Semiannual
Report | February
28, 2022
Vanguard
S&P Mid-Cap 400 Index Funds
| Vanguard S&P Mid-Cap 400 Index Fund |
| Vanguard S&P Mid-Cap 400 Value Index Fund |
| Vanguard S&P Mid-Cap 400 Growth Index Fund |
About Your
Fund’s Expenses
As
a shareholder of the fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund’s
gross income, directly reduce the investment return of the fund.
A
fund‘s expenses are expressed as a percentage of its average net assets. This
figure is known as the expense ratio. The following examples are intended to
help you understand the ongoing costs (in dollars) of investing in your fund and
to compare these costs with those of other mutual funds. The examples are based
on an investment of $1,000 made at the beginning of the period shown and held
for the entire period.
The
accompanying table illustrates your fund’s costs in two ways:
| • | Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. |
To
do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your fund under the heading ”Expenses Paid During Period.“
| • | Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. |
Note
that the expenses shown in the table are meant to highlight and help you compare
ongoing costs only and do not reflect
transaction costs incurred by the fund for buying and selling securities.
Further, the expenses do not include any purchase, redemption, or account
service fees described in the fund prospectus. If such fees were applied to your
account, your costs would be higher. Your fund does not carry a “sales
load.”
The
calculations assume no shares were bought or sold during the period. Your actual
costs may have been higher or lower, depending on the amount of your investment
and the timing of any purchases or redemptions.
You
can find more information about the fund’s expenses, including annual expense
ratios, in the Financial Statements section of this report. For additional
information on operating expenses and other shareholder costs, please refer to
your fund’s current prospectus.
1
| Six Months Ended February 28, 2022 | |||
| Beginning Account Value 8/31/2021 |
Ending Account Value 2/28/2022 |
Expenses Paid During Period | |
| Based on Actual Fund Return | |||
| S&P Mid-Cap 400 Index Fund | |||
| ETF Shares | $1,000.00 | $972.40 | $0.49 |
| Institutional Shares | 1,000.00 | 972.60 | 0.39 |
| S&P Mid-Cap 400 Value Index Fund | |||
| ETF Shares | $1,000.00 | $1,009.80 | $0.75 |
| Institutional Shares | 1,000.00 | 1,010.60 | 0.40 |
| S&P Mid-Cap 400 Growth Index Fund | |||
| ETF Shares | $1,000.00 | $934.80 | $0.72 |
| Institutional Shares | 1,000.00 | 935.30 | 0.38 |
| Based on Hypothetical 5% Yearly Return | |||
| S&P Mid-Cap 400 Index Fund | |||
| ETF Shares | $1,000.00 | $1,024.30 | $0.50 |
| Institutional Shares | 1,000.00 | 1,024.40 | 0.40 |
| S&P Mid-Cap 400 Value Index Fund | |||
| ETF Shares | $1,000.00 | $1,024.05 | $0.75 |
| Institutional Shares | 1,000.00 | 1,024.40 | 0.40 |
| S&P Mid-Cap 400 Growth Index Fund | |||
| ETF Shares | $1,000.00 | $1,024.05 | $0.75 |
| Institutional Shares | 1,000.00 | 1,024.40 | 0.40 |
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
S&P Mid-Cap 400 Index Fund, 0.10% for ETF Shares and 0.08% for Institutional
Shares; for the S&P Mid-Cap 400 Value Index Fund, 0.15% for ETF Shares and
0.08% for Institutional Shares; and for the S&P Mid-Cap 400 Growth Index
Fund, 0.15% for ETF Shares and 0.08% 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).
2
S&P
Mid-Cap 400 Index Fund
Fund
Allocation
As
of February 28, 2022
| Communication Services | 1.7% |
| Consumer Discretionary | 15.0 |
| Consumer Staples | 3.5 |
| Energy | 2.7 |
| Financials | 14.7 |
| Health Care | 9.3 |
| Industrials | 18.5 |
| Information Technology | 14.4 |
| Materials | 7.0 |
| Real Estate | 10.1 |
| Utilities | 3.1 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Global Industry Classification
Standard (“GICS”), except for the “Other” category (if applicable), which
includes securities that have not been provided a GICS 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
Global Industry Classification Standard (“GICS”) was developed by and is the
exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and
Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed
for use by Vanguard. Neither MSCI, S&P nor any third party involved in
making or compiling the GICS or any GICS classification makes any express or
implied warranties or representations with respect to such standard or
classification (or the results to be obtained by the use thereof), and all such
parties hereby expressly disclaim all warranties of originality, accuracy,
completeness, merchantability or fitness for a particular purpose with respect
to any such standard or classification. Without limiting any of the foregoing,
in no event shall MSCI, S&P, any of its affiliates or any third party
involved in making or compiling the GICS or any GICS classification have any
liability for any direct, indirect, special, punitive, consequential or any
other damages (including lost profits) even if notified of the possibility of
such damages.
3
S&P
Mid-Cap 400 Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of February 28, 2022
The
fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are
available on the SEC’s website at www.sec.gov.
