% | 2.52% | 2.76% |
| Portfolio Turnover Rate3 | 5% | 10% | 12% | 8% | 9% | 7% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
36
Value
Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $46.41 | $46.77 | $38.17 | $41.41 | $36.23 | $31.82 |
| Investment Operations | ||||||
| Net Investment Income | .5921 | 1.1931 | 1.1891 | 1.0631 | .9691 | .893 |
| Net Realized and Unrealized Gain (Loss) on Investments | 7.183 | (.368) | 8.581 | (3.260) | 5.165 | 4.407 |
| Total from Investment Operations | 7.775 | .825 | 9.770 | (2.197) | 6.134 | 5.300 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.565) | (1.185) | (1.170) | (1.043) | (.954) | (.890) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.565) | (1.185) | (1.170) | (1.043) | (.954) | (.890) |
| Net Asset Value, End of Period | $53.62 | $46.41 | $46.77 | $38.17 | $41.41 | $36.23 |
| Total Return | 16.80% | 2.30% | 25.83% | -5.42% | 17.14% | 16.87% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $14,414 | $12,579 | $12,481 | $9,789 | $10,085 | $8,684 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% |
| Ratio of Net Investment Income to Average Net Assets | 2.31% | 2.87% | 2.76% | 2.56% | 2.53% | 2.77% |
| Portfolio Turnover Rate2 | 5% | 10% | 12% | 8% | 9% | 7% |
| 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.
37
Value
Index Fund
Notes
to Financial Statements
Vanguard
Value Index Fund is registered under the Investment Company Act of 1940 as an
open-end investment company, or mutual fund. The fund offers four classes of
shares: Investor Shares, ETF Shares, Admiral 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 NYSE Arca; they can be purchased and sold through a
broker.
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.
| 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 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. The notional
amounts of the contracts are not recorded in the Statement of Assets and
Liabilities. 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 gains (losses) on futures
contracts.
38
Value
Index Fund
During
the six months ended June 30, 2021, 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.
3.
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.
The
notional amounts of swap contracts are not recorded in the Statement of Assets
and Liabilities. Swaps are valued daily based on market quotations received from
independent pricing services or recognized dealers and the change in value is
recorded in the Statement of Assets and Liabilities as an asset (liability) and
in the Statement of Operations as unrealized appreciation (depreciation) until
periodic payments are made or the termination of the swap, at which time
realized gain (loss) is recorded.
During
the six months ended June 30, 2021, the fund’s average amounts of investments in
total return swaps represented less than 1% of net assets, based on the average
of notional amounts at each quarter-end during the period.
4. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. The fund’s tax returns are
open to examination by the relevant tax authorities until expiration of the
applicable statute of limitations, which is
39
Value
Index Fund
generally
three years after the filing of the tax return. Management has analyzed the
fund’s tax positions taken for all open federal and state income tax years, and
has concluded that no provision for income tax is required in the fund’s
financial statements.
5. 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.
6. 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. Collateral investments in Vanguard
Market Liquidity Fund are subject to market appreciation or depreciation.
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.
7. Credit
Facilities 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 and an uncommitted credit facility provided by Vanguard. Both
facilities may be renewed annually. Each fund is individually liable for its
borrowings, if any, under the credit facilities. Borrowings may be utilized for
temporary or emergency purposes, subject to the fund’s regulatory and
contractual borrowing restrictions. With respect to the committed credit
facility, the participating funds are charged administrative fees and an annual
commitment fee of 0.10% of the undrawn committed 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 either facility bear interest at a
rate based upon the higher of the one-month London Interbank Offered Rate (or an
acceptable alternate rate, if necessary), federal funds effective rate, or
overnight bank funding rate plus an agreed-upon spread, except that borrowings
under the uncommitted credit facility may bear interest based upon an alternate
rate agreed to by the fund and Vanguard.
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
40
Value
Index Fund
borrowings
normally extend overnight, but can have a maximum duration of seven days. Loans
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 June 30, 2021, the fund did not utilize the credit
facilities or the Interfund Lending Program.
