N-CSR 1 quantitativefunds_final.htm quantitativefunds_final.htm - Generated by SEC Publisher for SEC Filing

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-04526

 

Name of Registrant:

Vanguard Quantitative Funds

 

Address of Registrant:

P.O. Box 2600
  Valley Forge, PA 19482

 

Name and address of agent for service:

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

 

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

 

Date of fiscal year end:    September 30

 

 

Date of reporting period: October 1, 2014 – September 30, 2015

 

Item 1: Reports to Shareholders

 

 



Annual Report | September 30, 2015

Vanguard Growth and Income Fund

 

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.

Contents  
Your Fund’s Total Returns. 1
Chairman’s Letter. 2
Advisors’ Report. 8
Fund Profile. 13
Performance Summary. 15
Financial Statements. 17
Your Fund’s After-Tax Returns. 37
About Your Fund’s Expenses. 38
Trustees Approve Advisory Arrangements. 40
Glossary. 42

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

 

Your Fund’s Total Returns

Fiscal Year Ended September 30, 2015  
  Total
  Returns
Vanguard Growth and Income Fund  
Investor Shares 0.22%
Admiral™ Shares 0.31
S&P 500 Index -0.61
Large-Cap Core Funds Average -2.30
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

 

Your Fund’s Performance at a Glance
September 30, 2014, Through September 30, 2015

      Distributions Per Share
  Starting Ending    
  Share Share Income Capital
  Price Price Dividends Gains
Vanguard Growth and Income Fund        
Investor Shares $42.69 $39.55 $0.724 $2.604
Admiral Shares 69.71 64.57 1.264 4.251

 

1

 

 

 

 

Chairman’s Letter

Dear Shareholder,

After posting a decent advance in the first six months, the broad U.S. stock market retreated and finished in slightly negative territory for the 12 months ended September 30, 2015. Investors worried about a slowdown across most regions of the world, accompanied by a steep drop in commodity prices.

Vanguard Growth and Income Fund returned less than 1% for the fiscal year, besting its benchmark, the Standard & Poor’s 500 Index, which returned –0.61%. The average return of its large-capitalization core fund peers was even lower, at –2.30%.

Of the fund’s ten industry sectors, six recorded gains. Consumer-related and health care companies fared well; energy and materials companies were notable detractors.

If you own shares of the fund in a taxable account, you may wish to review information on the fund’s after-tax returns that appears later in this report. Please note that as of September 30, 2015, the Growth and Income Fund had realized short-term capital gains equal to about 1% of fund assets and long-term capital gains equal to about 4% of fund assets. Gains will be distributed in December.

China’s economic woes weighed on U.S. stocks

The broad U.S. stock market returned –0.49% for the 12 months. The final two months were especially rocky as investors

2

 

worried in particular about the global ripple effects of slower economic growth in China.

For much of the fiscal year, investors were preoccupied with the possibility of an increase in short-term interest rates. On September 17, the Federal Reserve announced that it would hold rates steady for the time being, a decision that to some investors indicated that the Fed was concerned about the fragility of global markets.

International stocks returned about –11%, as the dollar’s strength against many foreign currencies weighed on results. Returns for emerging markets, which were especially hard hit by concerns about China, trailed those of the developed markets of the Pacific region and Europe.

Taxable bonds recorded gains as investors searched for safety

The broad U.S. taxable bond market returned 2.94%, as investors gravitated toward safe-haven assets amid global stock market turmoil. Stimulative monetary policies from the world’s central banks, declining inflation expectations, and global investors’ search for higher yields also helped lift U.S. bonds.

The yield of the 10-year Treasury note ended September at 2.05%, down from 2.48% a year earlier. (Bond prices and yields move in opposite directions.)

Market Barometer      
 
  Average Annual Total Returns
  Periods Ended September 30, 2015
  One Three Five
  Year Years Years
Stocks      
Russell 1000 Index (Large-caps) -0.61% 12.66% 13.42%
Russell 2000 Index (Small-caps) 1.25 11.02 11.73
Russell 3000 Index (Broad U.S. market) -0.49 12.53 13.28
FTSE All-World ex US Index (International) -11.34 2.87 2.19
 
Bonds      
Barclays U.S. Aggregate Bond Index (Broad taxable market) 2.94% 1.71% 3.10%
Barclays Municipal Bond Index (Broad tax-exempt market) 3.16 2.88 4.14
Citigroup Three-Month U.S. Treasury Bill Index 0.02 0.02 0.04
 
CPI      
Consumer Price Index -0.04% 0.93% 1.73%

 

3

 

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned –7.67%, hurt by the dollar’s strength. Without this currency effect, international bonds advanced modestly.

The Fed’s 0%–0.25% target for short-term interest rates continued to limit returns for money market funds and savings accounts.

Consumer stocks did well, but energy weighed heavily

The Growth and Income Fund invests in a diversified portfolio of hundreds of large-cap stocks that, while similar in composition to the S&P 500 Index, has the potential to outperform it. The fund’s three advisors rely on sophisticated computer models to identify the stocks that offer the best prospects.

The two consumer-oriented sectors, consumer discretionary (+15%) and consumer staples (+7%), advanced notably as retail spending rose. Strong auto sales were reflected in auto component stocks, and returns from internet retailers were particularly robust. Gains also came from the subsectors associated with the housing market’s rebound.

Health care stocks also contributed, generating returns of about 7%. The industry has benefited from several trends, including an aging U.S. population that requires more health care and the broader availability of insurance coverage through the Affordable Care Act. Health care services and medical equipment companies stood out. The picture was far different for the pharmaceutical and biotechnology

Expense Ratios      
Your Fund Compared With Its Peer Group      
 
  Investor Admiral Peer Group
  Shares Shares Average
Growth and Income Fund 0.37% 0.26% 1.12%

The fund expense ratios shown are from the prospectus dated January 26, 2015, and represent estimated costs for the current fiscal year. For
the fiscal year ended September 30, 2015, the fund’s expense ratios were 0.34% for Investor Shares and 0.23% for Admiral Shares. The
peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end
2014.

Peer group: Large-Cap Core Funds.

4

 

subsectors: They were strong performers in the first half of the period, but their 12-month return was near zero.

Information technology, the largest sector, posted a tepid 2% return. Internet-based services enjoyed strong returns as investors were optimistic about the subsector’s growth prospects.

Financial stocks, which made up the third-largest portion of the fund on average, returned –2%. Although health care real estate investment trusts benefited from the trends helping the health care industry, banks, asset managers, and consumer credit stocks retreated in the face of continuing low interest rates, crimping profit margins from loans.

The two sectors that weighed most heavily on the fund were energy (–24%) and materials (–14%). Both were hit hard by the big decline in commodity prices. Oil prices plunged about 50% over the 12-month period, and natural gas fell about 40% as a global glut of supply and slowing demand from developing nations cut profits dramatically.

For more about the advisors’ strategy and the fund’s positioning during the 12 months, please see the Advisors’ Report that follows this letter.

The fund’s three advisors have seen success over time

Over the past ten years, Investor Shares of the Growth and Income Fund returned an annual average of 6.16%, close to that

Total Returns  
Ten Years Ended September 30, 2015  
  Average
  Annual Return
Growth and Income Fund Investor Shares 6.16%
S&P 500 Index 6.80
Large-Cap Core Funds Average 5.52
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  

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

5

 

Staying the course can help you stay closer to your fund’s return

When stock markets are highly volatile, as in recent months, it’s tempting to run for cover. But the price of panic can be high.

A rough measure of what can be lost from attempts to time the market is the difference between the returns produced by a fund and the returns earned by the fund’s investors.

The results shown in the Performance Summary later in this report are your fund’s time-weighted returns—the average annual returns investors would have earned if they had invested a lump sum in the fund at the start of the period and reinvested any distributions they received. Their actual returns, however, depend on whether they subsequently bought or sold any shares. There’s often a gap between this dollar-weighted return for investors and the fund’s time-weighted return, as shown below.

Many sensible investment behaviors can contribute to the difference in returns, but industry cash flow data suggest that one important factor is the generally counterproductive effort to buy and sell at the “right” time. Keeping your emotions in check can help narrow the gap.

Mutual fund returns and investor returns over the last decade


Notes: Data are as of December 31, 2014. The average fund returns and average investor returns are from Morningstar. The average
fund returns are the average of the funds’ time-weighted returns in each category. The average investor returns assume that the growth
of a fund’s total net assets for a given period is driven by market returns and investor cash ow. To calculate investor return, a fund’s
change in assets for the period is discounted by the return of the fund to isolate how much of the asset growth was driven by cash ow.
A model, similar to an internal rate-of-return calculation, is then used to calculate a constant growth rate that links the beginning total
net assets and periodic cash ows to the ending total net assets.
Sources: Vanguard and Morningstar, Inc.

6

 

of the benchmark and ahead of the average return of peer funds. The decade can be divided into two distinct halves. In the first five years, the fund trailed the S&P 500 Index in each fiscal year as extraordinary volatility made it especially difficult for computer-reliant stock-selection approaches.

But in each of the last five years, the fund outdistanced the index. The fund’s three advisors use complementary quantitative strategies that have worked well in outperforming the benchmark without taking on undue risk. We expect this multimanager approach will continue to provide competitive returns over the long term.

A dose of discipline is crucial when markets become volatile

Although the broad U.S. stock market has posted gains for six straight calendar years—from 2009 to 2014—that streak may not last a seventh. Stocks tumbled in August and swung up and down in September.

Nobody can control the direction of the markets or predict where they’ll go in the short term. However, investors can control how they react to unstable and turbulent markets.

During periods of market adversity, it’s more important than ever to keep sight of one of Vanguard’s key principles: Maintain perspective and long-term discipline. Whether you’re investing for yourself or on behalf of clients, your success is affected greatly by how you respond—or don’t respond—during turbulent markets. (You can read Vanguard’s Principles for Investing Success at vanguard.com/research.)

As I’ve written in the past, the best course for long-term investors is generally to ignore daily market moves and not make decisions based on emotion. (See the box on page 6 for more discussion on the benefit of staying the course.) This is also a good time to evaluate your portfolio and make sure your asset allocation is aligned with your time horizon, goals, and risk tolerance.

The markets are unpredictable and often confounding. Keeping long-term plans clearly in focus can help you weather these periodic storms.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
October 12, 2015

7

 

Advisors’ Report

Vanguard Growth and Income Fund’s Investor Shares returned 0.22% for the 12 months ended September 30, 2015. The Admiral Shares returned 0.31%. The Standard & Poor’s 500 Index returned –0.61%, and the average return of large-capitalization core funds was –2.30%.

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

The advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal year and of how the portfolio’s positioning reflects this assessment. (Please note that Los Angeles Capital’s discussion refers to industry sectors as defined by Russell classifications, rather than by the Global Industry Classification Standard used elsewhere in this report.) These comments were prepared on October 16, 2015.

Vanguard Growth and Income Fund Investment Advisors
 
  Fund Assets Managed  
Investment Advisor % $ Million Investment Strategy
Vanguard Quantitative 33 1,928 Employs a quantitative fundamental management
Equity Group     approach, using models that assess valuation, growth
      prospects, management decisions, market sentiment,
      and earnings and balance-sheet quality of companies
      as compared with their peers.
D. E. Shaw Investment 32 1,905 Employs quantitative models that seek to capture
Management, L.L.C.     predominantly “bottom up” stock-specific return
      opportunities while aiming to keep the portfolio’s
      sector weights, size, and style characteristics similar to
      the benchmark.
Los Angeles Capital 32 1,902 Employs a quantitative model that emphasizes stocks
      with characteristics investors are currently seeking and
      underweights stocks with characteristics investors are
      currently avoiding. The portfolio’s sector weights, size,
      and style characteristics may differ modestly from the
      benchmark in a risk-controlled manner.
Cash Investments 3 133 These short-term reserves are invested by Vanguard in
      equity index products to simulate investments in
      stocks. Each advisor also may maintain a modest cash
      position.

 

8

 

Vanguard Quantitative Equity Group

Portfolio Managers:

James D. Troyer, CFA, Principal

James P. Stetler, Principal

Michael R. Roach, CFA

For the fiscal year ended September 30, 2015, performance in U.S. equities was slightly negative. The broad U.S. equity market as measured by the Russell 3000 Index returned –0.49%. The Russell 1000 Index of large-capitalization stocks was down 0.61%, while the Russell 2000 Index of small-cap stocks was up 1.25%. Growth-oriented equities, as measured by the Russell 3000 Growth Index, returned 3.21%, while value-oriented equities, as measured by the Russell 3000 Value Index, returned –4.22%.

Globally, the U.S. equity market outperformed as countries outside the United States, as measured by the MSCI EAFE Index, were down 8.66%. Emerging markets, which returned –19.28% as measured by the MSCI Emerging Markets Index, were a large contributor to this underperformance as they continued to lag. Performance within the benchmark was mixed as five of the ten sectors posted negative returns. Results were best in consumer discretionary, consumer staples, and health care. Energy, materials, and industrial stocks were all negative for the fiscal year.

After six straight years of positive performance, the U.S. stock market declined slightly for the period. The Federal Reserve held off on raising interest rates until it sees further progress toward its employment and inflation targets. Real GDP in the second quarter increased at an annual rate of 3.9%, compared with a 0.6% increase in the first quarter. The second-quarter increase reflected contributions from exports, acceleration in personal consumption expenditures, and an increase in state and local government spending. The unemployment rate has continued to decline over the past year. U.S. nonfarm payroll employment rose by 142,000 in September, and the unemployment rate fell to 5.1% from 5.9% a year ago.

The economic slowdown overseas, especially in emerging markets, continued to contribute to the recent volatility. Emerging-market currencies have lost value against the U.S. dollar. The possibility that the Fed might raise interest rates by the end of 2015 is pushing the dollar up and driving capital outflows from these countries. Many emerging economies also have been affected by weak commodity prices that have contributed to lower export growth. China’s continuing slowdown still represents significant downside risk to overall emerging-market performance.

It’s important to understand how portfolio performance is affected by the macroeconomic factors listed above, but it is

9

 

also important to focus on our approach, which emphasizes specific stock fundamentals. We compare stocks in the same industry groups to identify those with characteristics that will help them outperform in the long term. Our strict quantitative process concentrates on a combination of valuation and other factors focused on fundamental growth. We use the results of our model to construct our portfolio, with the goal of maximizing expected return and minimizing exposure to risks that our research indicates do not improve returns, such as market capitalization and other risks relative to our benchmark.

The model’s effectiveness across sectors was promising; we were able to produce positive stock selection results in seven of the ten sectors over the period. Our strongest results were in consumer discretionary, energy, and information technology. We underperformed in financials, telecommunication services, and utilities.

At the individual stock level, the largest contributions came from overweight positions in Cablevision Systems, O’Reilly Automotive, and Expedia. In addition, when comparing the portfolio’s performance with its benchmark’s, we benefited from underweighting or avoiding poorly performing stocks such as 21st Century Fox and Viacom.

Unfortunately, we were not able to avoid all bad performers. Overweight positions in Navient, Legg Mason, and Discover Financial Services directly lowered performance. Also, underweighting companies that were not positively identified by the fundamentals in our model, such as Citigroup and Public Storage, hurt our overall outperformance relative to the benchmark.

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

Portfolio Managers:

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

Philip Kearns, Ph.D., Managing Director

During the reporting period, global equity markets appeared to be particularly sensitive to developments in China’s stock and currency markets. In August, the Chinese central bank devalued the yuan, resulting in a 3.5% depreciation of China’s currency against the U.S. dollar. In the next two weeks, the Shanghai Stock Exchange Composite Index dropped more than 20%; equity markets around the world also fell significantly. Although the roughly 40% fall in mainland Chinese equities from their June peak through August garnered much attention, Chinese stocks returned more than 30% during the reporting period, highlighting that market’s considerable volatility.

10

 

Earlier in the fiscal year, the price of crude oil tumbled, losing half its value between October and January. Although there was a brief recovery in prices during the second quarter of 2015, oil finished the reporting period down about 50%. The decline in oil prices contributed to low U.S. consumer inflation, which may help explain why the Federal Reserve has maintained its near-zero interest rate policy.

Although we actively monitor such market activity, we generally do not make portfolio decisions based on a subjective analysis of the investment environment, except for attempting to identify and mitigate new risk factors. There were no such occurrences during the period.

Our quantitative equity investment process deploys models that seek to forecast individual stock returns as it works to mitigate active exposures to industries, sectors, and common risk factors. However, in constructing our equity portfolios from the bottom up, our process may result in small to moderate exposures to certain industries, sectors, and risk factors. Therefore, we generally attribute our portfolio performance to three major sources: bottom-up stock selection; exposure to risk factors such as value, growth, and market capitalization; and exposure to industry groups.