4
S&P
Mid-Cap 400 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 Mid-Cap 400 Index | March 2022 | 1 | 266 | 4 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
9
S&P
Mid-Cap 400 Index Fund
Statement
of Assets and Liabilities
As
of February 28, 2022
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $2,391,647) | 2,974,652 |
| Affiliated Issuers (Cost $7,326) | 7,326 |
| Total Investments in Securities | 2,981,978 |
| Investment in Vanguard | 97 |
| Cash Collateral Pledged—Futures Contracts | 20 |
| Receivables for Investment Securities Sold | 423 |
| Receivables for Accrued Income | 2,135 |
| Receivables for Capital Shares Issued | 505 |
| Total Assets | 2,985,158 |
| Liabilities | |
| Due to Custodian | 1,869 |
| Payables for Investment Securities Purchased | 1 |
| Collateral for Securities on Loan | 7,321 |
| Payables for Capital Shares Redeemed | 396 |
| Payables to Vanguard | 94 |
| Variation Margin Payable—Futures Contracts | — |
| Total Liabilities | 9,681 |
| Net Assets | 2,975,477 |
10
S&P
Mid-Cap 400 Index Fund
| Statement of Assets and Liabilities (continued)
| |
|
At February 28, 2022, net assets consisted of: |
|
| ($000s, except shares and per-share amounts) | Amount |
| Paid-in Capital | 2,540,680 |
| Total Distributable Earnings (Loss) | 434,797 |
| Net Assets | 2,975,477 |
| ETF Shares—Net Assets | |
| Applicable
to 8,526,157 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
1,531,764 |
| Net Asset Value Per Share—ETF Shares | $179.65 |
| Institutional Shares—Net Assets | |
| Applicable
to 4,028,977 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
1,443,713 |
| Net Asset Value Per Share—Institutional Shares | $358.33 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
11
S&P
Mid-Cap 400 Index Fund
Statement
of Operations
| Six
Months Ended February 28, 2022 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 17,413 |
| Interest1 | 3 |
| Securities Lending—Net | 8 |
| Total Income | 17,424 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 129 |
| Management and Administrative—ETF Shares | 622 |
| Management and Administrative—Institutional Shares | 453 |
| Marketing and Distribution—ETF Shares | 28 |
| Marketing and Distribution—Institutional Shares | 28 |
| Custodian Fees | 25 |
| Shareholders’ Reports—ETF Shares | 22 |
| Shareholders’ Reports—Institutional Shares | 8 |
| Trustees’ Fees and Expenses | 1 |
| Other Expenses | 8 |
| Total Expenses | 1,324 |
| Net Investment Income | 16,100 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 85,389 |
| Futures Contracts | (597) |
| Realized Net Gain (Loss) | 84,792 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | (183,046) |
| Futures Contracts | (15) |
| Change in Unrealized Appreciation (Depreciation) | (183,061) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (82,169) |
| 1 | Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $3,000, ($4,000), less than $1,000, and less than $1,000, respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $99,763,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
12
S&P
Mid-Cap 400 Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended February 28, 2022 |
Year
Ended August 31, 2021 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 16,100 | 31,769 | |
| Realized Net Gain (Loss) | 84,792 | 185,294 | |
| Change in Unrealized Appreciation (Depreciation) | (183,061) | 699,605 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (82,169) | 916,668 | |
| Distributions | |||
| ETF Shares | (11,417) | (14,119) | |
| Institutional Shares | (10,831) | (16,856) | |
| Total Distributions | (22,248) | (30,975) | |
| Capital Share Transactions | |||
| ETF Shares | 111,225 | 182,048 | |
| Institutional Shares | 96,889 | (248,994) | |
| Net Increase (Decrease) from Capital Share Transactions | 208,114 | (66,946) | |
| Total Increase (Decrease) | 103,697 | 818,747 | |
| Net Assets | |||
| Beginning of Period | 2,871,780 | 2,053,033 | |
| End of Period | 2,975,477 | 2,871,780 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
13
S&P
Mid-Cap 400 Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $186.16 | $130.31 | $127.18 | $138.01 | $116.74 | $105.51 |
| Investment Operations | ||||||
| Net Investment Income1 | 1.002 | 1.996 | 1.959 | 1.880 | 1.778 | 1.510 |
| Net Realized and Unrealized Gain (Loss) on Investments | (6.120) | 55.805 | 3.205 | (10.864) | 21.199 | 11.294 |
| Total from Investment Operations | (5.118) | 57.801 | 5.164 | (8.984) | 22.977 | 12.804 |
| Distributions | ||||||
| Dividends from Net Investment Income | (1.392) | (1.951) | (2.034) | (1.846) | (1.707) | (1.574) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (1.392) | (1.951) | (2.034) | (1.846) | (1.707) | (1.574) |
| Net Asset Value, End of Period | $179.65 | $186.16 | $130.31 | $127.18 | $138.01 | $116.74 |
| Total Return | -2.76% | 44.65% | 4.11% | -6.50% | 19.82% | 12.22% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $1,532 | $1,476 | $890 | $919 | $973 | $727 |
| Ratio of Total Expenses to Average Net Assets | 0.10% | 0.10% | 0.10% | 0.10% | 0.15% | 0.15% |
| Ratio of Net Investment Income to Average Net Assets | 1.14% | 1.21% | 1.57% | 1.47% | 1.38% | 1.34% |
| Portfolio Turnover Rate2 | 6% | 16% | 17% | 10% | 12% | 13% |
| 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.