8. Other:
Dividend income is recorded on the ex-dividend date. Non-cash dividends included
in income, if any, are recorded at the fair value of the securities received.
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 and 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 June 30, 2021, the fund had contributed to Vanguard
capital in the amount of $4,393,000, representing less than 0.01% of the fund’s
net assets and 1.76% 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 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.
41
Value
Index Fund
The
following table summarizes the market value of the fund’s investments and
derivatives as of June 30, 2021, based on the inputs used to value them:
| Level
1 ($000) |
Level
2 ($000) |
Level
3 ($000) |
Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks | 125,606,195 | — | — | 125,606,195 |
| Temporary Cash Investments | 97,172 | — | — | 97,172 |
| Total | 125,703,367 | — | — | 125,703,367 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Futures Contracts1 | 733 | — | — | 733 |
| Swap Contracts | — | 532 | — | 532 |
| Total | 733 | 532 | — | 1,265 |
| Liabilities | ||||
| Swap Contracts | — | 4 | — | 4 |
| 1 | Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
| D. | As of June 30, 2021, 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 | 90,838,161 |
| Gross Unrealized Appreciation | 36,592,078 |
| Gross Unrealized Depreciation | (1,726,139) |
| Net Unrealized Appreciation (Depreciation) | 34,865,939 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at December 31, 2020, the fund had available
capital losses totaling $3,475,867,000 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
December 31, 2021; 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 June 30, 2021, the fund purchased $20,795,946,000 of investment securities and sold $8,628,883,000 of investment securities, other than temporary cash investments. Purchases and sales include $13,580,408,000 and $3,356,566,000, respectively, in connection with in-kind purchases and redemptions of the fund's capital shares. |
The
fund purchased securities from and sold securities to other Vanguard funds or
accounts managed by Vanguard or its affiliates, in accordance with procedures
adopted by the board of trustees in compliance with Rule 17a-7 of the Investment
Company Act of 1940. For the six months ended ended June 30, 2021, such
purchases and sales were $1,917,089,000 and
42
Value
Index Fund
$1,665,096,000,
respectively; these amounts, other than temporary cash investments, are included
in the purchases and sales of investment securities noted above.
| F. | Capital share transactions for each class of shares were: |
| Six Months Ended June 30, 2021 |
Year Ended December 31, 2020 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| Investor Shares | |||||
| Issued | 29,929 | 588 | 30,119 | 734 | |
| Issued in Lieu of Cash Distributions | 2,911 | 56 | 7,153 | 186 | |
| Redeemed | (71,822) | (1,399) | (83,089) | (2,048) | |
| Net Increase (Decrease)—Investor Shares | (38,982) | (755) | (45,817) | (1,128) | |
| ETF Shares | |||||
| Issued | 14,037,976 | 106,013 | 12,323,003 | 114,853 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (3,856,690) | (29,025) | (6,826,615) | (63,575) | |
| Net Increase (Decrease)—ETF Shares | 10,181,286 | 76,988 | 5,496,388 | 51,278 | |
| Admiral Shares | |||||
| Issued | 4,170,090 | 82,759 | 5,109,104 | 126,982 | |
| Issued in Connection with Acquisition of Vanguard Capital Value Fund | 1,035,654 | 21,626 | — | — | |
| Issued in Lieu of Cash Distributions | 263,939 | 5,112 | 491,886 | 12,702 | |
| Redeemed | (2,349,656) | (46,155) | (5,462,302) | (134,427) | |
| Net Increase (Decrease)—Admiral Shares | 3,120,027 | 63,342 | 138,688 | 5,257 | |
| Institutional Shares | |||||