Based on our analysis, our portfolio’s outperformance during the reporting period was driven mostly by certain risk factors, with stock selection a close second. Among fundamental risk factors, the three largest contributors to relative performance were underweight exposures to high-dividend-yield stocks, stocks with low price/book ratios, and large-capitalization stocks.

Several technical risk factors also had an impact: Overweight exposure to stocks with low trading volume contributed to relative performance, while overweight exposure to high-volatility stocks detracted.

The three largest single-stock contributions came from overweight positions in Constellation Brands and Amazon.com (which shifted from under-to overweight) and an underweight position in ConocoPhillips. The three largest single-stock detractors were overweight positions in Micron Technology, Netflix, and Anadarko Petroleum.

We believe that China’s continuing economic weakness, falling oil prices, and uncertainty about the timing of a Fed rate hike are significant risks in the current market and could contribute to ongoing equity market volatility.

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Los Angeles Capital

Portfolio Managers:

Thomas D. Stevens, CFA,
Chairman and Principal

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

The S&P 500 Index was down 0.61% for the fiscal year, with losses especially significant in the commodity-linked energy and materials sectors. Despite two consecutive quarters of declining earnings, U.S. economic activity remains strong relative to the global economy. With 70% of their revenues derived from U.S. sales, large-capitalization companies in the United States represent a haven for global equity investors. Even after the August volatility spike, when the VIX index climbed to its highest level since the peak of the European financial crisis in 2011, the forward-looking price/earnings ratio for the S&P 500 Index was around 15, above its ten-year historical average of 14.1.

An analysis of equity factors over the past year shows that higher-quality stocks with strong analyst estimates and some exposure to leverage outperformed, while globally integrated stocks with large foreign revenues underperformed given the relative strength of the U.S. economy and the U.S. dollar. Amid global economic concerns, investors continue to favor higher-quality securities with sustainable growth over securities with risky balance sheets. Growth assets were stronger than value assets as investors penalized distressed companies with high price/book valuations.

Growth-oriented sectors generally outperformed, led by retail, health care, and consumer discretionary. Energy and materials were the weakest as prices continued to fall on expanded supply and reduced demand from China and other economies. The S&P GSCI Index, which tracks commodity prices, ended down 42% for the fiscal year.

Over the 12-month period, our portfolio shifted out of energy and technology and into retail and financials. The portfolio decreased its exposure to value factors in favor of companies with above-average earnings growth expectations. It is positioned away from companies with large foreign revenues, given the appreciation of the dollar and declining growth expectations for foreign economies. In addition, the portfolio increased its quality positioning and is tilted toward stocks with low volatility and high earnings quality.

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Growth and Income Fund

Fund Profile
As of September 30, 2015

Share-Class Characteristics  
 
  Investor Admiral
  Shares Shares
Ticker Symbol VQNPX VGIAX
Expense Ratio1 0.37% 0.26%
30-Day SEC Yield 1.86% 1.97%

 

Portfolio Characteristics    
      DJ
      U.S.
      Total
      Market
    S&P 500 FA
  Fund Index Index
Number of Stocks 780 505 4,000
Median Market Cap $50.2B $75.8B $46.5B
Price/Earnings Ratio 19.2x 18.9x 20.2x
Price/Book Ratio 2.7x 2.6x 2.5x
Return on Equity 18.0% 18.2% 17.2%
Earnings Growth      
Rate 10.4% 9.8% 10.1%
Dividend Yield 2.2% 2.3% 2.1%
Foreign Holdings 0.2% 0.0% 0.0%
Turnover Rate 116%
Short-Term Reserves 0.4%

 

Volatility Measures    
    DJ
    U.S. Total
  S&P 500 Market
  Index FA Index
R-Squared 0.99 0.98
Beta 0.98 0.95
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc. Technology  
  Hardware, Storage &  
  Peripherals 3.3%
Exxon Mobil Corp. Integrated Oil & Gas 1.6
Johnson & Johnson Pharmaceuticals 1.6
JPMorgan Chase & Co. Diversified Banks 1.5
Google Inc. Internet Software &  
  Services 1.4
Wells Fargo & Co. Diversified Banks 1.3
Microsoft Corp. Systems Software 1.3
Gilead Sciences Inc. Biotechnology 1.1
AT&T Inc. Integrated  
  Telecommunication  
  Services 1.1
Pfizer Inc. Pharmaceuticals 1.1
Top Ten   15.3%
The holdings listed exclude any temporary cash investments and equity index products.

 

Investment Focus


1 The expense ratios shown are from the prospectus dated January 26, 2015, and represent estimated costs for the current fiscal year. For the fiscal
year ended September 30, 2015, the expense ratios were 0.34% for Investor Shares and 0.23% for Admiral Shares.

13

 

Growth and Income Fund

Sector Diversification (% of equity exposure)
      DJ
      U.S. Total
    S&P 500 Market
  Fund Index FA Index
Consumer      
Discretionary 13.9% 13.1% 13.7%
Consumer Staples 10.9 9.9 8.7
Energy 5.9 6.9 6.3
Financials 15.8 16.5 18.3
Health Care 15.7 14.7 14.4
Industrials 11.2 10.1 10.6
Information      
Technology 17.8 20.4 19.6
Materials 3.8 2.8 3.1
Telecommunication      
Services 2.3 2.4 2.1
Utilities 2.7 3.2 3.2

 

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Growth and Income Fund

Performance Summary

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

Cumulative Performance: September 30, 2005, Through September 30, 2015
Initial Investment of $10,000


 
    Average Annual Total Returns  
    Periods Ended September 30, 2015  
 
          Final Value
    One Five Ten of a $10,000
    Year Years Years Investment
  Growth and Income Fund*Investor        
  Shares 0.22% 13.91% 6.16% $18,188
•••••••• S&P 500 Index -0.61 13.34 6.80 19,305
 
 
– – – – Dow Large-Cap Jones Core U.S. Funds Total Stock Average Market -2.30 11.57 5.52 17,120
  Float Adjusted Index -0.55 13.26 7.06 19,778
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

 

        Final Value
  One Five Ten of a $50,000
  Year Years Years Investment
Growth and Income Fund Admiral Shares 0.31% 14.03% 6.30% $92,089
S&P 500 Index -0.61 13.34 6.80 96,526
Dow Jones U.S. Total Stock Market Float        
Adjusted Index -0.55 13.26 7.06 98,892

 

See Financial Highlights for dividend and capital gains information.

15

 

Growth and Income Fund

Fiscal-Year Total Returns (%): September 30, 2005, Through September 30, 2015


16

 

Growth and Income Fund

Financial Statements

Statement of Net Assets
As of September 30, 2015

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

      Market
      Value
    Shares ($000)
Common Stocks (97.4%)1    
Consumer Discretionary (13.5%)  
  Home Depot Inc. 531,208 61,349
  Walt Disney Co. 595,075 60,817
* Amazon.com Inc. 115,192 58,966
  Comcast Corp. Class A 975,100 55,464
  Lowe’s Cos. Inc. 703,243 48,467
  NIKE Inc. Class B 382,700 47,061
  Target Corp. 387,630 30,491
  Darden Restaurants Inc. 334,223 22,908
* O’Reilly Automotive Inc. 88,560 22,140
  Time Warner Inc. 271,915 18,694
  Time Warner Cable Inc. 103,866 18,630
  Expedia Inc. 157,697 18,558
  Wyndham    
  Worldwide Corp. 256,150 18,417
  L Brands Inc. 198,180 17,862
  Leggett & Platt Inc. 430,240 17,747
  Interpublic Group    
  of Cos. Inc. 783,645 14,991
  Delphi Automotive plc 188,750 14,353
  Goodyear Tire    
  & Rubber Co. 472,520 13,859
* Priceline Group Inc. 10,900 13,482
  Carnival Corp. 258,500 12,847
  McDonald’s Corp. 126,620 12,476
* Netflix Inc. 111,650 11,529
  Marriott International Inc.    
  Class A 161,100 10,987
  General Motors Co. 352,750 10,590
  Hasbro Inc. 140,027 10,102
  TJX Cos. Inc. 129,120 9,222
* AutoZone Inc. 12,018 8,699
  Best Buy Co. Inc. 232,970 8,648
  Johnson Controls Inc. 183,998 7,610
  Genuine Parts Co. 90,345 7,489
  Ross Stores Inc. 146,025 7,078
  VF Corp. 96,640 6,592
  Kohl’s Corp. 123,270 5,709
  Omnicom Group Inc. 82,513 5,438
  Newell Rubbermaid Inc. 114,880 4,562
  Signet Jewelers Ltd. 32,600 4,438
* Bed Bath & Beyond Inc. 73,490 4,190
* Liberty Global plc 100,850 4,137
  Gap Inc. 142,366 4,057
* AutoNation Inc. 68,060 3,960
  Tractor Supply Co. 43,780 3,691
* Ulta Salon Cosmetics    
  & Fragrance Inc. 19,600 3,202
* CarMax Inc. 53,420 3,169
  Staples Inc. 252,402 2,961
  Ford Motor Co. 214,310 2,908
  PVH Corp. 28,400 2,895
* NVR Inc. 1,850 2,822
  Nordstrom Inc. 38,890 2,789
  Starbucks Corp. 48,980 2,784
  Whirlpool Corp. 17,755 2,615
  TEGNA Inc. 108,430 2,428
  Macy’s Inc. 46,301 2,376
  CBS Corp. Class B 55,640 2,220
  Advance Auto Parts Inc. 10,700 2,028
  Coach Inc. 68,400 1,979
^ GameStop Corp. Class A 46,400 1,912
* Mohawk Industries Inc. 10,430 1,896
* Sally Beauty Holdings Inc. 74,200 1,762
  Graham Holdings Co.    
  Class B 2,842 1,640
* Liberty Ventures Class A 27,700 1,118
* Cable One Inc. 2,655 1,114
  Hilton Worldwide    
  Holdings Inc. 47,600 1,092
  Royal Caribbean Cruises Ltd. 9,714 865
  Gannett Co. Inc. 54,215 799
* Fossil Group Inc. 12,600 704
  Dollar General Corp. 7,830 567
* Michaels Cos. Inc. 21,700 501
  Hanesbrands Inc. 14,900 431
  Time Inc. 18,721 357
* Liberty Media Corp. 9,700 334

 

17

 

Growth and Income Fund

      Market
      Value
    Shares ($000)
  Gentex Corp. 21,500 333
* DISH Network Corp. Class A 5,400 315
  DR Horton Inc. 9,900 291
^ Restaurant Brands    
  International Inc. 5,600 201
  PulteGroup Inc. 8,650 163
* Houghton Mifflin    
  Harcourt Co. 7,613 155
* Liberty Broadband Corp. 3,000 153
^,* Sears Holdings Corp. 5,900 133
* Vista Outdoor Inc. 2,700 120
* Liberty Interactive Corp.    
  QVC Group Class A 4,200 110
* Liberty Global PLC LiLAC 3,200 110
  SeaWorld Entertainment Inc. 6,100 109
  BorgWarner Inc. 2,434 101
  Libbey Inc. 3,100 101
  Churchill Downs Inc. 682 91
  Bloomin’ Brands Inc. 4,700 85
  International Game    
  Technology plc 5,500 84
* Murphy USA Inc. 1,500 82
* Liberty TripAdvisor    
  Holdings Inc. Class A 3,700 82
* Mattress Firm Holding Corp. 1,800 75
  Aramark 2,400 71
* Denny’s Corp. 4,506 50
  Rent-A-Center Inc. 2,000 48
* New York & Co. Inc. 19,273 48
  DineEquity Inc. 500 46
  HSN Inc. 800 46
* Lee Enterprises Inc. 20,312 42
  Marriott Vacations    
  Worldwide Corp. 619 42
* Townsquare Media Inc.    
  Class A 4,102 40
* MakeMyTrip Ltd. 2,800 38
  Journal Media Group Inc. 4,200 31
  CST Brands Inc. 700 24
* ServiceMaster Global    
  Holdings Inc. 600 20
* Regis Corp. 1,493 20
  La-Z-Boy Inc. 700 19
* Vince Holding Corp. 5,400 18
* Isle of Capri Casinos Inc. 1,000 17
* Liberty Broadband Corp.    
  Class A 300 15
  Haverty Furniture Cos. Inc. 600 14
  DeVry Education Group Inc. 500 14
* Biglari Holdings Inc. 34 12
  Nutrisystem Inc. 435 11
  Aaron’s Inc. 300 11
* Tumi Holdings Inc. 600 11
* TopBuild Corp. 300 9
* Nautilus Inc. 600 9
  Big 5 Sporting Goods Corp. 799 8
* J Alexander’s Holdings Inc. 725 7
* Nord Anglia Education Inc. 339 7
* Dollar Tree Inc. 100 7
* Sirius XM Holdings Inc. 1,600 6
* Clear Channel Outdoor    
  Holdings Inc. Class A 509 4
  Universal Technical    
  Institute Inc. 500 2
      794,236
Consumer Staples (10.7%)    
  Procter & Gamble Co. 873,950 62,872
  Coca-Cola Co. 1,334,242 53,530
  Altria Group Inc. 911,048 49,561
  PepsiCo Inc. 507,296 47,838
  CVS Health Corp. 457,050 44,096
  Costco Wholesale Corp. 257,396 37,212
  Kroger Co. 991,503 35,763
  Wal-Mart Stores Inc. 495,849 32,151
  Constellation Brands Inc.    
  Class A 235,367 29,470
  Dr Pepper Snapple    
  Group Inc. 347,920 27,503
  Reynolds American Inc. 529,360 23,435
  Clorox Co. 197,837 22,856
  Mondelez International Inc.    
  Class A 431,120 18,051
  Archer-Daniels-Midland Co. 430,730 17,854
  Campbell Soup Co. 324,800 16,461
  ConAgra Foods Inc. 377,130 15,278
  Colgate-Palmolive Co. 190,890 12,114
  Walgreens Boots    
  Alliance Inc. 134,300 11,160
  Philip Morris    
  International Inc. 125,714 9,973
  General Mills Inc. 168,320 9,448
  Kellogg Co. 127,910 8,512
  Hormel Foods Corp. 115,365 7,304
  Kraft Heinz Co. 100,900 7,122
  Tyson Foods Inc. Class A 143,876 6,201
  Kimberly-Clark Corp. 56,701 6,183
  Hershey Co. 53,255 4,893
  Estee Lauder Cos. Inc.    
  Class A 32,800 2,646
  Coca-Cola Enterprises Inc. 44,300 2,142
  JM Smucker Co. 18,049 2,059
  Sysco Corp. 51,938 2,024
  Bunge Ltd. 17,100 1,253
^ Pilgrim’s Pride Corp. 40,800 848
  Whole Foods Market Inc. 6,838 216
  McCormick & Co. Inc. 1,390 114
  Brown-Forman Corp.    
  Class B 800 77
* Adecoagro SA 6,100 49

 

18

 