14
S&P
Mid-Cap 400 Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $371.30 | $259.90 | $253.60 | $275.26 | $232.82 | $210.40 |
| Investment Operations | ||||||
| Net Investment Income1 | 2.022 | 4.038 | 3.959 | 3.786 | 3.711 | 3.176 |
| Net Realized and Unrealized Gain (Loss) on Investments | (12.180) | 111.307 | 6.384 | (21.653) | 42.301 | 22.516 |
| Total from Investment Operations | (10.158) | 115.345 | 10.343 | (17.867) | 46.012 | 25.692 |
| Distributions | ||||||
| Dividends from Net Investment Income | (2.812) | (3.945) | (4.043) | (3.793) | (3.572) | (3.272) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (2.812) | (3.945) | (4.043) | (3.793) | (3.572) | (3.272) |
| Net Asset Value, End of Period | $358.33 | $371.30 | $259.90 | $253.60 | $275.26 | $232.82 |
| Total Return | -2.74% | 44.69% | 4.14% | -6.49% | 19.92% | 12.31% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $1,444 | $1,396 | $1,164 | $1,202 | $1,420 | $1,119 |
| Ratio of Total Expenses to Average Net Assets | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% |
| Ratio of Net Investment Income to Average Net Assets | 1.16% | 1.24% | 1.59% | 1.49% | 1.45% | 1.41% |
| Portfolio Turnover Rate2 | 6% | 16% | 17% | 10% | 12% | 13% |
| 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
S&P
Mid-Cap 400 Index Fund
Notes
to Financial Statements
Vanguard
S&P Mid-Cap 400 Index Fund is registered under the Investment Company Act of
1940 as an open-end investment company, or mutual fund. The fund offers two
classes of shares: ETF Shares and Institutional Shares. Each of the share
classes has different eligibility and minimum purchase requirements, and is
designed for different types of investors. ETF Shares are listed for trading on
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.
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.
During
the six months ended February 28, 2022, 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.
16
S&P
Mid-Cap 400 Index Fund
3. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. 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 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
alternative 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
17
S&P
Mid-Cap 400 Index Fund
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 February 28, 2022, 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. 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 February 28, 2022, the fund had contributed to Vanguard
capital in the amount of $97,000, representing less than 0.01% of the fund’s net
assets and 0.04% 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.
At
February 28, 2022, 100% of the market value of the fund's investments and
derivatives was determined based on Level 1 inputs.
18
S&P
Mid-Cap 400 Index Fund
| D. | As of February 28, 2022, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows: |
| Amount ($000) | |
| Tax Cost | 2,406,949 |
| Gross Unrealized Appreciation | 714,996 |
| Gross Unrealized Depreciation | (139,963) |
| Net Unrealized Appreciation (Depreciation) | 575,033 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at August 31, 2021, the fund had available
capital losses totaling $228,906,000 that may be carried forward indefinitely to
offset future net capital gains. The fund will use these capital losses to
offset net taxable capital gains, if any, realized during the year ending August
31, 2022; should the fund realize net capital losses for the year, the losses
will be added to the loss carryforward balance above.
| E. | During the six months ended February 28, 2022, the fund purchased $601,749,000 of investment securities and sold $395,309,000 of investment securities, other than temporary cash investments. Purchases and sales include $299,434,000 and $213,766,000, 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 February 28, 2022, such purchases
were $93,839,000 and sales were $54,564,000, resulting in net realized loss of
$15,791,000; 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 February 28, 2022 |
Year Ended August 31, 2021 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| ETF Shares | |||||
| Issued | 335,969 | 1,825 | 666,229 | 4,125 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (224,744) | (1,225) | (484,181) | (3,025) | |
| Net Increase (Decrease)—ETF Shares | 111,225 | 600 | 182,048 | 1,100 | |
| Institutional Shares | |||||
| Issued | 157,060 | 432 | 157,041 | 500 | |
| Issued in Lieu of Cash Distributions | 10,352 | 29 | 16,165 | 52 | |
| Redeemed | (70,523) | (192) | (422,200) | (1,269) | |
| Net Increase (Decrease)—Institutional Shares | 96,889 | 269 | (248,994) | (717) | |
19
S&P
Mid-Cap 400 Index Fund
| G. | Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund. |
Management
has determined that no other events or transactions occurred subsequent to
February 28, 2022, that would require recognition or disclosure in these
financial statements.
20
S&P
Mid-Cap 400 Value Index Fund
Fund
Allocation
As
of February 28, 2022
| Communication Services | 1.4% |
| Consumer Discretionary | 13.7 |
| Consumer Staples | 5.5 |
| Energy | 2.4 |
| Financials | 17.3 |
| Health Care | 7.1 |
| Industrials | 19.3 |
| Information Technology | 10.5 |
| Materials | 6.5 |
| Real Estate | 11.2 |
| Utilities | 5.1 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Global Industry Classification
Standard (“GICS”), except for the “Other” category (if applicable), which
includes securities that have not been provided a GICS 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
Global Industry Classification Standard (“GICS”) was developed by and is the
exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and
Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed
for use by Vanguard. Neither MSCI, S&P nor any third party involved in
making or compiling the GICS or any GICS classification makes any express or
implied warranties or representations with respect to such standard or
classification (or the results to be obtained by the use thereof), and all such
parties hereby expressly disclaim all warranties of originality, accuracy,
completeness, merchantability or fitness for a particular purpose with respect
to any such standard or classification. Without limiting any of the foregoing,
in no event shall MSCI, S&P, any of its affiliates or any third party
involved in making or compiling the GICS or any GICS classification have any
liability for any direct, indirect, special, punitive, consequential or any
other damages (including lost profits) even if notified of the possibility of
such damages.
21
S&P
Mid-Cap 400 Value Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of February 28, 2022
The
fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are
available on the SEC’s website at www.sec.gov.
22
S&P
Mid-Cap 400 Value 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 Mid-Cap 400 Index | March 2022 | 2 | 532 | 9 |
25
S&P
Mid-Cap 400 Value 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) |
| Harley-Davidson Inc. | 8/31/22 | BANA | 2,420 | (0.071) | 482 | — |
| 1 | Based on USD Overnight Bank Funding Rate as of the most recent payment date. Floating interest payment received/paid monthly. |
| BANA—Bank of America, N.A. |
At
February 28, 2022, the counterparties had deposited in segregated accounts cash
of $510,000 in connection with open over-the-counter swap contracts.