| Issued | 1,528,375 | 29,918 | 2,756,913 | 66,872 | |
| Issued in Lieu of Cash Distributions | 143,974 | 2,789 | 292,134 | 7,539 | |
| Redeemed | (1,741,832) | (34,936) | (2,983,749) | (70,252) | |
| Net Increase (Decrease)—Institutional Shares | (69,483) | (2,229) | 65,298 | 4,159 | |
| G. | On February 5, 2021, the fund acquired all the net assets of Vanguard U.S. Value Fund pursuant to a plan of reorganization approved by the funds’ boards of trustees on July 23, 2020, and by the shareholders of the U.S. Value Fund at a special meeting on January 22, 2021. The purpose of the transaction was to consolidate the assets of the two funds, placing U.S. Value Fund shareholders in a comparable fund with better historical long-term investment performance; delivering a large expense ratio reduction for U.S. Value Fund shareholders; and creating a larger combined fund, which we anticipate, over time, will achieve greater economies of scale. The acquisition was accomplished by a tax-free exchange of 21.6 million Admiral Shares of the Value Index Fund for the 60.0 million shares of the U.S. Value Fund outstanding on February 5, 2021. The U.S. Value Fund’s net assets of $1.0 billion, including $156.3 million of unrealized appreciation, were combined with the Value Index Fund’s net assets of $101.5 billion, resulting in combined net assets of $102.5 billion on February 5, 2021. |
43
Value
Index Fund
Assuming
that the acquisition had been completed on January 1, 2021, the beginning of the
fund’s reporting period, the fund’s pro forma results of operations for the
six-months ended June 30, 2021, would be:
| ($000) | |
| Net Investment Income | 1,315,380 |
| Realized Net Gain (Loss) | 1,983,579 |
| Change in Unrealized Appreciation (Depreciation) | 13,722,947 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 17,021,906 |
Because
the combined funds have been managed as a single integrated fund since the
acquisition was completed, it is not practical to separate the results of
operations of Vanguard U.S. Value Fund that have been included in the fund’s
Statement of Operations since February 5, 2021.
| H. | Management has determined that no events or transactions occurred subsequent to June 30, 2021, that would require recognition or disclosure in these financial statements. |
44
Large-Cap
Index Fund
Fund
Allocation
As
of June 30, 2021
| Basic Materials | 1.7% |
| Consumer Discretionary | 16.0 |
| Consumer Staples | 5.0 |
| Energy | 2.7 |
| Financials | 10.7 |
| Health Care | 12.6 |
| Industrials | 13.3 |
| Real Estate | 2.7 |
| Technology | 29.5 |
| Telecommunications | 3.2 |
| Utilities | 2.6 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Industry Classification
Benchmark (“ICB”), except for the “Other” category (if applicable), which
includes securities that have not been provided an ICB 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 its target index as closely as possible.
The
Industry Classification Benchmark (“ICB”) is owned by FTSE. FTSE does not accept
any liability to any person for any loss or damage arising out of any error or
omission in the ICB.
45
Large-Cap
Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of June 30, 2021
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.
46
Large-Cap
Index Fund
47
Large-Cap
Index Fund
48
Large-Cap
Index Fund
49
Large-Cap
Index Fund
50
Large-Cap
Index Fund
51
Large-Cap
Index Fund
| Shares | Market Value• ($000) | ||
| Avangrid Inc. | 76,355 | 3,927 | |
| 993,755 | |||
| Total Common Stocks (Cost $18,438,963) | 37,599,208 | ||
| Temporary Cash Investments (0.3%) | |||
| Money Market Fund (0.3%) | |||
| 2,3 | Vanguard Market Liquidity Fund, 0.056% (Cost $125,863) | 1,258,689 | 125,869 |
| Total Investments (100.1%) (Cost $18,564,826) | 37,725,077 | ||
| Other Assets and Liabilities— Net (-0.1%) | (45,699) | ||