Growth and Income Fund

        Market
        Value
      Shares ($000)
  Spectrum Brands      
  Holdings Inc.   500 46
* Rite Aid Corp.   4,500 27
  Cott Corp.   1,300 14
        628,356
Energy (5.6%)      
  Exxon Mobil Corp. 1,294,784 96,267
  Schlumberger Ltd.   609,750 42,054
  Tesoro Corp.   304,290 29,589
  Valero Energy Corp.   410,180 24,652
  Marathon Petroleum Corp. 471,630 21,851
  Phillips 66   192,040 14,756
  Chevron Corp.   154,526 12,189
* FMC Technologies Inc. 324,500 10,060
^ Transocean Ltd.   732,700 9,466
  EOG Resources Inc.   129,000 9,391
  Ensco plc Class A   661,600 9,315
  Anadarko Petroleum Corp. 145,500 8,787
  Noble Corp. plc   774,400 8,449
  Occidental Petroleum Corp. 114,400 7,568
  Williams Cos. Inc.   203,600 7,503
  Kinder Morgan Inc.   243,300 6,735
  Devon Energy Corp.   102,600 3,805
* Cameron International Corp. 41,500 2,545
  Columbia Pipeline      
  Group Inc.   81,200 1,485
  Murphy Oil Corp.   58,900 1,425
  Cimarex Energy Co.   8,200 840
^ Cameco Corp.   45,600 555
  EnLink Midstream LLC 22,467 411
* Cheniere Energy Inc.   8,300 401
  Cabot Oil & Gas Corp.   16,100 352
  Plains GP Holdings LP      
  Class A   19,600 343
  Euronav NV   12,700 177
* Harvest Natural      
  Resources Inc.   82,231 114
  US Silica Holdings Inc. 7,600 107
* Southwestern Energy Co. 6,800 86
  Frank’s International NV 4,900 75
  Teekay Corp.   2,400 71
* Memorial Resource      
  Development Corp.   3,400 60
* Kosmos Energy Ltd.   7,900 44
  SemGroup Corp. Class A 1,000 43
* TransAtlantic Petroleum Ltd. 8,887 23
* Fairmount Santrol      
  Holdings Inc.   8,200 22
  Aegean Marine Petroleum    
  Network Inc.   3,260 22
  California Resources Corp. 6,619 17
* Pacific Drilling SA   12,700 16
  World Fuel Services Corp. 400 14
  Noble Energy Inc.   459 14
* Westmoreland Coal Co. 400 6
* Unit Corp. 500 6
* Willbros Group Inc. 2,547 3
* Triangle Petroleum Corp. 1,749 2
* PetroQuest Energy Inc. 2,100 2
* Swift Energy Co. 4,543 2
      331,720
Financials (15.4%)    
  JPMorgan Chase & Co. 1,429,808 87,175
  Wells Fargo & Co. 1,507,116 77,390
  Citigroup Inc. 1,168,124 57,951
  Bank of America Corp. 2,577,380 40,156
* Berkshire Hathaway Inc.    
  Class B 298,252 38,892
  Hartford Financial    
  Services Group Inc. 758,205 34,711
  Bank of New York    
  Mellon Corp. 787,135 30,816
  Travelers Cos. Inc. 268,822 26,756
  Morgan Stanley 755,450 23,797
  Assurant Inc. 265,486 20,976
  Cincinnati Financial Corp. 329,890 17,748
  Simon Property Group Inc. 94,587 17,378
  Progressive Corp. 566,634 17,362
  Weyerhaeuser Co. 602,335 16,468
  Prudential Financial Inc. 215,961 16,458
  Northern Trust Corp. 239,780 16,343
  Huntington    
  Bancshares Inc. 1,509,277 15,998
  Legg Mason Inc. 380,876 15,848
  McGraw Hill Financial Inc. 179,046 15,487
  Moody’s Corp. 155,580 15,278
  Aon plc 168,260 14,910
  American Express Co. 189,030 14,013
  Crown Castle    
  International Corp. 171,650 13,538
  Nasdaq Inc. 242,560 12,936
  PNC Financial Services    
  Group Inc. 138,100 12,319
  People’s United    
  Financial Inc. 769,502 12,104
  Prologis Inc. 289,300 11,254
* E*TRADE Financial Corp. 418,700 11,024
  SunTrust Banks Inc. 287,260 10,985
  ACE Ltd. 105,330 10,891
  Plum Creek Timber Co. Inc. 267,862 10,583
  Ameriprise Financial Inc. 95,364 10,407
  Allstate Corp. 177,268 10,324
  Navient Corp. 897,100 10,083
  Goldman Sachs Group Inc. 50,734 8,816
  Capital One Financial Corp. 120,400 8,731
  AvalonBay    
  Communities Inc. 49,185 8,599
  Equinix Inc. 30,700 8,393
  CME Group Inc. 88,700 8,226
  BlackRock Inc. 26,280 7,818

 

19

 

Growth and Income Fund

      Market
      Value
    Shares ($000)
  Marsh & McLennan    
  Cos. Inc. 131,681 6,876
  Welltower Inc. 101,200 6,853
  General Growth    
  Properties Inc. 244,020 6,337
  Intercontinental    
  Exchange Inc. 26,400 6,204
  Lincoln National Corp. 102,010 4,841
  US Bancorp 91,594 3,756
  First Horizon National Corp. 252,670 3,583
  Public Storage 15,797 3,343
  Equity LifeStyle    
  Properties Inc. 54,400 3,186
* CBRE Group Inc. Class A 96,971 3,103
  Voya Financial Inc. 79,200 3,071
  Principal Financial    
  Group Inc. 64,730 3,064
* Realogy Holdings Corp. 55,800 2,100
  Torchmark Corp. 35,720 2,015
  Franklin Resources Inc. 51,700 1,926
  Apartment Investment    
  & Management Co. 45,320 1,678
  Equity Residential 21,290 1,599
  American International    
  Group Inc. 24,650 1,401
  Charles Schwab Corp. 45,467 1,299
  Essex Property Trust Inc. 5,800 1,296
* Affiliated Managers    
  Group Inc. 7,500 1,282
  Vornado Realty Trust 12,063 1,091
  XL Group plc Class A 28,540 1,037
  Fifth Third Bancorp 54,710 1,035
  Kimco Realty Corp. 40,000 977
* Signature Bank 7,000 963
  UBS Group AG 49,170 911
  BankUnited Inc. 22,400 801
  Comerica Inc. 17,592 723
* Genworth Financial Inc.    
  Class A 153,100 707
  Synovus Financial Corp. 21,800 645
  Realty Income Corp. 11,490 545
  Invesco Ltd. 14,426 451
* MGIC Investment Corp. 47,800 443
  Ventas Inc. 7,130 400
  KeyCorp 30,430 396
  First Republic Bank 5,900 370
  East West Bancorp Inc. 9,579 368
  United Bankshares Inc. 8,800 334
* Forest City Enterprises Inc.    
  Class A 15,300 308
  Discover Financial Services 5,488 285
  Credicorp Ltd. 2,400 255
  FNF Group 7,100 252
  Investors Bancorp Inc. 19,600 242
* Beneficial Bancorp Inc. 16,200 215
  Blackstone Mortgage    
  Trust Inc. Class A 7,200 198
  TD Ameritrade Holding Corp. 6,000 191
  National Health Investors Inc. 3,300 190
  Host Hotels & Resorts Inc. 11,888 188
  Brown & Brown Inc. 5,600 173
* Santander Consumer    
  USA Holdings Inc. 6,271 128
  M&T Bank Corp. 1,000 122
  Raymond James    
  Financial Inc. 2,400 119
  Ryman Hospitality    
  Properties Inc. 2,400 118
  State Street Corp. 1,580 106
  Retail Properties    
  of America Inc. 6,620 93
  Brookline Bancorp Inc. 9,100 92
* Flagstar Bancorp Inc. 4,300 88
  Columbia Banking    
  System Inc. 2,800 87
* Essent Group Ltd. 3,400 85
* Springleaf Holdings Inc.    
  Class A 1,900 83
  Old National Bancorp 5,900 82
  Assured Guaranty Ltd. 3,000 75
  Erie Indemnity Co. Class A 900 75
  Ladder Capital Corp. 4,900 70
  BancorpSouth Inc. 2,900 69
  Validus Holdings Ltd. 1,374 62
  Old Republic    
  International Corp. 3,799 59
  Wilshire Bancorp Inc. 5,500 58
  MVC Capital Inc. 6,700 55
* FNFV Group 4,200 49
* Western Alliance Bancorp 1,600 49
  Leucadia National Corp. 2,400 49
* NewStar Financial Inc. 5,604 46
  Meridian Bancorp Inc. 3,100 42
* Credit Acceptance Corp. 200 39
  Reinsurance Group of    
  America Inc. Class A 428 39
  Cathay General Bancorp 1,200 36
  AG Mortgage Investment    
  Trust Inc. 2,159 33
* Third Point Reinsurance Ltd. 2,400 32
  Apple Hospitality REIT Inc. 1,700 32
  Sterling Bancorp 1,900 28
  Armada Hoffler Properties Inc. 2,800 27
  Southwest Bancorp Inc. 1,600 26
  Aflac Inc. 447 26
  Columbia Property Trust Inc. 1,100 26
* Stifel Financial Corp. 600 25
  Fulton Financial Corp. 2,000 24
* PHH Corp. 1,700 24
  First Commonwealth    
  Financial Corp. 2,546 23

 

20

 

Growth and Income Fund

        Market
        Value
      Shares ($000)
  Banner Corp.   466 22
* Arch Capital Group Ltd.   300 22
  GAIN Capital Holdings Inc.   3,000 22
  Argo Group International      
  Holdings Ltd.   379 21
  FelCor Lodging Trust Inc.   2,900 21
  HFF Inc. Class A   600 20
* Green Dot Corp. Class A   1,100 19
  Allied World Assurance Co.      
  Holdings AG   500 19
  Brixmor Property Group Inc. 800 19
  State Bank Financial Corp.   888 18
  Arbor Realty Trust Inc.   2,800 18
* Cascade Bancorp   2,222 12
  Citizens & Northern Corp.   490 10
* KCG Holdings Inc. Class A   800 9
  Arthur J Gallagher & Co.   200 8
  Alexander & Baldwin Inc.   200 7
  West Bancorporation Inc.   352 7
  United Community Banks Inc. 310 6
  Sierra Bancorp   386 6
  Lamar Advertising Co. Class A 100 5
  TPG Specialty Lending Inc.   300 5
  Flushing Financial Corp.   245 5
  Parkway Properties Inc.   315 5
* eHealth Inc.   381 5
  Primerica Inc.   100 5
  Starwood Property Trust Inc. 200 4
* SLM Corp.   500 4
  Physicians Realty Trust   231 4
  Washington Federal Inc.   150 3
  Suffolk Bancorp   100 3
  FNB Corp.   200 3
  Ares Commercial      
  Real Estate Corp.   172 2
  Chimera Investment Corp.   100 1
        905,190
Health Care (15.3%)      
  Johnson & Johnson 1,013,136 94,576
  Gilead Sciences Inc. 676,577 66,433
  Pfizer Inc. 2,112,160 66,343
  Merck & Co. Inc. 1,175,476 58,057
  Eli Lilly & Co. 550,255 46,051
  Anthem Inc. 299,110 41,875
  Bristol-Myers Squibb Co. 704,596 41,712
* Express Scripts      
  Holding Co. 496,289 40,180
  UnitedHealth Group Inc. 323,328 37,509
  Cardinal Health Inc. 467,580 35,919
  Amgen Inc. 246,280 34,065
* HCA Holdings Inc. 374,220 28,950
  AbbVie Inc. 516,063 28,079
  AmerisourceBergen Corp.      
  Class A 235,782 22,397
* Boston Scientific Corp. 1,333,139 21,877
  Abbott Laboratories 436,113 17,540
  Aetna Inc. 154,830 16,940
* Biogen Inc. 57,850 16,881
  McKesson Corp. 86,100 15,931
  Zoetis Inc. 365,010 15,031
  Cigna Corp. 109,850 14,832
  Baxalta Inc. 381,328 12,016
* Laboratory Corp. of    
  America Holdings 105,920 11,489
  Thermo Fisher    
  Scientific Inc. 83,910 10,261
* Regeneron    
  Pharmaceuticals Inc. 20,392 9,485
  Stryker Corp. 94,250 8,869
* DaVita HealthCare    
  Partners Inc. 115,290 8,339
  Patterson Cos. Inc. 150,672 6,517
  CR Bard Inc. 30,391 5,662
  Zimmer Biomet    
  Holdings Inc. 59,952 5,631
  Agilent Technologies Inc. 161,100 5,531
* Mylan NV 102,800 4,139
* Allergan plc 14,582 3,964
  Quest Diagnostics Inc. 63,810 3,922
  Becton Dickinson and Co. 27,882 3,699
  Humana Inc. 18,410 3,295
* Celgene Corp. 28,600 3,094
* Mallinckrodt plc 44,100 2,820
* Valeant Pharmaceuticals    
  International Inc. 14,625 2,609
* Medivation Inc. 61,200 2,601
  Perrigo Co. plc 14,900 2,343
  PerkinElmer Inc. 49,910 2,294
* Intuitive Surgical Inc. 4,564 2,098
  Medtronic plc 26,300 1,761
* Vertex Pharmaceuticals Inc. 13,004 1,354
  Universal Health    
  Services Inc. Class B 10,380 1,296
* Neurocrine Biosciences Inc. 28,300 1,126
* Endo International plc 16,190 1,122
* VCA Inc. 19,652 1,035
* United Therapeutics Corp. 7,700 1,011
* Varian Medical Systems Inc. 12,000 885
* Cerner Corp. 10,330 619
* Dyax Corp. 23,100 441
* Health Net Inc. 6,400 385
* Illumina Inc. 1,700 299
* Hologic Inc. 7,200 282
* TESARO Inc. 5,429 218
* FibroGen Inc. 6,300 138
* BioMarin Pharmaceutical Inc. 1,300 137
* Alere Inc. 2,800 135
* Sangamo BioSciences Inc. 21,700 122
* Pain Therapeutics Inc. 66,692 122
* Geron Corp. 43,200 119
* Rigel Pharmaceuticals Inc. 42,894 106

 

21

 

Growth and Income Fund

          Market
          Value
      Shares ($000)
* BioTelemetry Inc.     7,500 92
* OPKO Health Inc.   10,400 87
* IMS Health Holdings Inc.   2,600 76
* Sirona Dental Systems Inc.   800 75
* Waters Corp.     620 73
* Quintiles Transnational      
  Holdings Inc.     620 43
* Merit Medical Systems Inc.   1,800 43
* VWR Corp.     1,600 41
* Imprivata Inc.     2,200 39
  St. Jude Medical Inc.     600 38
* Corcept Therapeutics Inc.   8,400 32
* Omeros Corp.     2,800 31
* Vitae Pharmaceuticals Inc.   2,400 26
* Cardiovascular Systems Inc.   1,632 26
* Cytokinetics Inc.     3,500 23
* Puma Biotechnology Inc.   300 23
* Oncothyreon Inc.     8,056 22
* XenoPort Inc.     5,571 19
  Theravance Inc.     2,400 17
* ArQule Inc.     8,649 16
* OvaScience Inc.     1,800 15
* Genocea Biosciences Inc.   1,723 12
* Myriad Genetics Inc.     300 11
* Incyte Corp.     100 11
* Triple-S Management Corp.      
  Class B     600 11
* Syneron Medical Ltd.     1,400 10
* Amicus Therapeutics Inc.   700 10
* SciClone Pharmaceuticals Inc. 1,400 10
* Catalent Inc.     300 7
* Pernix Therapeutics        
  Holdings Inc.     2,300 7
* Radius Health Inc.     100 7
* Alnylam Pharmaceuticals Inc.   76 6
* Momenta Pharmaceuticals Inc. 269 4
* GTx Inc.     4,487 3
* Zeltiq Aesthetics Inc.     100 3
* Cross Country Healthcare Inc. 200 3
* RTI Surgical Inc.     400 2
* Catalyst Biosciences Inc.   450 2
          895,545
Industrials (11.0%)        
  General Electric Co. 2,103,330 53,046
  General Dynamics Corp. 373,230 51,487
  Northrop Grumman Corp. 222,440 36,914
  Boeing Co.   280,400 36,718
  Lockheed Martin Corp. 169,034 35,042
  Cintas Corp.   370,884 31,803
  3M Co.   210,493 29,842
  Southwest Airlines Co. 703,330 26,755
  FedEx Corp.   178,150 25,650
  United Parcel Service Inc.      
  Class B   242,787 23,961
  Pitney Bowes Inc.   833,571 16,546
  Honeywell International Inc. 169,336 16,034
  Delta Air Lines Inc. 320,390 14,376
  ADT Corp. 433,856 12,972
  Stanley Black    
  & Decker Inc. 131,590 12,762
* Spirit AeroSystems    
  Holdings Inc. Class A 257,000 12,423
  Republic Services Inc.    
  Class A 289,629 11,933
  PACCAR Inc. 213,100 11,117
  Equifax Inc. 111,160 10,803
  Robert Half International Inc. 197,673 10,113
  Rockwell Automation Inc. 98,600 10,005
  Union Pacific Corp. 111,200 9,831
  United Technologies Corp. 106,970 9,519
  Waste Management Inc. 187,180 9,323
* United Rentals Inc. 144,400 8,671
* Stericycle Inc. 54,320 7,567
  Raytheon Co. 68,027 7,433
  Snap-on Inc. 49,000 7,396
  Allison Transmission    
  Holdings Inc. 272,700 7,278
  Danaher Corp. 82,400 7,021
  Deere & Co. 94,691 7,007
  Expeditors International    
  of Washington Inc. 137,980 6,492
  Ingersoll-Rand plc 125,762 6,385
  Ryder System Inc. 83,700 6,197
  Allegion plc 99,300 5,726
  Tyco International plc 163,800 5,481
* AerCap Holdings NV 126,500 4,837
* United Continental    
  Holdings Inc. 89,700 4,759
  L-3 Communications    
  Holdings Inc. 42,825 4,476
  AMETEK Inc. 72,547 3,796
  Dun & Bradstreet Corp. 33,330 3,500
  KAR Auction Services Inc. 97,000 3,444
* Nielsen Holdings plc 63,770 2,836
  Illinois Tool Works Inc. 25,350 2,087
  Textron Inc. 44,800 1,686
  Rockwell Collins Inc. 20,000 1,637
  Xylem Inc. 49,300 1,620
  Roper Technologies Inc. 8,400 1,316
  Pentair plc 16,100 822
* RPX Corp. 44,000 604
  Huntington Ingalls    
  Industries Inc. 5,603 600
* Verisk Analytics Inc. Class A 6,576 486
  BWX Technologies Inc. 18,100 477
  Eaton Corp. plc 6,900 354
  Greenbrier Cos. Inc. 8,700 279
* Quanta Services Inc. 11,500 278
  Canadian Pacific Railway Ltd. 1,800 258
* Sensata Technologies    
  Holding NV 5,300 235