See
accompanying Notes, which are an integral part of the Financial
Statements.
26
S&P
Mid-Cap 400 Value Index Fund
Statement
of Assets and Liabilities
As
of February 28, 2022
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $848,818) | 923,235 |
| Affiliated Issuers (Cost $3,673) | 3,673 |
| Total Investments in Securities | 926,908 |
| Investment in Vanguard | 30 |
| Cash Collateral Pledged—Futures Contracts | 30 |
| Receivables for Accrued Income | 903 |
| Receivables for Capital Shares Issued | 1 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | 482 |
| Total Assets | 928,354 |
| Liabilities | |
| Payables for Investment Securities Purchased | 1,541 |
| Payables for Capital Shares Redeemed | 28 |
| Payables to Vanguard | 46 |
| Variation Margin Payable—Futures Contracts | — |
| Total Liabilities | 1,615 |
| Net Assets | 926,739 |
|
At February 28, 2022, net assets consisted of: |
|
| Paid-in Capital | 916,755 |
| Total Distributable Earnings (Loss) | 9,984 |
| Net Assets | 926,739 |
| ETF Shares—Net Assets | |
| Applicable
to 5,100,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
835,807 |
| Net Asset Value Per Share—ETF Shares | $163.88 |
| Institutional Shares—Net Assets | |
| Applicable
to 276,651 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
90,932 |
| Net Asset Value Per Share—Institutional Shares | $328.69 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
27
S&P
Mid-Cap 400 Value Index Fund
Statement
of Operations
| Six
Months Ended February 28, 2022 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 7,508 |
| Interest1 | 2 |
| Securities Lending—Net | 2 |
| Total Income | 7,512 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 5 |
| Management and Administrative—ETF Shares | 562 |
| Management and Administrative—Institutional Shares | 36 |
| Marketing and Distribution—ETF Shares | 15 |
| Marketing and Distribution—Institutional Shares | 3 |
| Custodian Fees | 14 |
| Shareholders’ Reports—ETF Shares | 17 |
| Shareholders’ Reports—Institutional Shares | — |
| Trustees’ Fees and Expenses | — |
| Other Expenses | 8 |
| Total Expenses | 660 |
| Net Investment Income | 6,852 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 101,985 |
| Futures Contracts | (38) |
| Swap Contracts | (327) |
| Realized Net Gain (Loss) | 101,620 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | (103,347) |
| Futures Contracts | (54) |
| Swap Contracts | 482 |
| Change in Unrealized Appreciation (Depreciation) | (102,919) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 5,553 |
| 1 | Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $2,000, ($1,000), less than $1,000, and less than $1,000, respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $114,073,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
28
S&P
Mid-Cap 400 Value Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended February 28, 2022 |
Year
Ended August 31, 2021 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 6,852 | 14,037 | |
| Realized Net Gain (Loss) | 101,620 | 23,607 | |
| Change in Unrealized Appreciation (Depreciation) | (102,919) | 272,949 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 5,553 | 310,593 | |
| Distributions | |||
| ETF Shares | (15,176) | (12,813) | |
| Institutional Shares | (1,625) | (3,807) | |
| Total Distributions | (16,801) | (16,620) | |
| Capital Share Transactions | |||
| ETF Shares | 24,291 | 92,161 | |
| Institutional Shares | (70,361) | (63,166) | |
| Net Increase (Decrease) from Capital Share Transactions | (46,070) | 28,995 | |
| Total Increase (Decrease) | (57,318) | 322,968 | |
| Net Assets | |||
| Beginning of Period | 984,057 | 661,089 | |
| End of Period | 926,739 | 984,057 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
29
S&P
Mid-Cap 400 Value Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $165.29 | $109.60 | $117.53 | $130.06 | $112.31 | $101.70 |
| Investment Operations | ||||||
| Net Investment Income1 | 1.191 | 2.488 | 2.423 | 2.061 | 2.090 | 1.767 |
| Net Realized and Unrealized Gain (Loss) on Investments | .404 | 56.385 | (8.078) | (12.629) | 17.548 | 10.344 |
| Total from Investment Operations | 1.595 | 58.873 | (5.655) | (10.568) | 19.638 | 12.111 |
| Distributions | ||||||
| Dividends from Net Investment Income | (3.005) | (3.183) | (2.275) | (1.962) | (1.888) | (1.501) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (3.005) | (3.183) | (2.275) | (1.962) | (1.888) | (1.501) |
| Net Asset Value, End of Period | $163.88 | $165.29 | $109.60 | $117.53 | $130.06 | $112.31 |
| Total Return | 0.98% | 54.51% | -5.10% | -8.04% | 17.60% | 11.91% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $836 | $822 | $501 | $685 | $735 | $632 |
| Ratio of Total Expenses to Average Net Assets | 0.15% | 0.15% | 0.15% | 0.15% | 0.20% | 0.20% |
| Ratio of Net Investment Income to Average Net Assets | 1.50% | 1.72% | 2.13% | 1.72% | 1.72% | 1.61% |
| Portfolio Turnover Rate2 | 28% | 36% | 51% | 38% | 36% | 39% |
| 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.