| Net Assets (100%) | 37,679,378 | ||
| Cost is in $000. | |||
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $46,022,000. |
| 2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 3 | Collateral of $47,370,000 was received for securities on loan, of which $44,598,000 is held in Vanguard Market Liquidity Fund and $2,772,000 is held in cash. |
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 500 Index | September 2021 | 368 | 78,910 | 927 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
52
Large-Cap
Index Fund
Statement
of Assets and Liabilities
As
of June 30, 2021
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $18,438,963) | 37,599,208 |
| Affiliated Issuers (Cost $125,863) | 125,869 |
| Total Investments in Securities | 37,725,077 |
| Investment in Vanguard | 1,275 |
| Cash | 2,772 |
| Cash Collateral Pledged—Futures Contracts | 5,597 |
| Receivables for Investment Securities Sold | 3,049 |
| Receivables for Accrued Income | 36,198 |
| Receivables for Capital Shares Issued | 12,010 |
| Variation Margin Receivable—Futures Contracts | 160 |
| Total Assets | 37,786,138 |
| Liabilities | |
| Due to Custodian | 12,393 |
| Payables for Investment Securities Purchased | 6,210 |
| Collateral for Securities on Loan | 47,370 |
| Payables for Capital Shares Redeemed | 40,130 |
| Payables to Vanguard | 657 |
| Total Liabilities | 106,760 |
| Net Assets | 37,679,378 |
53
Large-Cap
Index Fund
| Statement of Assets and Liabilities (continued)
| |
| At June 30, 2021, net assets consisted of: | |
| ($000s, except shares and per-share amounts) | Amount |
| Paid-in Capital | 18,443,053 |
| Total Distributable Earnings (Loss) | 19,236,325 |
| Net Assets | 37,679,378 |
| Investor Shares—Net Assets | |
| Applicable
to 474,624 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
38,481 |
| Net Asset Value Per Share—Investor Shares | $81.08 |
| ETF Shares—Net Assets | |
| Applicable
to 122,855,650 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
24,662,697 |
| Net Asset Value Per Share—ETF Shares | $200.75 |
| Admiral Shares—Net Assets | |
| Applicable
to 105,716,509 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
10,718,045 |
| Net Asset Value Per Share—Admiral Shares | $101.38 |
| Institutional Shares—Net Assets | |
| Applicable
to 5,416,392 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
2,260,155 |
| Net Asset Value Per Share—Institutional Shares | $417.28 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
54
Large-Cap
Index Fund
Statement
of Operations
| Six
Months Ended June 30, 2021 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 239,647 |
| Interest1 | 56 |
| Securities Lending—Net | 512 |
| Total Income | 240,215 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 1,267 |
| Management and Administrative—Investor Shares | 29 |
| Management and Administrative—ETF Shares | 3,093 |
| Management and Administrative—Admiral Shares | 1,881 |
| Management and Administrative—Institutional Shares | 321 |
| Marketing and Distribution—Investor Shares | 1 |
| Marketing and Distribution—ETF Shares | 253 |
| Marketing and Distribution—Admiral Shares | 147 |
| Marketing and Distribution—Institutional Shares | 29 |
| Custodian Fees | 188 |
| Shareholders’ Reports—Investor Shares | — |
| Shareholders’ Reports—ETF Shares | 248 |
| Shareholders’ Reports—Admiral Shares | 30 |
| Shareholders’ Reports—Institutional Shares | 1 |
| Trustees’ Fees and Expenses | 5 |
| Total Expenses | 7,493 |
| Net Investment Income | 232,722 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 549,847 |
| Futures Contracts | 24,323 |
| Realized Net Gain (Loss) | 574,170 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | 4,089,936 |
| Futures Contracts | (3,142) |