 

22

 

Growth and Income Fund

        Market
        Value
      Shares ($000)
* HD Supply Holdings Inc.   7,900 226
  Fluor Corp.   4,200 178
  Air Lease Corp. Class A   5,500 170
* Kirby Corp.   2,500 155
  West Corp.   4,800 108
* Rexnord Corp.   4,700 80
  Seaspan Corp. Class A   5,100 78
  Matson Inc.   2,000 77
* Continental Building      
  Products Inc.   3,700 76
* Babcock & Wilcox      
  Enterprises Inc.   3,900 66
* SPX FLOW Inc.   1,900 65
* Navigant Consulting Inc.   3,972 63
* NCI Building Systems Inc.   5,400 57
  MFC Industrial Ltd.   19,512 56
* ARC Document      
  Solutions Inc.   8,239 49
  Insperity Inc.   1,100 48
* IHS Inc. Class A   400 46
* DigitalGlobe Inc.   2,100 40
  Knoll Inc.   1,400 31
  Cubic Corp.   600 25
* USG Corp.   900 24
  Universal Forest Products Inc. 374 22
* WABCO Holdings Inc.   200 21
  John Bean Technologies Corp. 500 19
* TransUnion   600 15
  SPX Corp.   1,255 15
  Curtiss-Wright Corp.   172 11
  Hillenbrand Inc.   400 10
  H&E Equipment Services Inc. 500 8
  Alaska Air Group Inc.   100 8
  Heartland Express Inc.   300 6
* CAI International Inc.   573 6
* Blount International Inc.   1,012 6
  Textainer Group Holdings Ltd. 330 5
* Great Lakes Dredge      
  & Dock Corp.   1,004 5
* MasTec Inc.   300 5
  Costamare Inc.   300 4
* MRC Global Inc.   316 4
  Trinity Industries Inc.   66 2
        643,906
Information Technology (17.2%)    
  Apple Inc. 1,773,101 195,573
  Microsoft Corp. 1,710,570 75,710
* Google Inc. Class C   71,269 43,359
* Facebook Inc. Class A 456,690 41,056
* Google Inc. Class A   63,471 40,518
  Intel Corp. 1,174,829 35,409
  Cisco Systems Inc. 1,144,417 30,041
  International Business      
  Machines Corp. 205,874 29,846
  Visa Inc. Class A 414,420 28,868
  Hewlett-Packard Co. 1,082,454 27,722
  Computer Sciences Corp. 447,840 27,488
  Accenture plc Class A 274,480 26,970
  Total System Services Inc. 479,830 21,799
* Fiserv Inc. 246,015 21,307
  Western Union Co. 1,157,272 21,248
  Texas Instruments Inc. 410,802 20,343
  Intuit Inc. 225,170 19,984
  MasterCard Inc. Class A 209,640 18,893
* Electronic Arts Inc. 266,430 18,051
  Avago Technologies Ltd.    
  Class A 131,600 16,451
  QUALCOMM Inc. 287,800 15,463
* F5 Networks Inc. 131,800 15,262
  Juniper Networks Inc. 587,918 15,115
  Xerox Corp. 1,352,400 13,159
  Fidelity National    
  Information Services Inc. 195,380 13,106
  Paychex Inc. 274,467 13,073
  Oracle Corp. 356,403 12,873
* VeriSign Inc. 175,255 12,366
  Skyworks Solutions Inc. 145,400 12,244
  Symantec Corp. 560,336 10,910
* PayPal Holdings Inc. 345,360 10,720
* Cognizant Technology    
  Solutions Corp. Class A 168,910 10,575
  TE Connectivity Ltd. 140,900 8,439
  Seagate Technology plc 185,460 8,309
  Motorola Solutions Inc. 113,591 7,767
  Corning Inc. 449,028 7,687
* Adobe Systems Inc. 93,300 7,671
  Harris Corp. 95,305 6,972
  Automatic Data    
  Processing Inc. 59,800 4,806
* Citrix Systems Inc. 60,562 4,196
  CA Inc. 122,810 3,353
* salesforce.com inc 42,710 2,965
  Broadcom Corp. Class A 55,536 2,856
  Xilinx Inc. 66,873 2,835
* Micron Technology Inc. 181,439 2,718
* Autodesk Inc. 56,900 2,512
  Amphenol Corp. Class A 40,000 2,038
* Red Hat Inc. 24,860 1,787
  NVIDIA Corp. 71,950 1,774
* Yahoo! Inc. 47,544 1,374
^ King Digital    
  Entertainment plc 81,700 1,106
  Western Digital Corp. 13,200 1,049
  Marvell Technology    
  Group Ltd. 95,600 865
  Applied Materials Inc. 58,402 858
* CoreLogic Inc. 22,000 819
* Trimble Navigation Ltd. 39,700 652
* SolarWinds Inc. 15,571 611
  Analog Devices Inc. 10,700 604
* CommScope Holding Co. Inc. 19,000 571

 

23

 

Growth and Income Fund

      Market
      Value
    Shares ($000)
* ON Semiconductor Corp. 58,152 547
  InterDigital Inc. 10,499 531
  Lam Research Corp. 8,100 529
* EchoStar Corp. Class A 11,038 475
* Polycom Inc. 39,200 411
  Maxim Integrated    
  Products Inc. 11,900 397
  Linear Technology Corp. 8,900 359
  Amdocs Ltd. 5,700 324
  Teradyne Inc. 15,900 286
* Take-Two Interactive    
  Software Inc. 9,700 279
* Genpact Ltd. 11,500 272
* Zebra Technologies Corp. 3,400 260
* BlackBerry Ltd. 40,400 248
  IAC/InterActiveCorp 3,700 241
* Blackhawk Network    
  Holdings Inc. 4,564 193
  Brocade Communications    
  Systems Inc. 17,100 177
* Glu Mobile Inc. 32,300 141
* ShoreTel Inc. 18,784 140
  Global Payments Inc. 1,200 138
  FLIR Systems Inc. 4,700 132
  Belden Inc. 2,800 131
  KLA-Tencor Corp. 2,400 120
* Zynga Inc. Class A 50,484 115
* Flextronics International Ltd. 9,700 102
* WebMD Health Corp. 1,900 76
  Tessera Technologies Inc. 2,300 75
* Silicon Laboratories Inc. 1,600 66
* Cabot Microelectronics Corp. 1,676 65
  Logitech International SA 4,491 59
* Pandora Media Inc. 2,700 58
* SunEdison    
  Semiconductor Ltd. 5,400 57
* QLogic Corp. 5,300 54
* Verint Systems Inc. 1,200 52
* Cimpress NV 600 46
* Monster Worldwide Inc. 6,862 44
* TeleCommunication    
  Systems Inc. Class A 12,500 43
* Blucora Inc. 2,856 39
* TechTarget Inc. 4,300 37
* Fabrinet 1,800 33
* ARRIS Group Inc. 1,200 31
* Photronics Inc. 3,152 29
* Keysight Technologies Inc. 900 28
  Microchip Technology Inc. 623 27
* Synopsys Inc. 500 23
  NVE Corp. 430 21
* Ixia 1,400 20
* XO Group Inc. 1,300 18
  NIC Inc. 1,000 18
* Lionbridge Technologies Inc. 3,500 17
  Sabre Corp. 600 16
* United Online Inc. 1,500 15
* Microsemi Corp. 400 13
* Amkor Technology Inc. 2,873 13
* PMC-Sierra Inc. 1,900 13
* Avid Technology Inc. 1,500 12
* Ciber Inc. 2,844 9
* NCR Corp. 364 8
* Millennial Media Inc. 4,662 8
* Entegris Inc. 600 8
* CommVault Systems Inc. 200 7
* MoneyGram International Inc. 825 7
* Sigma Designs Inc. 600 4
* RealD Inc. 400 4
* Care.com Inc. 600 3
* Kemet Corp. 1,643 3
  Atmel Corp. 357 3
* Progress Software Corp. 100 3
* Ultra Clean Holdings Inc. 300 2
      1,010,431
Materials (3.6%)    
  Air Products    
  & Chemicals Inc. 259,394 33,094
  Sherwin-Williams Co. 132,940 29,616
  Sealed Air Corp. 512,280 24,016
  International Paper Co. 587,274 22,193
  LyondellBasell Industries    
  NV Class A 216,700 18,064
  Avery Dennison Corp. 283,620 16,044
  Monsanto Co. 157,000 13,398
^ Dow Chemical Co. 308,093 13,063
  Ball Corp. 160,106 9,959
  Vulcan Materials Co. 97,419 8,690
  Eastman Chemical Co. 116,721 7,554
  PPG Industries Inc. 59,800 5,244
  Bemis Co. Inc. 89,170 3,528
  Ecolab Inc. 28,600 3,138
  Mosaic Co. 62,553 1,946
* Berry Plastics Group Inc. 21,900 659
  Potash Corp. of    
  Saskatchewan Inc. 14,474 297
* Turquoise Hill    
  Resources Ltd. 105,800 270
  Graphic Packaging    
  Holding Co. 20,900 267
* Constellium NV Class A 36,100 219
  Reliance Steel    
  & Aluminum Co. 3,919 212
  Nucor Corp. 5,600 210
  International Flavors    
  & Fragrances Inc. 2,000 207
  Valspar Corp. 2,649 190
  Southern Copper Corp. 6,000 160
  CF Industries Holdings Inc. 3,300 148
  Globe Specialty Metals Inc. 10,900 132
^ Mesabi Trust 9,982 119

 

24

 

Growth and Income Fund

        Market
        Value
      Shares ($000)
* Novagold Resources Inc. 27,900 101
  Sonoco Products Co.   2,650 100
  Materion Corp.   2,700 81
  Orion Engineered      
  Carbons SA   4,738 68
* Headwaters Inc.   2,500 47
  SunCoke Energy Inc.   5,900 46
* Ferro Corp.   3,500 38
  TimkenSteel Corp.   3,400 34
  Chemours Co.   5,205 34
  Allegheny Technologies Inc. 2,300 33
  Mercer International Inc. 2,000 20
* Axalta Coating Systems Ltd. 500 13
* Louisiana-Pacific Corp. 600 9
* AM Castle & Co.   809 2
        213,263
Other (0.2%)      
^ SPDR S&P 500 ETF Trust 51,572 9,883
* Safeway Inc. CVR (Casa Ley)    
  Exp. 01/30/2018   75,810 10
* Safeway Inc. CVR (PDC)    
  Exp. 01/30/2017   75,810 3
* Biosante      
  Pharmaceutical Inc. CVR 4,189
        9,896
Telecommunication Services (2.2%)  
  AT&T Inc. 2,037,696 66,388
  Verizon      
  Communications Inc. 836,799 36,409
  CenturyLink Inc.   778,441 19,555
* Level 3      
  Communications Inc. 115,400 5,042
  Frontier      
  Communications Corp. 331,200 1,573
* T-Mobile US Inc.   2,600 104
* Globalstar Inc.   11,500 18
* Zayo Group Holdings Inc. 600 15
* General Communication Inc.    
  Class A   700 12
        129,116
Utilities (2.7%)      
  Edison International   253,950 16,017
  FirstEnergy Corp.   460,700 14,424
  Public Service Enterprise    
  Group Inc.   327,730 13,817
  Ameren Corp.   321,523 13,591
  Duke Energy Corp.   180,090 12,956
  Exelon Corp.   418,500 12,429
  Southern Co.   254,930 11,395
  NextEra Energy Inc.   110,770 10,806
  Consolidated Edison Inc. 158,500 10,596
  American Electric      
  Power Co. Inc.   180,160 10,244
  Sempra Energy   93,910 9,083
  Dominion Resources Inc. 74,984 5,277
  CenterPoint Energy Inc. 187,610 3,384
  Eversource Energy   53,093 2,688
  Xcel Energy Inc.   73,360 2,598
  DTE Energy Co.   26,590 2,137
  Pinnacle West Capital Corp. 26,690 1,712
* Dynegy Inc.   76,600 1,583
  TECO Energy Inc.   44,970 1,181
  SCANA Corp.   9,400 529
  AES Corp.   35,300 346
^ Atlantic Power Corp. 110,311 205
  Entergy Corp.   2,170 141
  PG&E Corp.   2,590 137
  WGL Holdings Inc.   453 26
  Questar Corp.   400 8
  ITC Holdings Corp.   100 3
        157,313
Total Common Stocks      
(Cost $5,183,663)     5,718,972
Temporary Cash Investments (2.9%)1  
Money Market Fund (2.7%)    
2,3 Vanguard Market      
  Liquidity Fund,      
  0.189% 160,437,772 160,438
 
      Face  
      Amount  
      ($000)  
U.S. Government and Agency Obligations (0.2%)
4,5 Federal Home Loan Bank    
  Discount Notes,      
  0.100%, 10/23/15   4,000 4,000
4,5 Federal Home Loan Bank    
  Discount Notes,      
  0.114%, 10/28/15   100 100
4,5 Federal Home Loan Bank    
  Discount Notes,      
  0.180%, 11/4/15   3,000 2,999
4 Federal Home Loan Bank    
  Discount Notes,      
  0.145%, 12/11/15   200 200
5,6 Freddie Mac Discount Notes,    
  0.125%, 10/30/15   800 800
        8,099
Total Temporary Cash Investments  
(Cost $168,537)     168,537
Total Investments (100.3%)    
(Cost $5,352,200)     5,887,509

 

25

 

Growth and Income Fund

  Amount
  ($000)
Other Assets  
Investment in VGI 545
Receivables for Investment Securities Sold 69,569
Receivables for Accrued Income 9,035
Receivables for Capital Shares Issued 19,379
Total Other Assets 98,528
Liabilities  
Payables for Investment Securities  
Purchased (68,344)
Collateral for Securities on Loan (14,297)
Payables to Investment Advisor (1,477)
Payables for Capital Shares Redeemed (22,522)
Payables to Vanguard (11,788)
Other Liabilities (102)
Total Liabilities (118,530)
Other Assets and Liabilities (-0.3%)  
Net Assets (100%) 5,867,507

 

At September 30, 2015, net assets consisted of:
  Amount
  ($000)
Paid-in Capital 5,026,718
Undistributed Net Investment Income 16,881
Accumulated Net Realized Gains 291,027
Unrealized Appreciation (Depreciation)  
Investment Securities 535,309
Futures Contracts (2,428)
Net Assets 5,867,507
 
 
Investor Shares—Net Assets  
Applicable to 68,030,653 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 2,690,599
Net Asset Value Per Share—  
Investor Shares $39.55
 
 
Admiral Shares—Net Assets  
Applicable to 49,198,122 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 3,176,908
Net Asset Value Per Share—  
Admiral Shares $64.57

See Note A in Notes to Financial Statements.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $14,176,000.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 99.8% and 0.5%, respectively,
of net assets.
2 Includes $14,297,000 of collateral received for securities on loan.
3 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the
7-day yield.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
5 Securities with a value of $7,099,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the
Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange
for senior preferred stock.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.