30
S&P
Mid-Cap 400 Value Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $331.49 | $219.78 | $235.62 | $260.90 | $225.05 | $203.65 |
| Investment Operations | ||||||
| Net Investment Income1 | 2.719 | 5.090 | 5.011 | 4.332 | 4.454 | 3.866 |
| Net Realized and Unrealized Gain (Loss) on Investments | .596 | 113.153 | (16.157) | (25.380) | 35.198 | 20.656 |
| Total from Investment Operations | 3.315 | 118.243 | (11.146) | (21.048) | 39.652 | 24.522 |
| Distributions | ||||||
| Dividends from Net Investment Income | (6.115) | (6.533) | (4.694) | (4.232) | (3.802) | (3.122) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (6.115) | (6.533) | (4.694) | (4.232) | (3.802) | (3.122) |
| Net Asset Value, End of Period | $328.69 | $331.49 | $219.78 | $235.62 | $260.90 | $225.05 |
| Total Return | 1.06% | 54.62% | -5.01% | -7.99% | 17.75% | 12.05% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $91 | $162 | $160 | $186 | $235 | $159 |
| Ratio of Total Expenses to Average Net Assets | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% |
| Ratio of Net Investment Income to Average Net Assets | 1.71% | 1.79% | 2.21% | 1.79% | 1.84% | 1.73% |
| Portfolio Turnover Rate2 | 28% | 36% | 51% | 38% | 36% | 39% |
| 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.
31
S&P
Mid-Cap 400 Value Index Fund
Notes
to Financial Statements
Vanguard
S&P Mid-Cap 400 Value Index Fund is registered under the Investment Company
Act of 1940 as an open-end investment company, or mutual fund. The fund offers
two classes of shares: ETF Shares and Institutional Shares. Each of the share
classes has different eligibility and minimum purchase requirements, and is
designed for different types of investors. ETF Shares are listed for trading on
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.
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.
During
the six months ended February 28, 2022, 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.
32
S&P
Mid-Cap 400 Value Index Fund
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 February 28, 2022, 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 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.
33
S&P
Mid-Cap 400 Value Index Fund
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
alternative 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.
34
S&P
Mid-Cap 400 Value Index Fund
For
the six months ended February 28, 2022, 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. 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 February 28, 2022, the fund had contributed to Vanguard
capital in the amount of $30,000, representing less than 0.01% of the fund’s net
assets and 0.01% 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.
35
S&P
Mid-Cap 400 Value Index Fund
The
following table summarizes the market value of the fund's investments and
derivatives as of February 28, 2022, based on the inputs used to value
them:
| Level
1 ($000) |
Level
2 ($000) |
Level
3 ($000) |
Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks | 923,235 | — | — | 923,235 |
| Temporary Cash Investments | 3,673 | — | — | 3,673 |
| Total | 926,908 | — | — | 926,908 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Futures Contracts1 | 9 | — | — | 9 |
| Swap Contracts | — | 482 | — | 482 |
| Total | 9 | 482 | — | 491 |
| 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 February 28, 2022, 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 | 853,955 |
| Gross Unrealized Appreciation | 115,678 |
| Gross Unrealized Depreciation | (42,234) |
| Net Unrealized Appreciation (Depreciation) | 73,444 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at August 31, 2021, the fund had available
capital losses totaling $164,382,000 that may be carried forward indefinitely to
offset future net capital gains. The fund will use these capital losses to
offset net taxable capital gains, if any, realized during the year ending August
31, 2022; should the fund realize net capital losses for the year, the losses
will be added to the loss carryforward balance above.
| E. | During the six months ended February 28, 2022, the fund purchased $527,740,000 of investment securities and sold $579,747,000 of investment securities, other than temporary cash investments. Purchases and sales include $265,288,000 and $324,722,000, 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 February 28, 2022, such purchases
were $208,555,000 and sales were $102,449,000, resulting in net realized loss of
$3,676,000; these amounts, other than temporary cash investments, are included
in the purchases and sales of investment securities noted above.
36
S&P
Mid-Cap 400 Value Index Fund
| F. | Capital share transactions for each class of shares were: |
| Six Months Ended February 28, 2022 |
Year Ended August 31, 2021 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| ETF Shares | |||||
| Issued | 353,948 | 2,125 | 301,250 | 2,050 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (329,657) | (2,000) | (209,089) | (1,650) | |
| Net Increase (Decrease)—ETF Shares | 24,291 | 125 | 92,161 | 400 | |
| Institutional Shares | |||||
| Issued | 7,940 | 24 | 26,775 | 92 | |
| Issued in Lieu of Cash Distributions | 1,318 | 4 | 3,181 | 12 | |
| Redeemed | (79,619) | (239) | (93,122) | (342) | |
| Net Increase (Decrease)—Institutional Shares | (70,361) | (211) | (63,166) | (238) | |
| G. | Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund. |
Management
has determined that no other events or transactions occurred subsequent to
February 28, 2022, that would require recognition or disclosure in these
financial statements.
37
S&P
Mid-Cap 400 Growth Index Fund
Fund
Allocation
As
of February 28, 2022
| Communication Services | 2.1% |
| Consumer Discretionary | 16.0 |
| Consumer Staples | 1.5 |
| Energy | 3.1 |
| Financials | 11.9 |
| Health Care | 11.6 |
| Industrials | 17.7 |
| Information Technology | 18.5 |
| Materials | 7.5 |
| Real Estate | 9.0 |
| Utilities | 1.1 |
The
table reflects the fund’s investments, except for short-term investments and
derivatives. Sector categories are based on the Global Industry Classification
Standard (“GICS”), except for the “Other” category (if applicable), which
includes securities that have not been provided a GICS 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
Global Industry Classification Standard (“GICS”) was developed by and is the
exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and
Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed
for use by Vanguard. Neither MSCI, S&P nor any third party involved in
making or compiling the GICS or any GICS classification makes any express or
implied warranties or representations with respect to such standard or
classification (or the results to be obtained by the use thereof), and all such
parties hereby expressly disclaim all warranties of originality, accuracy,
completeness, merchantability or fitness for a particular purpose with respect
to any such standard or classification. Without limiting any of the foregoing,
in no event shall MSCI, S&P, any of its affiliates or any third party
involved in making or compiling the GICS or any GICS classification have any
liability for any direct, indirect, special, punitive, consequential or any
other damages (including lost profits) even if notified of the possibility of
such damages.