| Change in Unrealized Appreciation (Depreciation) | 4,086,794 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 4,893,686 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $54,000, less than $1,000, and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $564,911,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
55
Large-Cap
Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended June 30, 2021 |
Year
Ended December 31, 2020 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 232,722 | 475,660 | |
| Realized Net Gain (Loss) | 574,170 | 736,290 | |
| Change in Unrealized Appreciation (Depreciation) | 4,086,794 | 4,719,115 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 4,893,686 | 5,931,065 | |
| Distributions | |||
| Investor Shares | (214) | (488) | |
| ETF Shares | (149,722) | (309,168) | |
| Admiral Shares | (64,781) | (134,821) | |
| Institutional Shares | (14,649) | (30,593) | |
| Total Distributions | (229,366) | (475,070) | |
| Capital Share Transactions | |||
| Investor Shares | (3,194) | 679 | |
| ETF Shares | 90,207 | 1,675,512 | |
| Admiral Shares | 56,968 | 247,258 | |
| Institutional Shares | (193,002) | 42,631 | |
| Net Increase (Decrease) from Capital Share Transactions | (49,021) | 1,966,080 | |
| Total Increase (Decrease) | 4,615,299 | 7,422,075 | |
| Net Assets | |||
| Beginning of Period | 33,064,079 | 25,642,004 | |
| End of Period | 37,679,378 | 33,064,079 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
56
Large-Cap
Index Fund
Financial
Highlights
| Investor Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $71.00 | $59.72 | $46.36 | $49.48 | $41.31 | $37.78 |
| Investment Operations | ||||||
| Net Investment Income | .4541 | .9691 | .9181 | .9661 | .8191 | .768 |
| Net Realized and Unrealized Gain (Loss) on Investments | 10.073 | 11.268 | 13.466 | (3.184) | 8.161 | 3.533 |
| Total from Investment Operations | 10.527 | 12.237 | 14.384 | (2.218) | 8.980 | 4.301 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.447) | (.957) | (1.024) | (.902) | (.810) | (.771) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.447) | (.957) | (1.024) | (.902) | (.810) | (.771) |
| Net Asset Value, End of Period | $81.08 | $71.00 | $59.72 | $46.36 | $49.48 | $41.31 |
| Total Return2 | 14.86% | 20.89% | 31.23% | -4.59% | 21.89% | 11.50% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $38 | $37 | $30 | $344 | $387 | $400 |
| Ratio of Total Expenses to Average Net Assets | 0.17% | 0.17% | 0.17% | 0.17% | 0.17% | 0.18% |
| Ratio of Net Investment Income to Average Net Assets | 1.20% | 1.61% | 1.75% | 1.91% | 1.81% | 2.02% |
| Portfolio Turnover Rate3 | 3% | 3% | 5% | 4% | 3% | 5% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
57
Large-Cap
Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $175.80 | $147.88 | $114.77 | $122.49 | $102.27 | $93.52 |
| Investment Operations | ||||||
| Net Investment Income | 1.2471 | 2.5941 | 2.5811 | 2.5721 | 2.1681 | 2.018 |
| Net Realized and Unrealized Gain (Loss) on Investments | 24.934 | 27.890 | 33.204 | (7.896) | 20.196 | 8.754 |
| Total from Investment Operations | 26.181 | 30.484 | 35.785 | (5.324) | 22.364 | 10.772 |
| Distributions | ||||||
| Dividends from Net Investment Income | (1.231) | (2.564) | (2.675) | (2.396) | (2.144) | (2.022) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (1.231) | (2.564) | (2.675) | (2.396) | (2.144) | (2.022) |
| Net Asset Value, End of Period | $200.75 | $175.80 | $147.88 | $114.77 | $122.49 | $102.27 |
| Total Return | 14.93% | 20.99% | 31.39% | -4.44% | 22.03% | 11.65% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $24,663 | $21,540 | $16,270 | $12,358 | $11,613 | $8,468 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 1.33% | 1.74% | 1.93% | 2.04% | 1.93% | 2.14% |
| Portfolio Turnover Rate2 | 3% | 3% | 5% | 4% | 3% | 5% |
| 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.