26

 

Growth and Income Fund

Statement of Operations

  Year Ended
  September 30, 2015
  ($000)
Investment Income  
Income  
Dividends1 126,551
Interest2 242
Securities Lending 192
Total Income 126,985
Expenses  
Investment Advisory Fees—Note B  
Basic Fee 6,334
Performance Adjustment 55
The Vanguard Group—Note C  
Management and Administrative—Investor Shares 6,428
Management and Administrative—Admiral Shares 3,548
Marketing and Distribution—Investor Shares 442
Marketing and Distribution—Admiral Shares 332
Custodian Fees 243
Auditing Fees 33
Shareholders’ Reports—Investor Shares 71
Shareholders’ Reports—Admiral Shares 18
Trustees’ Fees and Expenses 12
Total Expenses 17,516
Net Investment Income 109,469
Realized Net Gain (Loss)  
Investment Securities Sold 343,059
Futures Contracts 5,108
Realized Net Gain (Loss) 348,167
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (436,657)
Futures Contracts (1,535)
Change in Unrealized Appreciation (Depreciation) (438,192)
Net Increase (Decrease) in Net Assets Resulting from Operations 19,444
1 Dividends are net of foreign withholding taxes of $13,000.
2 Interest income from an affiliated company of the fund was $233,000.

 

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

27

 

Growth and Income Fund

Statement of Changes in Net Assets

  Year Ended September 30,
  2015 2014
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 109,469 95,797
Realized Net Gain (Loss) 348,167 660,609
Change in Unrealized Appreciation (Depreciation) (438,192) 260,158
Net Increase (Decrease) in Net Assets Resulting from Operations 19,444 1,016,564
Distributions    
Net Investment Income    
Investor Shares (50,108) (47,416)
Admiral Shares (57,404) (43,820)
Realized Capital Gain1    
Investor Shares (180,933)
Admiral Shares (179,399)
Total Distributions (467,844) (91,236)
Capital Share Transactions    
Investor Shares (82,169) (393,996)
Admiral Shares 501,641 338,592
Net Increase (Decrease) from Capital Share Transactions 419,472 (55,404)
Total Increase (Decrease) (28,928) 869,924
Net Assets    
Beginning of Period 5,896,435 5,026,511
End of Period2 5,867,507 5,896,435
1 Includes fiscal 2015 short-term gain distributions totaling $830,000. Short-term gain distributions are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $16,881,000 and $14,924,000.

 

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

28

 

Growth and Income Fund

Financial Highlights

Investor Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $42.69 $36.02 $30.73 $23.86 $23.98
Investment Operations          
Net Investment Income .729 .671 .631 .549 .482
Net Realized and Unrealized Gain (Loss)          
on Investments (.541) 6.639 5.288 6.846 (.124)
Total from Investment Operations .188 7.310 5.919 7.395 .358
Distributions          
Dividends from Net Investment Income (.724) (.640) (. 629) (. 525) (. 478)
Distributions from Realized Capital Gains (2.604)
Total Distributions (3.328) (.640) (. 629) (. 525) (. 478)
Net Asset Value, End of Period $39.55 $42.69 $36.02 $30.73 $23.86
 
Total Return1 0.22% 20.42% 19.54% 31.27% 1.28%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $2,691 $2,979 $2,869 $2,798 $2,548
Ratio of Total Expenses to          
Average Net Assets2 0.34% 0.37% 0.36% 0.36% 0.32%
Ratio of Net Investment Income to          
Average Net Assets 1.70% 1.67% 1.90% 1.94% 1.78%
Portfolio Turnover Rate 116% 133% 109% 102% 120%

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
2 Includes performance-based investment advisory fee increases (decreases) of 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).

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

29

 

Growth and Income Fund

Financial Highlights

Admiral Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $69.71 $58.82 $50.18 $38.97 $39.15
Investment Operations          
Net Investment Income 1.272 1.176 1.097 .952 .832
Net Realized and Unrealized Gain (Loss)          
on Investments (. 897) 10.833 8.633 11.168 (.199)
Total from Investment Operations .375 12.009 9.730 12.120 .633
Distributions          
Dividends from Net Investment Income (1.264) (1.119) (1.090) (.910) (.813)
Distributions from Realized Capital Gains (4.251)
Total Distributions (5.515) (1.119) (1.090) (.910) (.813)
Net Asset Value, End of Period $64.57 $69.71 $58.82 $50.18 $38.97
 
Total Return1 0.31% 20.55% 19.69% 31.40% 1.39%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $3,177 $2,917 $2,157 $1,591 $1,131
Ratio of Total Expenses to          
Average Net Assets2 0.23% 0.26% 0.26% 0.25% 0.21%
Ratio of Net Investment Income to          
Average Net Assets 1.81% 1.78% 2.00% 2.05% 1.89%
Portfolio Turnover Rate 116% 133% 109% 102% 120%

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.
2 Includes performance-based investment advisory fee increases (decreases) of 0.00%, 0.02%, 0.01%, 0.01%, and (0.04%).

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

30

 

Growth and Income Fund

Notes to Financial Statements

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

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

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

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

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

During the year ended September 30, 2015, the fund’s average investments in long and short futures contracts represented 2% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

31

 

Growth and Income Fund

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

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

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counter-parties, 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 counter-party risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.06% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate equal to the higher of the federal funds rate or LIBOR reference rate plus an agreed-upon spread.

The fund had no borrowings outstanding at September 30, 2015, or at any time during the period then ended.

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

32

 

Growth and Income Fund

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

Vanguard provides investment advisory services to a portion of the fund as described below; the fund paid Vanguard advisory fees of $737,000 for the year ended September 30, 2015.

For the year ended September 30, 2015, the aggregate investment advisory fee paid to all advisors represented an effective annual basic rate of 0.10% of the fund’s average net assets, before a net increase of $55,000 (0.00%) based on performance.

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

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At September 30, 2015, the fund had contributed capital to Vanguard in the amount of $545,000, representing 0.01% of the fund’s net assets and 0.22% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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

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

33

 

Growth and Income Fund

The following table summarizes the market value of the fund’s investments as of September 30, 2015, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 5,718,958 14
Temporary Cash Investments 160,438 8,099
Futures Contracts—Assets1 2,619
Futures Contracts—Liabilities1 (94)
Total 5,881,921 8,099 14
1 Represents variation margin on the last day of the reporting period.

 

E. At September 30, 2015, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

      ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
S&P 500 Index December 2015 278 132,655 (2,460)
E-mini S&P 500 Index December 2015 46 4,390 32
        (2,428)

 

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

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

The fund used a tax accounting practice to treat a portion of the price of capital shares redeemed during the year as distributions from realized capital gains. Accordingly, the fund has reclassified $28,006,000 from accumulated net realized gains to paid-in capital.

For tax purposes, at September 30, 2015, the fund had $91,810,000 of ordinary income and $236,695,000 of long-term capital gains available for distribution.

34

 

Growth and Income Fund

At September 30, 2015, the cost of investment securities for tax purposes was $5,363,714,000. Net unrealized appreciation of investment securities for tax purposes was $523,795,000, consisting of unrealized gains of $800,719,000 on securities that had risen in value since their purchase and $276,924,000 in unrealized losses on securities that had fallen in value since their purchase.

G. During the year ended September 30, 2015, the fund purchased $7,027,277,000 of investment securities and sold $6,981,490,000 of investment securities, other than temporary cash investments.

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

  Year Ended September 30,
  2015 2014
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Investor Shares        
Issued 316,336 7,469 208,737 5,202
Issued in Lieu of Cash Distributions 225,186 5,491 46,158 1,157
Redeemed (623,691) (14,720) (648,891) (16,224)
Net Increase (Decrease)—Investor Shares (82,169) (1,760) (393,996) (9,865)
Admiral Shares        
Issued 646,610 9,344 536,136 8,191
Issued in Lieu of Cash Distributions 221,904 3,311 40,816 624
Redeemed (366,873) (5,305) (238,360) (3,640)
Net Increase (Decrease) —Admiral Shares 501,641 7,350 338,592 5,175

 

I. Management has determined that no material events or transactions occurred subsequent to September 30, 2015, that would require recognition or disclosure in these financial statements.

35

 

Report of Independent Registered
Public Accounting Firm

To the Board of Trustees of Vanguard Quantitative Funds and the Shareholders of Vanguard Growth and Income Fund:

In our opinion, the accompanying statement of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Growth and Income Fund (constituting a separate portfolio of Vanguard Quantitative Funds, hereafter referred to as the “Fund”) at September 30, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2015 by correspondence with the custodian and brokers, by agreement to the underlying ownership records of the transfer agent and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 10, 2015

Special 2015 tax information (unaudited) for Vanguard Growth and Income Fund

This information for the fiscal year ended September 30, 2015, is included pursuant to provisions
of the Internal Revenue Code.

The fund distributed $381,941,000 as capital gain dividends (20% rate gain distributions) to
shareholders during the fiscal year.

The fund distributed $108,342,000 of qualified dividend income to shareholders during the fiscal year.

For corporate shareholders, 64.7% of investment income (dividend income plus short-term gains,
if any) qualifies for the dividends-received deduction.

36

 

Your Fund’s After-Tax Returns

This table presents returns for your fund both before and after taxes. The after-tax returns are shown in two ways: (1) assuming that an investor owned the fund during the entire period and paid taxes on the fund’s distributions, and (2) assuming that an investor paid taxes on the fund’s distributions and sold all shares at the end of each period.

Calculations are based on the highest individual federal income tax and capital gains tax rates in effect at the times of the distributions and the hypothetical sales. State and local taxes were not considered. After-tax returns reflect any qualified dividend income, using actual prior-year figures and estimates for 2015. (In the example, returns after the sale of fund shares may be higher than those assuming no sale. This occurs when the sale would have produced a capital loss. The calculation assumes that the investor received a tax deduction for the loss.)

The table shows returns for Investor Shares only; returns for other share classes will differ. Please note that your actual after-tax returns will depend on your tax situation and may differ from those shown. Also note that if you own the fund in a tax-deferred account, such as an individual retirement account or a 401(k) plan, this information does not apply to you. Such accounts are not subject to current taxes.

Finally, keep in mind that a fund’s performance—whether before or after taxes—does not guarantee future results.

Average Annual Total Returns: Growth and Income Fund Investor Shares
Periods Ended September 30, 2015

  One Five Ten
  Year Years Years
Returns Before Taxes 0.22% 13.91% 6.16%
Returns After Taxes on Distributions -1.60 13.20 5.49
Returns After Taxes on Distributions and Sale of Fund Shares 1.69 11.20 4.97

 

37

 

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.

38

 

Six Months Ended September 30, 2015      
  Beginning Ending Expenses
  Account Value Account Value Paid During
Growth and Income Fund 3/31/2015 9/30/2015 Period
Based on Actual Fund Return      
Investor Shares $1,000.00 $941.76 $1.61
Admiral Shares 1,000.00 942.26 1.07
Based on Hypothetical 5% Yearly Return      
Investor Shares $1,000.00 $1,023.41 $1.67
Admiral Shares 1,000.00 1,023.97 1.12

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that
period are 0.33% for Investor Shares and 0.22% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the
annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent
six-month period, then divided by the number of days in the most recent 12-month period (183/365).

39

 

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard Growth and Income Fund has renewed the fund’s investment advisory arrangements with D. E. Shaw Investment Management, L.L.C. (DESIM), Los Angeles Capital Management and Equity Research, Inc. (LA Capital), and The Vanguard Group, Inc. (Vanguard), through its Quantitative Equity Group. The board determined that renewing the fund’s advisory arrangements was in the best interest of the fund and its shareholders.

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

Nature, extent, and quality of services

The board reviewed the quality of each advisor’s investment management services provided to the fund since 2011, and took into account the organizational depth and stability of each advisor. The board considered the following:

DESIM. Founded in 2005, DESIM is a global investment management and technology development firm. The firm employs quantitative models that seek to capture predominantly “bottom-up” stock-specific return opportunities while aiming to control overall portfolio risk and characteristics, such as size, sector weights, and style, to be similar to those of the benchmark. The firm focuses on return drivers that it considers “idiosyncratic” or those that other quantitative managers tend to overlook and de-emphasizes the use of traditional factors such as value, growth, and momentum, as these factors are more subject to crowding from other quantitative managers. DESIM has managed a portion of the fund since 2011.

LA Capital. LA Capital was formed in 2002 from the equity portion of Wilshire Asset Management. The firm employs a controlled, dynamic investment model, gradually assigning new prices to key equity risks as market conditions evolve and investor preferences shift. The price of factor risk evolves over time in a way that can be captured in a model akin to changes in cost of capital. The model uses more than 50 factors to actively weight stocks, including value, momentum, quality, sector, and market capitalization. The team applies statistical techniques to reduce noise in the factor returns and it looks for velocity and acceleration of the cleansed factor performance over the prior six months.

LA Capital has managed a portion of the fund since 2011.

Vanguard. Vanguard has been managing investments for more than three decades. The Quantitative Equity Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth. Vanguard has managed a portion of the fund since 2011.

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

Investment performance

The board considered the fund’s investment performance since each advisor began managing the fund in 2011, including any periods of outperformance or underperformance relative to a benchmark index and peer group. The board concluded that the performance was such that the advisory arrangements should continue. Information about the fund’s most recent performance can be found in the Performance Summary section of this report.

40

 

Cost

The board concluded that the fund’s expense ratio was well below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also well below its peer-group average. Information about the fund’s expense ratio appears in the About Your Fund’s Expenses section of this report as well as in the Financial Statements section, which also includes information about the fund’s advisory fee rate.

The board did not consider profitability of DESIM and LA Capital in determining whether to approve the advisory fees, because the firms are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations. The board does not conduct a profitability analysis of Vanguard because of Vanguard’s unique “at-cost” structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees and produces “profits” only in the form of reduced expenses for fund shareholders.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules for DESIM and LA Capital. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by each advisor increase. The board also concluded that the fund’s at-cost arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as the fund’s assets managed by Vanguard increase.

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

41

 

Glossary

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

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

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

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

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

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

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

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

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

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

42

 

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

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

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

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

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

43

 

The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 194 Vanguard funds.

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

InterestedTrustee1 Rajiv L. Gupta
  Born 1945. Trustee Since December 2001.2 Principal
F. William McNabb III Occupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman of Experience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past (retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of the Rohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each of International PLC (diversified manufacturing and
the investment companies served by The Vanguard services), Hewlett-Packard Co. (electronic computer
Group, since January 2010; Director of The Vanguard manufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and (automotive components); Senior Advisor at New
President of The Vanguard Group, and of each of Mountain Capital.
the investment companies served by The Vanguard  
Group, since 2008; Director of Vanguard Marketing Amy Gutmann
Corporation; Managing Director of The Vanguard Born 1949. Trustee Since June 2006. Principal
Group (1995–2008). Occupation(s) During the Past Five Years and
  Other Experience: President of the University of
IndependentTrustees Pennsylvania; Christopher H. Browne Distinguished
  Professor of Political Science, School of Arts and
Emerson U. Fullwood Sciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. Principal School for Communication, with secondary faculty
Occupation(s) During the Past Five Years and appointments in the Department of Philosophy, School
Other Experience: Executive Chief Staff and of Arts and Sciences, and at the Graduate School of
Marketing Officer for North America and Corporate Education, University of Pennsylvania; Trustee of the
Vice President (retired 2008) of Xerox Corporation National Constitution Center; Chair of the Presidential
(document management products and services); Commission for the Study of Bioethical Issues.
Executive in Residence and 2009–2010 Distinguished  
Minett Professor at the Rochester Institute of JoAnn Heffernan Heisen
Technology; Director of SPX Corporation (multi-industry Born 1950. Trustee Since July 1998. Principal
manufacturing), the United Way of Rochester, Occupation(s) During the Past Five Years and Other
Amerigroup Corporation (managed health care), the Experience: Corporate Vice President and Chief
University of Rochester Medical Center, Monroe Global Diversity Officer (retired 2008) and Member
Community College Foundation, and North Carolina of the Executive Committee (1997–2008) of Johnson
A&T University. & Johnson (pharmaceuticals/medical devices/
  consumer products); Director of Skytop Lodge
  Corporation (hotels), the University Medical Center
  at Princeton, the Robert Wood Johnson Foundation,
  and the Center for Talent Innovation; Member of
  the Advisory Board of the Institute for Women’s
  Leadership at Rutgers University.