38
S&P
Mid-Cap 400 Growth Index Fund
Financial
Statements (unaudited)
Schedule
of Investments
As
of February 28, 2022
The
fund files its complete schedule of portfolio holdings with the Securities and
Exchange Commission (SEC) for the first and third quarters of each fiscal year
as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are
available on the SEC’s website at www.sec.gov.
39
S&P
Mid-Cap 400 Growth Index Fund
| Shares | Market Value• ($000) | |||||
| Temporary Cash Investments (0.6%) | ||||||
| Money Market Fund (0.6%) | ||||||
| 2,3 | Vanguard Market Liquidity Fund, 0.138% (Cost $6,035) |
60,354 | 6,035 | |||
| Total Investments (100.5%) (Cost $837,486) | 939,992 | |||||
| Other Assets and Liabilities—Net (-0.5%) | (4,851) | |||||
| Net Assets (100%) | 935,141 | |||||
| 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 $5,292,000. |
| 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 $5,342,000 was received for securities on loan, of which $5,294,000 is held in Vanguard Market Liquidity Fund and $48,000 is held in cash. |
| REIT—Real Estate Investment Trust. |
Derivative
Financial Instruments Outstanding as of Period End
| Futures Contracts | ||||
| ($000) | ||||
| Expiration | Number
of Long (Short) Contracts |
Notional Amount |
Value
and Unrealized Appreciation (Depreciation) | |
| Long Futures Contracts | ||||
| E-mini S&P Mid-Cap 400 Index | March 2022 | 4 | 1,063 | 10 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
42
S&P
Mid-Cap 400 Growth Index Fund
Statement
of Assets and Liabilities
As
of February 28, 2022
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $831,451) | 933,957 |
| Affiliated Issuers (Cost $6,035) | 6,035 |
| Total Investments in Securities | 939,992 |
| Investment in Vanguard | 32 |
| Cash | 151 |
| Cash Collateral Pledged—Futures Contracts | 50 |
| Receivables for Investment Securities Sold | 1,440 |
| Receivables for Accrued Income | 409 |
| Receivables for Capital Shares Issued | 65 |
| Total Assets | 942,139 |
| Liabilities | |
| Payables for Investment Securities Purchased | 101 |
| Collateral for Securities on Loan | 5,342 |
| Payables for Capital Shares Redeemed | 1,509 |
| Payables to Vanguard | 45 |
| Variation Margin Payable—Futures Contracts | 1 |
| Total Liabilities | 6,998 |
| Net Assets | 935,141 |
43
S&P
Mid-Cap 400 Growth Index Fund
| Statement of Assets and Liabilities (continued)
| |
|
At February 28, 2022, net assets consisted of: |
|
| ($000s, except shares and per-share amounts) | Amount |
| Paid-in Capital | 965,867 |
| Total Distributable Earnings (Loss) | (30,726) |
| Net Assets | 935,141 |
| ETF Shares—Net Assets | |
| Applicable
to 4,250,000 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
812,311 |
| Net Asset Value Per Share—ETF Shares | $191.13 |
| Institutional Shares—Net Assets | |
| Applicable
to 322,467 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
122,830 |
| Net Asset Value Per Share—Institutional Shares | $380.91 |
See
accompanying Notes, which are an integral part of the Financial
Statements.
44
S&P
Mid-Cap 400 Growth Index Fund
Statement
of Operations
| Six
Months Ended February 28, 2022 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 3,619 |
| Interest1 | 1 |
| Securities Lending—Net | 2 |
| Total Income | 3,622 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 12 |
| Management and Administrative—ETF Shares | 614 |
| Management and Administrative—Institutional Shares | 50 |
| Marketing and Distribution—ETF Shares | 17 |
| Marketing and Distribution—Institutional Shares | 3 |
| Custodian Fees | 10 |
| Shareholders’ Reports—ETF Shares | 17 |
| Shareholders’ Reports—Institutional Shares | — |
| Trustees’ Fees and Expenses | — |
| Other Expenses | 8 |
| Total Expenses | 731 |
| Net Investment Income | 2,891 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold1,2 | 68,729 |
| Futures Contracts | 14 |
| Realized Net Gain (Loss) | 68,743 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | (146,053) |
| Futures Contracts | 4 |
| Change in Unrealized Appreciation (Depreciation) | (146,049) |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (74,415) |
| 1 | Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $1,000, ($1,000), less than $1,000, and less than $1,000, respectively. Purchases and sales are for temporary cash investment purposes. |
| 2 | Includes $98,730,000 of net gain (loss) resulting from in-kind redemptions. |
See
accompanying Notes, which are an integral part of the Financial
Statements.