58
Large-Cap
Index Fund
Financial
Highlights
| Admiral Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $88.79 | $74.69 | $57.96 | $61.86 | $51.65 | $47.23 |
| Investment Operations | ||||||
| Net Investment Income | .6251 | 1.3031 | 1.2991 | 1.2881 | 1.0941 | 1.019 |
| Net Realized and Unrealized Gain (Loss) on Investments | 12.582 | 14.084 | 16.774 | (3.983) | 10.197 | 4.422 |
| Total from Investment Operations | 13.207 | 15.387 | 18.073 | (2.695) | 11.291 | 5.441 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.617) | (1.287) | (1.343) | (1.205) | (1.081) | (1.021) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.617) | (1.287) | (1.343) | (1.205) | (1.081) | (1.021) |
| Net Asset Value, End of Period | $101.38 | $88.79 | $74.69 | $57.96 | $61.86 | $51.65 |
| Total Return2 | 14.92% | 21.03% | 31.39% | -4.47% | 22.03% | 11.65% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $10,718 | $9,338 | $7,546 | $5,306 | $5,375 | $4,130 |
| Ratio of Total Expenses to Average Net Assets | 0.05% | 0.05% | 0.05% | 0.05% | 0.05% | 0.06% |
| Ratio of Net Investment Income to Average Net Assets | 1.32% | 1.73% | 1.92% | 2.03% | 1.93% | 2.14% |
| Portfolio Turnover Rate3 | 3% | 3% | 5% | 4% | 3% | 5% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | 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.
59
Large-Cap
Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended June 30, 2021 |
Year Ended December 31, | ||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||
| Net Asset Value, Beginning of Period | $365.43 | $307.39 | $238.57 | $254.60 | $212.59 | $194.40 |
| Investment Operations | ||||||
| Net Investment Income | 2.5821 | 5.3891 | 5.3631 | 5.3451 | 4.5291 | 4.215 |
| Net Realized and Unrealized Gain (Loss) on Investments | 51.827 | 57.981 | 69.016 | (16.390) | 41.958 | 18.199 |
| Total from Investment Operations | 54.409 | 63.370 | 74.379 | (11.045) | 46.487 | 22.414 |
| Distributions | ||||||
| Dividends from Net Investment Income | (2.559) | (5.330) | (5.559) | (4.985) | (4.477) | (4.224) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (2.559) | (5.330) | (5.559) | (4.985) | (4.477) | (4.224) |
| Net Asset Value, End of Period | $417.28 | $365.43 | $307.39 | $238.57 | $254.60 | $212.59 |
| Total Return | 14.93% | 21.05% | 31.39% | -4.46% | 22.03% | 11.66% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $2,260 | $2,149 | $1,796 | $1,178 | $1,212 | $932 |
| Ratio of Total Expenses to Average Net Assets | 0.04% | 0.04% | 0.04% | 0.04% | 0.04% | 0.05% |
| Ratio of Net Investment Income to Average Net Assets | 1.32% | 1.74% | 1.92% | 2.04% | 1.94% | 2.15% |
| Portfolio Turnover Rate2 | 3% | 3% | 5% | 4% | 3% | 5% |
| 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.
60
Large-Cap
Index Fund
Notes
to Financial Statements
Vanguard
Large-Cap Index Fund is registered under the Investment Company Act of 1940 as
an open-end investment company, or mutual fund. The fund offers four classes of
shares: Investor Shares, ETF Shares, Admiral 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 NYSE Arca; they can be purchased and sold through a
broker.
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.
| 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 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. The notional
amounts of the contracts are not recorded in the Statement of Assets and
Liabilities. 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 gains (losses) on futures
contracts.
61
Large-Cap
Index Fund
During
the six months ended June 30, 2021, 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.
3. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. The fund’s tax returns are
open to examination by the relevant tax authorities until expiration of the
applicable statute of limitations, which is generally three years after the
filing of the tax return. Management has analyzed the fund’s tax positions taken
for all open federal and state income tax years, and has concluded that no
provision for 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. Collateral investments in Vanguard
Market Liquidity Fund are subject to market appreciation or depreciation.
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
Facilities 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 and an uncommitted credit facility provided by Vanguard. Both
facilities may be renewed annually. Each fund is individually liable for its
borrowings, if any, under the credit facilities. Borrowings may be utilized for
temporary or emergency purposes, subject to the fund’s regulatory and
contractual borrowing restrictions. With respect to the committed credit
facility, the participating funds are charged administrative fees and an annual
commitment fee of 0.10% of the undrawn committed 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 either facility bear interest at a
rate based upon the higher of the one-month London Interbank Offered Rate (or an
acceptable alternate rate, if necessary), federal funds
62
Large-Cap
Index Fund
effective
rate, or overnight bank funding rate plus an agreed-upon spread, except that
borrowings under the uncommitted credit facility may bear interest based upon an
alternate rate agreed to by the fund and Vanguard.