 

 

F. Joseph Loughrey Executive Officers  
Born 1949. Trustee Since October 2009. Principal    
Occupation(s) During the Past Five Years and Other Glenn Booraem  
Experience: President and Chief Operating Officer Born 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery); Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specialized Other Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; Director Inc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materials served by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundation the investment companies served by The Vanguard
for Education, and the V Foundation for Cancer Group (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for the the investment companies served by The Vanguard
College of Arts and Letters and of the Advisory Board Group (2001–2010).  
to the Kellogg Institute for International Studies, both
at the University of Notre Dame. Thomas J. Higgins  
Born 1957. Chief Financial Officer Since September
Mark Loughridge 2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. Principal Years and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and Other Group, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financial investment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technology Treasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Plan by The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical
Company; Member of the Council on Chicago Booth. Peter Mahoney  
Born 1974. Controller Since May 2015. Principal
Scott C. Malpass Occupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. Principal Other Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Other at The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Vice investment companies served by The Vanguard Group;
President at the University of Notre Dame; Assistant Head of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College of Group (2008–2014).  
Business at Notre Dame; Member of the Notre Dame
403(b) Investment Committee; Board Member of Heidi Stam  
TIFF Advisory Services, Inc., and Catholic Investment Born 1956. Secretary Since July 2005. Principal
Services, Inc. (investment advisors); Member of Occupation(s) During the Past Five Years and Other
the Investment Advisory Committee of Major Experience: Managing Director of The Vanguard
League Baseball. Group, Inc.; General Counsel of The Vanguard Group;
Secretary of The Vanguard Group and of each of the
André F. Perold investment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. Principal Director and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and Other Marketing Corporation.  
Experience: George Gund Professor of Finance and    
Banking, Emeritus at the Harvard Business School Vanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and Managing Mortimer J. Buckley Chris D. McIsaac
Partner of HighVista Strategies LLC (private investment Kathleen C. Gubanich James M. Norris
firm); Director of Rand Merchant Bank; Overseer of Paul A. Heller Thomas M. Rampulla
the Museum of Fine Arts Boston. Martha G. King Glenn W. Reed
John T. Marcante Karin A. Risi
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal    
Occupation(s) During the Past Five Years and Other Chairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer    
(retired 2010) of Corning Incorporated (communications John J. Brennan  
equipment); Trustee of Colby-Sawyer College;    
Member of the Advisory Board of the Norris Cotton Chairman, 1996–2009  
Cancer Center and of the Advisory Board of the    
Parthenon Group (strategy consulting). Chief Executive Officer and President, 1996–2008
   
   
Founder  
  John C. Bogle  
  Chairman and Chief Executive Officer, 1974–1996

 

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

 

 

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This material may be used in conjunction  
with the offering of shares of any Vanguard  
fund only if preceded or accompanied by  
the fund’s current prospectus.  
 
All comparative mutual fund data are from Lipper, a  
Thomson Reuters Company, or Morningstar, Inc., unless  
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting  
guidelines by visiting vanguard.com/proxyreporting or by  
calling Vanguard at 800-662-2739. The guidelines are  
also available from the SEC’s website, sec.gov. In  
addition, you may obtain a free report on how your fund  
voted the proxies for securities it owned during the 12  
months ended June 30. To get the report, visit either  
vanguard.com/proxyreporting or sec.gov.  
 
You can review and copy information about your fund at  
the SEC’s Public Reference Room in Washington, D.C. To  
find out more about this public service, call the SEC at  
202-551-8090. Information about your fund is also  
available on the SEC’s website, and you can receive  
copies of this information, for a fee, by sending a  
request in either of two ways: via email addressed to  
publicinfo@sec.gov or via regular mail addressed to the  
Public Reference Section, Securities and Exchange  
Commission, Washington, DC 20549-1520.  
 
  © 2015 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q930 112015

 



Annual Report | September 30, 2015

Vanguard Structured Equity Funds

Vanguard Structured Large-Cap Equity Fund

Vanguard Structured Broad Market Fund

 

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.

Contents  
Your Fund’s Total Returns. 1
Chairman’s Letter. 2
Advisor’s Report. 8
Structured Large-Cap Equity Fund. 10
Structured Broad Market Fund. 26
About Your Fund’s Expenses. 44
Glossary. 46

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

 

Your Fund’s Total Returns

Fiscal Year Ended September 30, 2015  
  Total
  Returns
Vanguard Structured Large-Cap Equity Fund  
Institutional Shares 1.03%
Institutional Plus Shares 1.05
S&P 500 Index -0.61
Large-Cap Core Funds Average -2.30
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
Vanguard Structured Broad Market Fund  
Institutional Shares 2.80%
Institutional Plus Shares 2.84
Russell 3000 Index -0.49
Multi-Cap Core Funds Average -2.37

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

 

Your Fund’s Performance at a Glance
September 30, 2014, Through September 30, 2015

      Distributions Per Share
  Starting Ending    
  Share Share Income Capital
  Price Price Dividends Gains
Vanguard Structured Large-Cap Equity Fund        
Institutional Shares $38.88 $38.29 $1.008 $0.000
Institutional Plus Shares 76.94 75.80 1.987 0.000
Vanguard Structured Broad Market Fund        
Institutional Shares $37.28 $33.24 $0.630 $4.466
Institutional Plus Shares 74.52 66.43 1.302 8.924

 

1

 

 

 

 

Chairman’s Letter

Dear Shareholder,

The fiscal year ended September 30, 2015, was a volatile one for financial markets. Initially, stock prices headed higher amid largely positive developments regarding the domestic economy. As the period progressed, however, the ride got bumpier. A number of concerns affected investor sentiment, including the pace of growth at home and abroad and the fall in the price of oil and other commodities. The prospect of a Federal Reserve rate hike, the impact of a strong U.S. dollar on corporate profits, and seemingly lofty stock market valuations also weighed on returns.

For the 12-month period, Vanguard Structured Large-Cap Equity Fund returned 1.03% for Institutional Shares and a little more, 1.05%, for Institutional Plus Shares, which have a lower expense ratio. It surpassed the slightly negative result of its benchmark, the S&P 500 Index, by more than 1 percentage point and the average return of its peers by more than 3 percentage points.

Mid- and small-capitalization stocks performed a little better than large-caps. Institutional Shares of Vanguard Structured Broad Market Fund returned 2.80% and Institutional Plus Shares 2.84%. This fund outpaced its comparative standards by wider margins than its large-cap counterpart. It beat its benchmark, the Russell 3000 Index, by more than 3 percentage points and the average return of its peers by more than 5 percentage points.

2

 

Results by sector varied widely. For both funds, however, consumer discretionary and energy were among the biggest relative contributors, helping to offset subpar performances in other sectors including telecommunications and financials.

Please note: At the end of the reporting period, we estimated that the Structured Broad Market Fund would distribute capital gains equal to 7.6% of net assets in mid-December. The distribution will be almost all long-term gains.

China’s economic woes weighed on global stocks

The broad U.S. stock market returned –0.49% for the 12 months. The final two months were rocky as investors worried in particular about the global ripple effects of slower economic growth in China.

For much of the fiscal year, investors were preoccupied with the possibility of an increase in short-term interest rates. On September 17, the Federal Reserve announced that it would hold rates steady for the time being, a decision that to some investors indicated the Fed’s concern about the fragility of global markets.

International stocks returned about –11% as the dollar’s strength against many foreign currencies weighed on results. Returns for emerging markets, which were especially hard hit by concerns about China, trailed those of the developed markets of the Pacific region and Europe.

Taxable bonds recorded gains as investors searched for safety

The broad U.S. taxable bond market returned 2.94% as investors gravitated toward safe-haven assets amid global

Market Barometer      
 
  Average Annual Total Returns
  Periods Ended September 30, 2015
  One Three Five
  Year Years Years
Stocks      
Russell 1000 Index (Large-caps) -0.61% 12.66% 13.42%
Russell 2000 Index (Small-caps) 1.25 11.02 11.73
Russell 3000 Index (Broad U.S. market) -0.49 12.53 13.28
FTSE All-World ex US Index (International) -11.34 2.87 2.19
 
Bonds      
Barclays U.S. Aggregate Bond Index (Broad taxable market) 2.94% 1.71% 3.10%
Barclays Municipal Bond Index (Broad tax-exempt market) 3.16 2.88 4.14
Citigroup Three-Month U.S. Treasury Bill Index 0.02 0.02 0.04
 
CPI      
Consumer Price Index -0.04% 0.93% 1.73%

 

3

 

stock market turmoil. Stimulative monetary policies from the world’s central banks, declining inflation expectations, and global investors’ search for higher yields also helped lift U.S. bonds.

The yield of the 10-year Treasury note ended September at 2.05%, down from 2.48% a year earlier. (Bond prices and yields move in opposite directions.)

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned –7.67%; the dollar’s strength was a significant factor here as well. Without this currency effect, international bonds advanced modestly.

The Fed’s 0%–0.25% target for short-term interest rates continued to limit returns for money market funds and savings accounts.

The funds’ quantitative screening produced benchmark­beating results

The funds’ advisor, Vanguard Quantitative Equity Group, seeks to construct portfolios whose characteristics—stock market capitalization, sector allocation, and risk profile—closely match those of each fund’s benchmark. The advisor selects a subset of the stocks in the benchmarks using computer-driven quantitative models that consider criteria such as valuations, earnings growth potential, and market sentiment.

This screening process met with success in a majority of the sectors in both funds. Outperformance was especially strong among holdings in the media, home improvement, and automotive retailing segments of the consumer discretionary sector. For the broad market fund, the apparel segment was a bright spot as well.

The energy sector continued to suffer from the sharp drop in the price of oil and returned roughly –30% in each of the benchmarks. The funds were able to produce better returns, however, by holding oil and gas stocks that held up better than the sector as a whole. The broad market fund also benefited from underweighting the oil and gas equipment and services segment.

Another area of strength for the broad market fund was the information technology sector, where its holdings in software stocks produced double-digit returns.

The funds underperformed their benchmarks in a few sectors. In financials, outsized holdings in consumer finance hurt both funds. Regional banks were a weak spot for the broad market fund. And both funds disappointed in telecommunication services.

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

The funds have weathered ups and downs in the market

The Institutional Shares of both funds have been around for close to a decade, so their advisor has navigated them through the 2008–2009 financial crisis as well as some

4

 

heady times in the markets before and after that. Although the funds haven’t bested their benchmarks every fiscal year, they have outperformed over the longer term through good markets and bad. This is a testament to the good stewardship of the funds’ advisor as well as the merit of our low-cost structure.

The large-cap fund’s Institutional Shares have produced an average annual return of 6.87% since their launch in May 2006, while the benchmark returned 6.56%. The Broad Market Fund’s Institutional Shares have returned a little less than that, 6.49%, since their launch in November 2006, compared with 6.00% for the benchmark.

Both funds outpaced the average return of their peers by even wider margins over the same periods.

A dose of discipline is crucial when markets become volatile

Although the broad U.S. stock market has posted gains for six straight calendar years—from 2009 to 2014—that streak may not last a seventh. Stocks tumbled in August and swung up and down in September.

Nobody can control the direction of the markets or reliably predict where they’ll go in the short term. However, investors can control how they react to volatility.

Total Returns  
Inception Through September 30, 2015  
  Average
  Annual Return
Structured Large-Cap Equity Fund Institutional Shares (Returns since inception: 5/16/2006) 6.87%
S&P 500 Index 6.56
Large-Cap Core Funds Average 5.30
Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.  
 
Structured Broad Market Fund Institutional Shares (Returns since inception: 11/30/2006) 6.49%
Russell 3000 Index 6.00
Multi-Cap Core Funds Average 4.70
Multi-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.

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

5

 

Staying the course can help you stay closer to your fund’s return

When stock markets are highly volatile, as in recent months, it’s tempting to run for cover. But the price of panic can be high.

A rough measure of what can be lost from attempts to time the market is the difference between the returns produced by a fund and the returns earned by the fund’s investors.

The results shown in the Performance Summary later in this report are your fund’s time-weighted returns—the average annual returns investors would have earned if they had invested a lump sum in the fund at the start of the period and reinvested any distributions they received. Their actual returns, however, depend on whether they subsequently bought or sold any shares. There’s often a gap between this dollar-weighted return for investors and the fund’s time-weighted return, as shown below.

Many sensible investment behaviors can contribute to the difference in returns, but industry cash flow data suggest that one important factor is the generally counterproductive effort to buy and sell at the “right” time. Keeping your emotions in check can help narrow the gap.

Mutual fund returns and investor returns over the last decade

Notes: Data are as of December 31, 2014. The average fund returns and average investor returns are from Morningstar. The average
fund returns are the average of the funds’ time-weighted returns in each category. The average investor returns assume that the growth
of a fund’s total net assets for a given period is driven by market returns and investor cash ow. To calculate investor return, a fund’s
change in assets for the period is discounted by the return of the fund to isolate how much of the asset growth was driven by cash ow.
A model, similar to an internal rate-of-return calculation, is then used to calculate a constant growth rate that links the beginning total
net assets and periodic cash ows to the ending total net assets.
Sources: Vanguard and Morningstar, Inc.

6

 

During periods of market adversity, it’s more important than ever to keep sight of one of Vanguard’s key principles: Maintain perspective and long-term discipline. Whether you’re investing for yourself or on behalf of clients, your success is affected greatly by how you respond—or don’t respond—during turbulent markets. (You can read Vanguard’s Principles for Investing Success at vanguard.com/research.)

As I’ve written in the past, the best course for long-term investors is generally to ignore daily market moves and not make decisions based on emotion. (See the box on page 6 for more discussion on the benefit of staying the course.) This is also a good time to evaluate your portfolio and make sure your asset allocation is aligned with your time horizon, goals, and risk tolerance.

The markets are unpredictable and often confounding. Keeping our long-term plans clearly in focus can be crucial as we weather these periodic storms.

As always, thank you for investing with Vanguard.

Sincerely,


F. William McNabb III
Chairman and Chief Executive Officer
October 13, 2015

7

 

Advisor’s Report

For the fiscal year ended September 30, 2015, Vanguard Structured Large-Cap Equity Fund returned 1.03% for Institutional Shares and 1.05% for Institutional Plus Shares, outpacing the –0.61% return of its benchmark, the S&P 500 Index. Vanguard Structured Broad Market Fund returned 2.80% for Institutional Shares and 2.84% for Institutional Plus Shares, surpassing the –0.49% return of its benchmark, the Russell 3000 Index.

U.S. equities ended relatively flat after giving up most of their gains in late August. Small-capitalization stocks outperformed large-caps. The U.S. equity market remained ahead of international markets, although developed markets proved more resilient than emerging markets.

Sector performance was mixed; six out of ten generated positive returns. Results were best in consumer discretionary, health care, and consumer staples; energy, materials, and industrials lagged.

After six straight years of gains, the U.S. stock market declined slightly. The Federal Reserve held off on raising interest rates in order to facilitate further progress toward its employment and inflation targets. Second-quarter real GDP increased at an annual rate of 3.9% compared with an increase of 0.6% in the first quarter. This growth reflected positive contributions from exports, an acceleration in personal consumption expenditures, and an increase in state and local government spending. The unemployment rate has continued to improve. The U.S. nonfarm payroll rose by 142,000 in September, and the unemployment rate declined to 5.1% from 5.9% a year ago.

The economic slowdown overseas, especially in emerging markets, added to recent market volatility. Emerging-market currencies have lost value against the U.S. dollar. The possibility that the Fed might raise interest rates by the end of 2015 has pushed the dollar up and spurred capital outflows from these countries. Many emerging economies have also been affected by weak commodity prices that have contributed to lower export growth. China’s ongoing slowdown still represents significant downside risk to overall emerging-market performance.

Although we seek to understand the impact of macro factors on fund performance, our investment process is focused on specific stock fundamentals. We compare stocks within industry groups to identify those with characteristics that we believe will help them outperform over the long run. Our strict quantitative model analyzes valuation and other factors centered on fundamental growth, and we use the results to construct our portfolio. Our goal is to maximize expected return and minimize exposure to risks that our research indicates do not improve returns, such as deviations from market-capitalization and sector weightings relative to the benchmark.

The growth and management decisions components of our model produced superior relative results for both the

8

 

Structured Large-Cap Equity Fund and the Structured Broad Market Fund. However, the valuation component did not perform as expected.

The model’s overall effectiveness during the period was mixed. Stock selection was helpful in six out of ten sectors for the Structured Large-Cap Equity Fund, particularly in consumer discretionary, energy, and health care. We underperformed slightly in industrials, financials, telecommunications, and utilities. Stock picks boosted returns in seven out of ten sectors for the Structured Broad Market Fund; the strongest results came from consumer discretionary, information technology, and energy. However, our choices lagged slightly in financials, consumer staples, and telecommunications.

Structured Large­Cap Equity Fund

At the individual stock level, the largest contributions came from overweighted positions in Electronic Arts (+90%), O’Reilly Automotive (+66%), and Tesoro (+53%). Relative to its benchmark, the portfolio benefited from underweighting or avoiding poor performers such as Chevron Corporation (–31%) and Qualcomm (–26%).