45
S&P
Mid-Cap 400 Growth Index Fund
Statement
of Changes in Net Assets
| Six
Months Ended February 28, 2022 |
Year
Ended August 31, 2021 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 2,891 | 6,092 | |
| Realized Net Gain (Loss) | 68,743 | 164,740 | |
| Change in Unrealized Appreciation (Depreciation) | (146,049) | 133,712 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | (74,415) | 304,544 | |
| Distributions | |||
| ETF Shares | (4,524) | (6,040) | |
| Institutional Shares | (821) | (1,545) | |
| Total Distributions | (5,345) | (7,585) | |
| Capital Share Transactions | |||
| ETF Shares | (43,539) | (91,008) | |
| Institutional Shares | (17,300) | (117,515) | |
| Net Increase (Decrease) from Capital Share Transactions | (60,839) | (208,523) | |
| Total Increase (Decrease) | (140,599) | 88,436 | |
| Net Assets | |||
| Beginning of Period | 1,075,740 | 987,304 | |
| End of Period | 935,141 | 1,075,740 | |
See
accompanying Notes, which are an integral part of the Financial
Statements.
46
S&P
Mid-Cap 400 Growth Index Fund
Financial
Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $205.45 | $152.52 | $137.70 | $146.46 | $121.33 | $109.76 |
| Investment Operations | ||||||
| Net Investment Income1 | .546 | 1.052 | 1.359 | 1.519 | 1.268 | 1.152 |
| Net Realized and Unrealized Gain (Loss) on Investments | (13.866) | 53.198 | 15.183 | (9.084) | 25.098 | 11.576 |
| Total from Investment Operations | (13.320) | 54.250 | 16.542 | (7.565) | 26.366 | 12.728 |
| Distributions | ||||||
| Dividends from Net Investment Income | (1.000) | (1.320) | (1.722) | (1.195) | (1.236) | (1.158) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (1.000) | (1.320) | (1.722) | (1.195) | (1.236) | (1.158) |
| Net Asset Value, End of Period | $191.13 | $205.45 | $152.52 | $137.70 | $146.46 | $121.33 |
| Total Return | -6.52% | 35.70% | 12.08% | -5.08% | 21.83% | 11.67% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $812 | $925 | $774 | $737 | $831 | $686 |
| Ratio of Total Expenses to Average Net Assets | 0.15% | 0.15% | 0.15% | 0.15% | 0.20% | 0.20% |
| Ratio of Net Investment Income to Average Net Assets | 0.58% | 0.57% | 0.98% | 1.13% | 0.94% | 0.99% |
| Portfolio Turnover Rate2 | 32% | 40% | 49% | 40% | 43% | 40% |
| 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.
47
S&P
Mid-Cap 400 Growth Index Fund
Financial
Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period |
Six Months Ended February 28, 2022 |
Year Ended August 31, | ||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||
| Net Asset Value, Beginning of Period | $409.55 | $303.97 | $274.38 | $292.07 | $241.68 | $218.61 |
| Investment Operations | ||||||
| Net Investment Income1 | 1.238 | 2.347 | 2.925 | 3.242 | 2.894 | 2.604 |
| Net Realized and Unrealized Gain (Loss) on Investments | (27.636) | 106.033 | 30.247 | (18.167) | 49.971 | 23.011 |
| Total from Investment Operations | (26.398) | 108.380 | 33.172 | (14.925) | 52.865 | 25.615 |
| Distributions | ||||||
| Dividends from Net Investment Income | (2.242) | (2.800) | (3.582) | (2.765) | (2.475) | (2.545) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (2.242) | (2.800) | (3.582) | (2.765) | (2.475) | (2.545) |
| Net Asset Value, End of Period | $380.91 | $409.55 | $303.97 | $274.38 | $292.07 | $241.68 |
| Total Return | -6.47% | 35.80% | 12.17% | -5.02% | 21.97% | 11.80% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $123 | $151 | $213 | $205 | $271 | $320 |
| Ratio of Total Expenses to Average Net Assets | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% | 0.08% |
| Ratio of Net Investment Income to Average Net Assets | 0.66% | 0.65% | 1.06% | 1.20% | 1.06% | 1.11% |
| Portfolio Turnover Rate2 | 32% | 40% | 49% | 40% | 43% | 40% |
| 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.
48
S&P
Mid-Cap 400 Growth Index Fund
Notes
to Financial Statements
Vanguard
S&P Mid-Cap 400 Growth Index Fund is registered under the Investment Company
Act of 1940 as an open-end investment company, or mutual fund. The fund offers
two classes of shares: ETF Shares and Institutional Shares. Each of the share
classes has different eligibility and minimum purchase requirements, and is
designed for different types of investors. ETF Shares are listed for trading on
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.
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.
During
the six months ended February 28, 2022, 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.
49
S&P
Mid-Cap 400 Growth Index Fund
3. Federal
Income Taxes: The fund intends to continue to qualify as a regulated investment
company and distribute all of its taxable income. 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 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
alternative 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
50
S&P
Mid-Cap 400 Growth Index Fund
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 February 28, 2022, 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. 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 February 28, 2022, the fund had contributed to Vanguard
capital in the amount of $32,000, representing less than 0.01% of the fund’s net
assets and 0.01% 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.
At
February 28, 2022, 100% of the market value of the fund's investments and
derivatives was determined based on Level 1 inputs.