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 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 June 30, 2021, the fund did not utilize the credit
facilities or the Interfund Lending Program.
7. Other:
Dividend income is recorded on the ex-dividend date. Non-cash dividends included
in income, if any, are recorded at the fair value of the securities received.
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 and 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 June 30, 2021, the fund had contributed to Vanguard
capital in the amount of $1,275,000, representing less than 0.01% of the fund’s
net assets and 0.51% 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 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.
63
Large-Cap
Index Fund
Level
2—Other significant observable inputs
(including quoted prices for similar securities, interest rates, prepayment
speeds, credit risk, etc.).
Level
3—Significant unobservable inputs (including
the fund’s own assumptions used to determine the fair value of investments). Any
investments and derivatives valued with significant unobservable inputs are
noted on the Schedule of Investments.
At
June 30, 2021, 100% of the market value of the fund’s investments and
derivatives was determined based on Level 1 inputs.
| D. | As of June 30, 2021, 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 | 18,567,430 |
| Gross Unrealized Appreciation | 19,441,002 |
| Gross Unrealized Depreciation | (282,428) |
| Net Unrealized Appreciation (Depreciation) | 19,158,574 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at December 31, 2020, the fund had available
capital losses totaling $502,274,000 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
December 31, 2021; 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 June 30, 2021, the fund purchased $1,865,114,000 of investment securities and sold $1,767,802,000 of investment securities, other than temporary cash investments. Purchases and sales include $789,879,000 and $756,879,000, respectively, in connection with in-kind purchases and redemptions of the fund's capital shares. |
| F. | Capital share transactions for each class of shares were: |
| Six Months Ended June 30, 2021 |
Year Ended December 31, 2020 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| Investor Shares | |||||
| Issued | 3,033 | 41 | 12,683 | 220 | |
| Issued in Lieu of Cash Distributions | 214 | 3 | 488 | 9 | |
| Redeemed | (6,441) | (87) | (12,492) | (213) | |
| Net Increase (Decrease)—Investor Shares | (3,194) | (43) | 679 | 16 | |
| ETF Shares | |||||
| Issued | 859,928 | 4,531 | 2,981,881 | 21,401 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (769,721) | (4,200) | (1,306,369) | (8,900) | |
| Net Increase (Decrease)—ETF Shares | 90,207 | 331 | 1,675,512 | 12,501 | |
64
Large-Cap
Index Fund
| Six Months Ended June 30, 2021 |
Year Ended December 31, 2020 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| Admiral Shares | |||||
| Issued | 912,714 | 9,687 | 2,270,102 | 32,290 | |
| Issued in Lieu of Cash Distributions | 52,644 | 550 | 109,775 | 1,534 | |
| Redeemed | (908,390) | (9,691) | (2,132,619) | (29,688) | |
| Net Increase (Decrease)—Admiral Shares | 56,968 | 546 | 247,258 | 4,136 | |
| Institutional Shares | |||||
| Issued | 294,593 | 760 | 602,657 | 1,940 | |
| Issued in Lieu of Cash Distributions | 12,946 | 33 | 26,683 | 91 | |
| Redeemed | (500,541) | (1,259) | (586,709) | (1,991) | |
| Net Increase (Decrease)—Institutional Shares | (193,002) | (466) | 42,631 | 40 | |
| G. | Management has determined that no events or transactions occurred subsequent to June 30, 2021, that would require recognition or disclosure in these financial statements. |
65
Trustees
Approve Advisory Arrangements
The
board of trustees of Vanguard Growth Index Fund, Vanguard Value Index Fund, and
Vanguard Large-Cap Index Fund has renewed each fund’s investment advisory
arrangement with The Vanguard Group, Inc. (Vanguard), through its Equity Index
Group. The board determined that continuing each fund’s internalized management
structure was in the best interests of the fund and its shareholders.