Unfortunately, we were not able to avoid all detractors. Overweighted positions in United Rentals (–42%) and National Oilwell Varco (–46%) directly lowered returns. And underweighting companies that our model did not pick, such as Amazon (+59%) and Visa (+32%), hurt relative performance.

Structured Broad Market Fund

At the individual stock level, the largest contributions came from overweighted positions in Skechers (+152%), Manhattan Associates (+86%), and Cablevision (+91%). Relative performance benefited from underweighting or avoiding stocks including Halliburton (–44%) and Micron Technology (–56%).

Overweighted positions in Century Aluminum (–21%) and Greenbrier Companies (–38%) reduced portfolio results. Underweighting companies not selected by our model, such as Walgreens Boots Alliance (+43%) and Facebook (+14%), restrained relative performance.

We believe that the Structured Large-Cap Equity and Structured Broad Market Funds offer a strong mix of stocks with attractive valuations and growth characteristics relative to their benchmarks. We recognize that risk can reward or punish us in the near term. However, we continue to believe that constructing a portfolio that focuses on the fundamentals described above will benefit investors over the long term.

We thank you for your investment and look forward to the coming fiscal year.

Portfolio Managers:

James P. Stetler, Principal

James D. Troyer, CFA, Principal

Michael R. Roach, CFA

Vanguard Quantitative Equity Group

October 15, 2015

9

 

Structured Large-Cap Equity Fund

Fund Profile
As of September 30, 2015

Share-Class Characteristics  
  Institutional Institutional
  Shares Plus Shares
Ticker Symbol VSLIX VSLPX
Expense Ratio1 0.24% 0.17%
30-Day SEC Yield 2.09% 2.13%

 

Portfolio Characteristics    
      DJ
      U.S.
      Total
      Market
    S&P 500 FA
  Fund Index Index
Number of Stocks 176 505 4,000
Median Market Cap $50.2B $75.8B $46.5B
Price/Earnings Ratio 18.9x 18.9x 20.2x
Price/Book Ratio 2.7x 2.6x 2.5x
Return on Equity 18.5% 18.2% 17.2%
Earnings Growth      
Rate 11.3% 9.8% 10.1%
Dividend Yield 2.3% 2.3% 2.1%
Foreign Holdings 0.0% 0.0% 0.0%
Turnover Rate 73%
Short-Term      
Reserves 0.0%

 

Volatility Measures    
    DJ
    U.S. Total
  S&P 500 Market
  Index FA Index
R-Squared 0.98 0.97
Beta 0.98 0.95
These measures show the degree and timing of the fund’s
fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc. Technology  
  Hardware, Storage &  
  Peripherals 4.2%
Johnson & Johnson Pharmaceuticals 1.9
JPMorgan Chase & Co. Diversified Banks 1.8
Google Inc. Internet Software &  
  Services 1.6
Microsoft Corp. Systems Software 1.5
Verizon Communications Integrated  
Inc. Telecommunication  
  Services 1.4
Home Depot Inc. Home Improvement  
  Retail 1.4
Citigroup Inc. Diversified Banks 1.4
Gilead Sciences Inc. Biotechnology 1.3
Exxon Mobil Corp. Integrated Oil & Gas 1.3
Top Ten   17.8%
The holdings listed exclude any temporary cash investments and equity index products.

 

Investment Focus

 

1 The expense ratios shown are from the prospectus dated January 26, 2015. For the fiscal year ended September 30, 2015, the expense ratios were
0.20% for Institutional Shares and 0.16% for Institutional Plus Shares.

10

 

Structured Large-Cap Equity Fund

Sector Diversification (% of equity exposure)
      DJ
      U.S. Total
    S&P 500 Market
  Fund Index FA Index
Consumer      
Discretionary 13.7% 13.1% 13.7%
Consumer Staples 9.1 9.9 8.7
Energy 6.4 6.9 6.3
Financials 16.5 16.5 18.3
Health Care 15.4 14.7 14.4
Industrials 10.8 10.1 10.6
Information      
Technology 19.5 20.4 19.6
Materials 3.3 2.8 3.1
Telecommunication      
Services 2.1 2.4 2.1
Utilities 3.2 3.2 3.2

 

11

 

Structured Large-Cap Equity Fund

Performance Summary

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

Cumulative Performance: May 16, 2006, Through September 30, 2015
Initial Investment of $5,000,000

 

 
    Average Annual Total Returns  
    Periods Ended September 30, 2015  
 
        Since Final Value
    One Five Inception of a $5,000,000
    Year Years (5/16/2006) Investment
 
  Structured Large-Cap Equity        
  Fund*Institutional Shares 1.03% 15.11% 6.87% $9,319,531
 
••••••• S&P 500 Index -0.61 13.34 6.56 9,071,525
 
– – – – Large-Cap Core Funds Average -2.30 11.57 5.30 8,117,336
  Dow Jones U.S. Total Stock Market        
  Float Adjusted Index -0.55 13.26 6.74 9,217,911

Large-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.

 

      Since Final Value
  One Five Inception of a $200,000,000
  Year Years (5/15/2006) Investment
Structured Large-Cap Equity Fund Institutional        
Plus Shares 1.05% 15.18% 6.92% $374,718,788
S&P 500 Index -0.61 13.34 6.54 324,173,929
Dow Jones U.S. Total Stock Market Float        
Adjusted Index -0.55 13.26 6.72 368,159,218

"Since Inception" performance is calculated from the Institutional Plus Shares’ inception date for both the fund and its comparative standards.

See Financial Highlights for dividend and capital gains information.

12

 

Structured Large-Cap Equity Fund

Fiscal-Year Total Returns (%): May 16, 2006, Through September 30, 2015


13

 

Structured Large-Cap Equity Fund

Financial Statements

Statement of Net Assets
As of September 30, 2015

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

      Market
      Value
    Shares ($000)
Common Stocks (99.9%)1    
Consumer Discretionary (13.7%)  
  Home Depot Inc. 67,075 7,747
  Walt Disney Co. 65,779 6,723
* Amazon.com Inc. 11,907 6,095
  NIKE Inc. Class B 45,200 5,558
  Comcast Corp. Class A 91,457 5,202
  Target Corp. 57,100 4,491
* O’Reilly Automotive Inc. 15,500 3,875
  Lowe’s Cos. Inc. 55,926 3,854
  Carnival Corp. 73,100 3,633
  Delphi Automotive plc 46,600 3,543
  Expedia Inc. 27,300 3,213
  Darden Restaurants Inc. 46,300 3,173
  Goodyear Tire    
  & Rubber Co. 106,700 3,130
  Marriott International Inc.    
  Class A 45,350 3,093
  Leggett & Platt Inc. 68,300 2,817
  Best Buy Co. Inc. 71,220 2,644
  Interpublic Group    
  of Cos. Inc. 130,857 2,503
  Hasbro Inc. 28,800 2,078
  GameStop Corp. Class A 13,200 544
  Comcast Corp. Special    
  Class A 9,268 531
  DR Horton Inc. 7,400 217
      74,664
Consumer Staples (9.1%)    
  PepsiCo Inc. 75,192 7,091
  Costco Wholesale Corp. 34,500 4,988
  Reynolds American Inc. 96,600 4,276
  Kroger Co. 111,700 4,029
  Clorox Co. 30,700 3,547
  Dr Pepper Snapple    
  Group Inc. 43,800 3,462
  Procter & Gamble Co. 46,794 3,366
  Archer-Daniels-Midland Co. 80,300 3,328
  ConAgra Foods Inc. 80,000 3,241
  Campbell Soup Co. 61,800 3,132
  Altria Group Inc. 49,500 2,693
  Coca-Cola Co. 50,380 2,021
  Wal-Mart Stores Inc. 16,746 1,086
  Philip Morris    
  International Inc. 12,236 971
  CVS Health Corp. 9,500 917
  Hormel Foods Corp. 10,000 633
  Colgate-Palmolive Co. 9,200 584
  Coca-Cola Enterprises Inc. 2,700 130
      49,495
Energy (6.4%)    
  Exxon Mobil Corp. 96,439 7,170
  Valero Energy Corp. 63,000 3,786
  Marathon Petroleum Corp. 77,800 3,604
  Tesoro Corp. 34,500 3,355
^ Transocean Ltd. 207,200 2,677
  Spectra Energy Corp. 101,700 2,672
  Ensco plc Class A 187,700 2,643
* FMC Technologies Inc. 81,400 2,523
  Noble Corp. plc 217,100 2,369
  Chevron Corp. 22,856 1,803
  Schlumberger Ltd. 25,325 1,747
* Cameron International Corp. 6,100 374
  Phillips 66 1,800 138
      34,861
Financials (16.4%)    
  JPMorgan Chase & Co. 161,479 9,845
  Citigroup Inc. 152,125 7,547
  Wells Fargo & Co. 135,235 6,944
  Bank of America Corp. 444,653 6,928
  Bank of New York    
  Mellon Corp. 104,200 4,079

 

14

 

Structured Large-Cap Equity Fund

      Market
      Value
    Shares ($000)
  PNC Financial Services    
  Group Inc. 45,200 4,032
  Travelers Cos. Inc. 38,000 3,782
  Progressive Corp. 116,200 3,560
  Hartford Financial    
  Services Group Inc. 75,300 3,447
  Northern Trust Corp. 47,100 3,210
* E*TRADE Financial Corp. 119,000 3,133
  Cincinnati Financial Corp. 57,300 3,083
* Berkshire Hathaway Inc.    
  Class B 20,105 2,622
  Legg Mason Inc. 60,000 2,497
  Nasdaq Inc. 45,400 2,421
  Moody’s Corp. 23,400 2,298
  AvalonBay    
  Communities Inc. 12,600 2,203
* Berkshire Hathaway Inc.    
  Class A 11 2,148
  Equinix Inc. 7,200 1,969
  Prudential Financial Inc. 23,400 1,783
  Weyerhaeuser Co. 61,400 1,679
  Kimco Realty Corp. 68,500 1,673
  Apartment Investment    
  & Management Co. 42,400 1,570
  Navient Corp. 131,500 1,478
  CME Group Inc. 9,100 844
  HCP Inc. 21,500 801
  Public Storage 3,600 762
  General Growth    
  Properties Inc. 25,700 667
  Prologis Inc. 16,700 650
  KeyCorp 35,000 455
  Welltower Inc. 5,800 393
  Essex Property Trust Inc. 1,700 380
  Simon Property Group Inc. 2,000 367
  Realty Income Corp. 3,600 171
  SunTrust Banks Inc. 2,900 111
      89,532
Health Care (15.4%)    
  Johnson & Johnson 112,046 10,460
  Gilead Sciences Inc. 73,100 7,178
  Bristol-Myers Squibb Co. 94,800 5,612
  Eli Lilly & Co. 65,887 5,514
  AbbVie Inc. 95,968 5,222
* Biogen Inc. 14,600 4,260
* Express Scripts Holding Co. 52,400 4,242
  UnitedHealth Group Inc. 35,800 4,153
  Aetna Inc. 37,000 4,048
  Anthem Inc. 27,300 3,822
  Amgen Inc. 26,700 3,693
  Cardinal Health Inc. 45,100 3,465
  Pfizer Inc. 106,575 3,348
* HCA Holdings Inc. 43,000 3,326
  AmerisourceBergen Corp.    
  Class A 34,500 3,277
  Zoetis Inc. 75,500 3,109
  Baxalta Inc. 96,700 3,047
  Merck & Co. Inc. 39,844 1,968
  Abbott Laboratories 22,900 921
* Regeneron    
  Pharmaceuticals Inc. 1,800 837
* Allergan plc 2,777 755
  CR Bard Inc. 3,900 727
  Cigna Corp. 3,100 419
  Medtronic plc 5,400 361
* Celgene Corp. 2,200 238
      84,002
Industrials (10.8%)    
  3M Co. 38,000 5,387
  Boeing Co. 41,100 5,382
  General Electric Co. 203,122 5,123
  United Parcel Service Inc.    
  Class B 50,300 4,964
  Lockheed Martin Corp. 23,000 4,768
  General Dynamics Corp. 30,600 4,221
  Northrop Grumman Corp. 24,100 4,000
  Southwest Airlines Co. 98,600 3,751
  PACCAR Inc. 59,400 3,099
  Pitney Bowes Inc. 145,300 2,884
  Cintas Corp. 33,600 2,881
  Ryder System Inc. 31,500 2,332
* United Continental    
  Holdings Inc. 43,700 2,318
  Rockwell Automation Inc. 17,200 1,745
  Delta Air Lines Inc. 32,100 1,440
* United Rentals Inc. 22,500 1,351
  Honeywell International Inc. 12,000 1,136
  Rockwell Collins Inc. 11,100 909
  Illinois Tool Works Inc. 6,000 494
  Equifax Inc. 4,700 457
  Masco Corp. 9,600 242
      58,884
Information Technology (19.5%)  
  Apple Inc. 205,774 22,697
  Microsoft Corp. 189,641 8,394
  International Business    
  Machines Corp. 45,240 6,558
  Accenture plc Class A 50,500 4,962
* Google Inc. Class A 7,605 4,855
  Avago Technologies Ltd.    
  Class A 31,900 3,988
* Google Inc. Class C 6,430 3,912
* Facebook Inc. Class A 40,350 3,627
* Electronic Arts Inc. 53,300 3,611

 

15

 

Structured Large-Cap Equity Fund

      Market
      Value
    Shares ($000)
* Fiserv Inc. 40,150 3,477
  Hewlett-Packard Co. 133,750 3,425
  Skyworks Solutions Inc. 39,400 3,318
  Total System Services Inc. 70,400 3,198
  Western Union Co. 171,500 3,149
  Juniper Networks Inc. 120,600 3,101
  Computer Sciences Corp. 50,400 3,094
* F5 Networks Inc. 26,200 3,034
  Intuit Inc. 31,700 2,813
* Red Hat Inc. 37,500 2,696
  MasterCard Inc. Class A 28,900 2,605
  Intel Corp. 63,253 1,906
  Seagate Technology plc 38,000 1,702
  NVIDIA Corp. 57,900 1,427
  Cisco Systems Inc. 51,515 1,352
  Visa Inc. Class A 19,100 1,331
  Oracle Corp. 25,588 924
* Citrix Systems Inc. 9,700 672
  Paychex Inc. 4,700 224
  QUALCOMM Inc. 2,057 111
      106,163
Materials (3.3%)    
  LyondellBasell Industries    
  NV Class A 46,200 3,851
^ Dow Chemical Co. 77,700 3,295
  Sealed Air Corp. 64,000 3,000
  Avery Dennison Corp. 52,700 2,981
  Sherwin-Williams Co. 12,900 2,874
  International Paper Co. 48,700 1,841
      17,842
Telecommunication Services (2.1%)  
  Verizon    
  Communications Inc. 178,096 7,749
  AT&T Inc. 104,804 3,414
      11,163
Utilities (3.2%)    
  Public Service Enterprise    
  Group Inc. 87,700 3,697
  Edison International 58,400 3,683
  Exelon Corp. 118,300 3,514
  FirstEnergy Corp. 102,800 3,219
  Consolidated Edison Inc. 28,200 1,885
  American Electric    
  Power Co. Inc. 26,600 1,513
      17,511
Total Common Stocks    
(Cost $484,859)   544,117
    Market
    Value
  Shares ($000)
Temporary Cash Investments (0.3%)1  
Money Market Fund (0.3%)    
2,3 Vanguard Market    
Liquidity Fund, 0.189%  1,450,318 1,450
 
  Face  
  Amount  
  ($000)  
U.S. Government and Agency Obligations (0.0%)
4,5 Federal Home Loan    
Bank Discount Notes,    
0.150%, 11/13/15 200 200
Total Temporary Cash Investments  
(Cost $1,650)   1,650
Total Investments (100.2%)    
(Cost $486,509)   545,767
 
    Amount
    ($000)
Other Assets and Liabilities (-0.2%)  
Other Assets    
Investments in Vanguard   50
Receivables for Accrued Income 505
Receivables for Capital Shares Issued 3
Total Other Assets   558
Liabilities    
Collateral for Securities on Loan (1,046)
Payables to Vanguard   (483)
Total Liabilities   (1,529)
Net Assets (100%)   544,796

 

16

 

Structured Large-Cap Equity Fund

At September 30, 2015, net assets consisted of:
  Amount
  ($000)
Paid-in Capital 461,137
Undistributed Net Investment Income 7,832
Accumulated Net Realized Gains 16,585
Unrealized Appreciation (Depreciation)  
Investment Securities 59,258
Futures Contracts (16)
Net Assets 544,796
 
 
Institutional Shares—Net Assets  
Applicable to 2,268,106 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 86,839
Net Asset Value Per Share—  
Institutional Shares $38.29
 
 
Institutional Plus Shares—Net Assets  
Applicable to 6,041,335 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 457,957
Net Asset Value Per Share—  
Institutional Plus Shares $75.80

See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $1,043,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 0.2%, respectively,
of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
3 Includes $1,046,000 of collateral received for securities on loan.
4 Securities with a value of $200,000 have been segregated as initial margin for open futures contracts.
5 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
See accompanying Notes, which are an integral part of the Financial Statements.