51
S&P
Mid-Cap 400 Growth Index Fund
| D. | As of February 28, 2022, 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 | 838,526 |
| Gross Unrealized Appreciation | 147,443 |
| Gross Unrealized Depreciation | (45,967) |
| Net Unrealized Appreciation (Depreciation) | 101,476 |
The
fund’s tax-basis capital gains and losses are determined only at the end of each
fiscal year. For tax purposes, at August 31, 2021, the fund had available
capital losses totaling $201,166,000 that may be carried forward indefinitely to
offset future net capital gains. The fund will use these capital losses to
offset net taxable capital gains, if any, realized during the year ending August
31, 2022; should the fund realize net capital losses for the year, the losses
will be added to the loss carryforward balance above.
| E. | During the six months ended February 28, 2022, the fund purchased $593,595,000 of investment securities and sold $654,342,000 of investment securities, other than temporary cash investments. Purchases and sales include $246,139,000 and $322,474,000, 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 February 28, 2022, such purchases
were $230,339,000 and sales were $94,216,000, resulting in net realized loss of
$9,503,000; 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 February 28, 2022 |
Year Ended August 31, 2021 | ||||
| Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) | ||
| ETF Shares | |||||
| Issued | 279,841 | 1,375 | 418,838 | 2,325 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (323,380) | (1,625) | (509,846) | (2,900) | |
| Net Increase (Decrease)—ETF Shares | (43,539) | (250) | (91,008) | (575) | |
| Institutional Shares | |||||
| Issued | 3,807 | 9 | 12,736 | 34 | |
| Issued in Lieu of Cash Distributions | 821 | 2 | 1,545 | 4 | |
| Redeemed | (21,928) | (58) | (131,796) | (371) | |
| Net Increase (Decrease)—Institutional Shares | (17,300) | (47) | (117,515) | (333) | |
52
S&P
Mid-Cap 400 Growth Index Fund
| G. | Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund. |
Management
has determined that no other events or transactions occurred subsequent to
February 28, 2022, that would require recognition or disclosure in these
financial statements.
53
The
S&P MidCap 400 Index, S&P MidCap 400 Value Index, and S&P MidCap 400
Growth Index (the “Indexes”) are products of S&P Dow Jones Indices LLC, a
division of S&P Global, or its affiliates (“SPDJI”), and have been licensed
for use by Vanguard. Standard & Poor’s® and S&P® are registered
trademarks of Standard & Poor’s Financial Services LLC, a division of
S&P Global (“S&P”) and Dow Jones® is a registered trademark of Dow Jones
Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI
and have been sublicensed for use for certain purposes by Vanguard. Vanguard
S&P Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400 Value Index Fund,
and Vanguard S&P Mid-Cap 400 Growth Index Fund are not sponsored, endorsed,
sold or promoted by SPDJI, Dow Jones, S&P, or any of their respective
affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones
Indices make no representation or warranty, express or implied, to the owners of
the Vanguard S&P Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400 Value
Index Fund, and Vanguard S&P Mid-Cap 400 Growth Index Fund or any member of
the public regarding the advisability of investing in securities generally or in
Vanguard S&P Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400 Value
Index Fund, and Vanguard S&P Mid-Cap 400 Growth Index Fund particularly or
the ability of the S&P MidCap 400 Index, S&P MidCap 400 Value Index, and
S&P MidCap 400 Growth Index to track general market performance. S&P Dow
Jones Indices’ only relationship to Vanguard with respect to the S&P MidCap
400 Index, S&P MidCap 400 Value Index, and S&P MidCap 400 Growth Index
is the licensing of the Indexes and certain trademarks, service marks and/or
trade names of S&P Dow Jones Indices and/or its licensors. The S&P
MidCap 400 Index, S&P MidCap 400 Value Index, and S&P MidCap 400 Growth
Index are determined, composed and calculated by S&P Dow Jones Indices
without regard to Vanguard or Vanguard S&P Mid-Cap 400 Index Fund, Vanguard
S&P Mid-Cap 400 Value Index Fund, and Vanguard S&P Mid-Cap 400 Growth
Index Fund. S&P Dow Jones Indices have no obligation to take the needs of
Vanguard or the owners of Vanguard S&P Mid-Cap 400 Index Fund, Vanguard
S&P Mid-Cap 400 Value Index Fund, and Vanguard S&P Mid-Cap 400 Growth
Index Fund into consideration in determining, composing or calculating the
S&P MidCap 400 Index, S&P MidCap 400 Value Index, and S&P MidCap 400
Growth Index. S&P Dow Jones Indices are not responsible for and have not
participated in the determination of the prices and amount of Vanguard S&P
Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400 Value Index Fund, and
Vanguard S&P Mid-Cap 400 Growth Index Fund or the timing of the issuance or
sale of Vanguard S&P Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400
Value Index Fund, and Vanguard S&P Mid-Cap 400 Growth Index Fund or in the
determination or calculation of the equation by which Vanguard S&P Mid-Cap
400 Index Fund, Vanguard S& P Mid-Cap 400 Value Index Fund, and Vanguard
S&P Mid-Cap 400 Growth Index Fund are to be converted into cash, surrendered
or redeemed, as the case may be. S&P Dow Jones Indices have no obligation or
liability in connection with the administration, marketing or trading of
Vanguard S&P Mid-Cap 400 Index Fund, Vanguard S&P Mid-Cap 400 Value
Index Fund, and Vanguard S&P Mid-Cap 400 Growth Index Fund. There is no
assurance that investment products based on the S&P MidCap 400 Index,
S&P MidCap 400 Value Index, and S&P MidCap 400 Growth Index will
accurately track index performance or provide positive investment returns.
S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a
security within an index is not a recommendation by S&P Dow Jones Indices to
buy, sell, or hold such security, nor is it considered to be investment
advice.
S&P
DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF THE INDEXES OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION
(INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES
INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS,
OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKE NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY
VANGUARD, OWNERS OF VANGUARD S&P MID-CAP 400 INDEX FUND, VANGUARD S&P
MID-CAP 400 VALUE INDEX FUND, AND VANGUARD S&P MID-CAP 400 GROWTH INDEX
FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR WITH RESPECT
TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO,
LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT
LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY
AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND VANGUARD, OTHER
THAN THE LICENSORS OF S&P DOW JONES INDICES.
54