The
board based its decisions upon an evaluation of the advisor’s investment staff,
portfolio management process, and performance. This evaluation included
information provided to the board by Vanguard’s Portfolio Review Department,
which is responsible for fund and advisor oversight and product management. The
Portfolio Review Department met regularly with the advisor and made monthly
presentations to the board during the fiscal year that directed the board’s
focus to relevant information and topics.
The
board, or an investment committee made up of board members, also received
information throughout the year during advisor presentations. For each advisor
presentation, the board was provided with letters and reports that included
information about, among other things, the advisory firm and the advisor’s
assessment of the investment environment, portfolio performance, and portfolio
characteristics.
In
addition, the board received monthly reports, which included a Market and
Economic Report, a Fund Dashboard Monthly Summary, and a Fund Performance
Report.
Prior
to their meeting, the trustees were provided with a memo and materials that
summarized the information they received over the course of the year. They also
considered the factors discussed below, among others. However, no single factor
determined whether the board approved the arrangements. Rather, it was the
totality of the circumstances that drove the board’s decisions.
Nature,
extent, and quality of services
The
board reviewed the quality of each fund’s investment management services over
both the short and long term, and took into account the organizational depth and
stability of the advisor. The board considered that Vanguard has been managing
investments for more than four decades. The Equity Index Group adheres to a
sound, disciplined investment management process; the team has considerable
experience, stability, and depth.
The
board concluded that Vanguard’s experience, stability, depth, and performance,
among other factors, warranted continuation of each advisory arrangement.
Investment
performance
The
board considered the short- and long-term performance of each fund, including
any periods of outperformance or underperformance compared with its target index
and peer group. The board concluded that the performance was such that each
advisory arrangement should continue.
Cost
The
board concluded that each fund’s expense ratio was well below the average
expense ratio charged by funds in its peer group and that each fund’s advisory
expenses were also well below the peer-group average.
66
The
board does not conduct a profitability analysis of Vanguard because of
Vanguard’s unique structure. Unlike most other mutual fund management companies,
Vanguard is owned by the funds it oversees.
The
benefit of economies of scale
The
board concluded that the funds’ arrangements with Vanguard ensure that the funds
will realize economies of scale as they grow, with the cost to shareholders
declining as fund assets increase.
The
board will consider whether to renew the advisory arrangements again after a
one-year period.
67
Liquidity
Risk Management
Vanguard
funds (except for the money market funds) have adopted and implemented a written
liquidity risk management program (the “Program”) as required by Rule 22e-4
under the Investment Company Act of 1940. Rule 22e-4 requires that each fund
adopt a program that is reasonably designed to assess and manage the fund’s
liquidity risk, which is the risk that the fund could not meet redemption
requests without significant dilution of remaining investors’ interests in the
fund.
Assessment
and management of a fund’s liquidity risk under the Program take into
consideration certain factors, such as the fund’s investment strategy and the
liquidity of its portfolio investments during normal and reasonably foreseeable
stressed conditions, its short- and long-term cash-flow projections during both
normal and reasonably foreseeable stressed conditions, and its cash and
cash-equivalent holdings and access to other funding sources. As required by the
rule, the Program includes policies and procedures for classification of fund
portfolio holdings in four liquidity categories, maintaining certain levels of
highly liquid investments, and limiting holdings of illiquid investments.
The
board of trustees of Vanguard Index Funds approved the appointment of liquidity
risk management program administrators responsible for administering the Program
for Vanguard Growth Index Fund, Vanguard Value Index Fund and Vanguard Large-Cap
Index Fund, and for carrying out the specific responsibilities set forth in the
Program, including reporting to the board on at least an annual basis regarding
the Program’s operation, its adequacy, and the effectiveness of its
implementation for the past year (the “Program Administrator Report”). The board
has reviewed the Program Administrator Report covering the period from January
1, 2020, through December 31, 2020 (the “Review Period”). The Program
Administrator Report stated that during the Review Period the Program operated
and was implemented effectively to manage the funds' liquidity risk.
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