17

 

Structured Large-Cap Equity Fund

Statement of Operations

  Year Ended
  September 30, 2015
  ($000)
Investment Income  
Income  
Dividends 12,488
Interest1 3
Securities Lending 5
Total Income 12,496
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 548
Management and Administrative—Institutional Shares 68
Management and Administrative—Institutional Plus Shares 235
Marketing and Distribution—Institutional Shares 9
Marketing and Distribution—Institutional Plus Shares 49
Custodian Fees 14
Auditing Fees 35
Shareholders’ Reports—Institutional Shares 2
Shareholders’ Reports—Institutional Plus Shares 1
Total Expenses 961
Net Investment Income 11,535
Realized Net Gain (Loss)  
Investment Securities Sold 101,979
Futures Contracts (207)
Realized Net Gain (Loss) 101,772
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (100,462)
Futures Contracts 1
Change in Unrealized Appreciation (Depreciation) (100,461)
Net Increase (Decrease) in Net Assets Resulting from Operations 12,846
1 Interest income from an affiliated company of the fund was $2,000.

 

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

18

 

Structured Large-Cap Equity Fund

Statement of Changes in Net Assets

  Year Ended September 30,
  2015 2014
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 11,535 14,175
Realized Net Gain (Loss) 101,772 101,030
Change in Unrealized Appreciation (Depreciation) (100,461) 30,284
Net Increase (Decrease) in Net Assets Resulting from Operations 12,846 145,489
Distributions    
Net Investment Income    
Institutional Shares (1,797) (930)
Institutional Plus Shares (11,950) (11,472)
Realized Capital Gain    
Institutional Shares
Institutional Plus Shares
Total Distributions (13,747) (12,402)
Capital Share Transactions    
Institutional Shares 31,286 (4,066)
Institutional Plus Shares (223,798) (55,209)
Net Increase (Decrease) from Capital Share Transactions (192,512) (59,275)
Total Increase (Decrease) (193,413) 73,812
Net Assets    
Beginning of Period 738,209 664,397
End of Period1 544,796 738,209
1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $7,832,000 and $10,044,000.

 

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

19

 

Structured Large-Cap Equity Fund

Financial Highlights

Institutional Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $38.88 $32.42 $27.83 $21.49 $20.97
Investment Operations          
Net Investment Income .7731 .710 .618 .531 . 4281
Net Realized and Unrealized Gain (Loss)          
on Investments (.355) 6.363 4.542 6.306 .458
Total from Investment Operations .418 7.073 5.160 6.837 .886
Distributions          
Dividends from Net Investment Income (1.008) (. 613) (. 570) (.497) (.366)
Distributions from Realized Capital Gains
Total Distributions (1.008) (. 613) (. 570) (.497) (.366)
Net Asset Value, End of Period $38.29 $38.88 $32.42 $27.83 $21.49
 
Total Return 1.03% 22.08% 18.93% 32.32% 4.14%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $87 $58 $52 $15 $12
Ratio of Total Expenses to          
Average Net Assets 0.20% 0.24% 0.24% 0.24% 0.24%
Ratio of Net Investment Income to          
Average Net Assets 1.93% 1.86% 2.09% 2.10% 1.95%
Portfolio Turnover Rate 73% 68% 62% 64% 67%
1 Calculated based on average shares outstanding.

 

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

20

 

Structured Large-Cap Equity Fund

Financial Highlights

Institutional Plus Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $76.94 $64.10 $55.02 $42.48 $41.98
Investment Operations          
Net Investment Income 1.5501 1.455 1.207 1.084 .9101
Net Realized and Unrealized Gain (Loss)          
on Investments (.703) 12.586 9.037 12.466 .906
Total from Investment Operations .847 14.041 10.244 13.550 1.816
Distributions          
Dividends from Net Investment Income (1.987) (1.201) (1.164) (1.010) (1.316)
Distributions from Realized Capital Gains
Total Distributions (1.987) (1.201) (1.164) (1.010) (1.316)
Net Asset Value, End of Period $75.80 $76.94 $64.10 $55.02 $42.48
 
Total Return 1.05% 22.17% 19.02% 32.42% 4.18%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $458 $680 $612 $497 $379
Ratio of Total Expenses to          
Average Net Assets 0.16% 0.17% 0.17% 0.17% 0.17%
Ratio of Net Investment Income to          
Average Net Assets 1.97% 1.93% 2.16% 2.17% 2.02%
Portfolio Turnover Rate 73% 68% 62% 64% 67%
1 Calculated based on average shares outstanding.

 

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

21

 

Structured Large-Cap Equity Fund

Notes to Financial Statements

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

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

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

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

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

During the year ended September 30, 2015, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

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

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

22

 

Structured Large-Cap Equity Fund

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

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.06% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate equal to the higher of the federal funds rate or LIBOR reference rate plus an agreed­upon spread.

The fund had no borrowings outstanding at September 30, 2015, or at any time during the period then ended.

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

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class­specific 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 non­class­specific 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

23

 

Structured Large-Cap Equity Fund

of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Net Assets.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At September 30, 2015, the fund had contributed to Vanguard capital in the amount of $50,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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

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

The following table summarizes the market value of the fund’s investments as of September 30, 2015, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 544,117
Temporary Cash Investments 1,450 200
Futures Contracts—Assets1 12
Total 545,579 200
1 Represents variation margin on the last day of the reporting period.

 

D. At September 30, 2015, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

      ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
S&P 500 Index December 2015 1 477 (9)
E-mini S&P 500 Index December 2015 2 191 (7)
        (16)

 

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

E. Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain, or loss

24

 

Structured Large-Cap Equity Fund

are recognized in different periods for financial statement and tax purposes. These differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

During the year ended September 30, 2015, the fund realized $65,236,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.

The fund used a capital loss carryforward of $19,976,000 to offset taxable capital gains realized during the year ended September 30, 2015, reducing the amount of capital gains that would otherwise be available to distribute to shareholders. For tax purposes, at September 30, 2015, the fund had $8,302,000 of ordinary income and $16,563,000 of long-term capital gains available for distribution.

At September 30, 2015, the cost of investment securities for tax purposes was $486,509,000. Net unrealized appreciation of investment securities for tax purposes was $59,258,000, consisting of unrealized gains of $83,024,000 on securities that had risen in value since their purchase and $23,766,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended September 30, 2015, the fund purchased $457,402,000 of investment securities and sold $651,209,000 of investment securities, other than temporary cash investments. Purchases and sales include $0 and $222,234,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

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

  Year Ended September 30,
  2015 2014
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Institutional Shares        
Issued 83,381 2,068 5,401 150
Issued in Lieu of Cash Distributions 1,272 33 696 20
Redeemed (53,367) (1,328) (10,163) (283)
Net Increase (Decrease) —Institutional Shares 31,286 773 (4,066) (113)
Institutional Plus Shares        
Issued 2,279 28 533 8
Issued in Lieu of Cash Distributions 4,258 63
Redeemed (226,077) (2,825) (60,000) (784)
Net Increase (Decrease) —Institutional Plus Shares (223,798) (2,797) (55,209) (713)

 

At September 30, 2015, one shareholder was the record or beneficial owner of 84% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

H. Management has determined that no material events or transactions occurred subsequent to September 30, 2015, that would require recognition or disclosure in these financial statements.

25

 

Structured Broad Market Fund

Fund Profile
As of September 30, 2015

Share-Class Characteristics  
  Institutional Institutional
  Shares Plus Shares
Ticker Symbol VSBMX VSBPX
Expense Ratio1 0.24% 0.17%
30-Day SEC Yield 1.93% 1.97%

 

Portfolio Characteristics    
      DJ
      U.S.
      Total
    Russell Market
    3000 FA
  Fund Index Index
Number of Stocks 224 2,986 4,000
Median Market Cap $45.3B $46.9B $46.5B
Price/Earnings Ratio 17.1x 20.2x 20.2x
Price/Book Ratio 2.9x 2.5x 2.5x
Return on Equity 18.1% 17.3% 17.2%
Earnings Growth      
Rate 12.5% 10.1% 10.1%
Dividend Yield 2.1% 2.1% 2.1%
Foreign Holdings 0.0% 0.0% 0.0%
Turnover Rate 66%
Short-Term      
Reserves 0.1%

 

Volatility Measures    
    DJ
  Russell U.S. Total
  3000 Market
  Index FA Index
R-Squared 0.97 0.97
Beta 0.99 0.99
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

 

Ten Largest Holdings (% of total net assets)
Apple Inc. Technology  
  Hardware, Storage &  
  Peripherals 3.4%
Wells Fargo & Co. Diversified Banks 1.6
Johnson & Johnson Pharmaceuticals 1.6
JPMorgan Chase & Co. Diversified Banks 1.5
Exxon Mobil Corp. Integrated Oil & Gas 1.5
Amazon.com Inc. Internet Retail 1.4
Verizon Communications Integrated  
Inc. Telecommunication  
  Services 1.3
Walt Disney Co. Movies &  
  Entertainment 1.3
Pfizer Inc. Pharmaceuticals 1.3
Home Depot Inc. Home Improvement  
  Retail 1.2
Top Ten   16.1%
The holdings listed exclude any temporary cash investments and equity index products.

 

Investment Focus

1 The expense ratios shown are from the prospectus dated January 26, 2015. For the fiscal year ended September 30, 2015, the expense ratios were
0.20% for Institutional Shares and 0.16% for Institutional Plus Shares.

26

 

Structured Broad Market Fund

Sector Diversification (% of equity exposure)
      DJ
    Russell U.S. Total
    3000 Market
  Fund Index FA Index
Consumer      
Discretionary 14.2% 13.7% 13.7%
Consumer Staples 8.6 8.7 8.7
Energy 6.9 6.4 6.3
Financials 17.7 18.2 18.3
Health Care 14.9 14.3 14.4
Industrials 10.5 10.7 10.6
Information      
Technology 18.7 19.5 19.6
Materials 2.7 3.1 3.1
Telecommunication      
Services 2.6 2.2 2.1
Utilities 3.2 3.2 3.2

 

27

 

Structured Broad Market Fund

Performance Summary

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

Cumulative Performance: November 30, 2006, Through September 30, 2015
Initial Investment of $5,000,000

 

 
    Average Annual Total Returns  
    Periods Ended September 30, 2015  
 
        Since Final Value
    One Five Inception of a $5,000,000
    Year Years (11/30/2006) Investment
 
  Structured Broad Market        
  Fund*Institutional Shares 2.80% 15.75% 6.49% $8,713,534
 
••••••• Russell 3000 Index -0.49 13.28 6.00 8,366,600
 
– – – – Multi-Cap Core Funds Average -2.37 10.93 4.70 7,502,149
  Dow Jones U.S. Total Stock Market        
  Float Adjusted Index -0.55 13.26 6.13 8,454,372

Multi-Cap Core Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
"Since Inception" performance is calculated from the Institutional Shares’ inception date for both the fund and its comparative standards.

 

        Final Value
  One Five Ten of a $200,000,000
  Year Years Years Investment
Structured Broad Market Fund Institutional        
Plus Shares 2.84% 15.83% 7.46% $410,843,815
Russell 3000 Index -0.49 13.28 6.92 344,686,607
Dow Jones U.S. Total Stock Market Float        
Adjusted Index -0.55 13.26 7.06 395,568,342

The fund commenced operations as a registered investment company on October 3, 2006. The fund's performance includes the performance
of a predecessor trust, Vanguard Fiduciary Trust Company Structured Broad Market Trust, from September 30, 2005, to October 3, 2006.

See Financial Highlights for dividend and capital gains information.

28

 

Structured Broad Market Fund

Fiscal-Year Total Returns (%): November 30, 2006, Through September 30, 2015


29

 

Structured Broad Market Fund

Financial Statements

Statement of Net Assets
As of September 30, 2015

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

      Market
      Value
    Shares ($000)
Common Stocks (99.5%)1    
Consumer Discretionary (14.1%)  
* Amazon.com Inc. 15,100 7,730
  Walt Disney Co. 69,200 7,072
  Home Depot Inc. 59,100 6,826
  NIKE Inc. Class B 42,600 5,239
  Comcast Corp. Class A 85,091 4,840
  Lowe’s Cos. Inc. 67,400 4,645
  Target Corp. 52,700 4,145
* O’Reilly Automotive Inc. 15,200 3,800
  Carnival Corp. 69,900 3,474
  General Motors Co. 109,100 3,275
* DISH Network Corp.    
  Class A 56,000 3,267
  Cooper Tire & Rubber Co. 76,500 3,023
  Marriott International Inc.    
  Class A 44,200 3,014
* Skechers U.S.A. Inc.    
  Class A 21,900 2,936
* Madison Square    
  Garden Co. Class A 39,300 2,835
* Pinnacle Entertainment Inc. 74,200 2,511
^ Outerwall Inc. 38,700 2,203
* Isle of Capri Casinos Inc. 94,900 1,655
* American Axle    
  & Manufacturing    
  Holdings Inc. 79,300 1,581
  Comcast Corp. Special    
  Class A 27,000 1,546
  TJX Cos. Inc. 15,500 1,107
* Build-A-Bear Workshop Inc. 36,100 682
  Jack in the Box Inc. 2,000 154
  Cablevision Systems Corp.    
  Class A 3,800 123
      77,683
Consumer Staples (8.6%)    
  Altria Group Inc. 103,100 5,609
  Costco Wholesale Corp. 30,900 4,467
  PepsiCo Inc. 43,600 4,111
  Kroger Co. 108,200 3,903
  Reynolds American Inc. 87,600 3,878
  Archer-Daniels-Midland Co. 74,900 3,105
  Dr Pepper Snapple    
  Group Inc. 33,700 2,664
^ Pilgrim’s Pride Corp. 126,350 2,626
  Bunge Ltd. 35,600 2,609
  Procter & Gamble Co. 34,551 2,486
  Dean Foods Co. 130,500 2,156
  Wal-Mart Stores Inc. 23,065 1,495
  Ingles Markets Inc. Class A 28,000 1,339
* USANA Health Sciences Inc. 9,100 1,220
  Coca-Cola Co. 27,880 1,118
  Coty Inc. Class A 40,000 1,082
  Clorox Co. 9,000 1,040
  Cal-Maine Foods Inc. 17,600 961
  Colgate-Palmolive Co. 7,100 451
  Kimberly-Clark Corp. 3,100 338
* SUPERVALU Inc. 28,800 207
  CVS Health Corp. 2,000 193
  Philip Morris    
  International Inc. 1,950 155
      47,213
Energy (6.8%)    
  Exxon Mobil Corp. 108,220 8,046
  Valero Energy Corp. 60,700 3,648
  Tesoro Corp. 34,100 3,316
  Marathon Petroleum Corp. 68,600 3,178
  Teekay Tankers Ltd.    
  Class A 430,400 2,970
  PBF Energy Inc. Class A 97,200 2,744
  Schlumberger Ltd. 32,610 2,249
*,^ Frontline Ltd. 798,000 2,147
  Spectra Energy Corp. 80,500 2,115
  Chevron Corp. 26,565 2,095
  Nordic American    
  Tankers Ltd. 106,400 1,617
  Western Refining Inc. 33,800 1,491
  Ship Finance    
  International Ltd. 67,900 1,103
  Delek US Holdings Inc. 31,900 884
      37,603

 

30

 

Structured Broad Market Fund

      Market
      Value
    Shares ($000)
Financials (17.7%)    
  Wells Fargo & Co. 173,270 8,897
  JPMorgan Chase & Co. 139,736 8,520
  Citigroup Inc. 115,900 5,750
  PNC Financial Services    
  Group Inc. 45,400 4,050
  Travelers Cos. Inc. 37,500 3,732
  Goldman Sachs Group Inc. 21,000 3,649
  Universal Insurance    
  Holdings Inc. 111,400 3,291
* Berkshire Hathaway Inc.    
  Class B 25,100 3,273
  Everest Re Group Ltd. 18,400 3,189
  Ameriprise Financial Inc. 27,900 3,045
  American Express Co. 40,800 3,025
  Simon Property Group Inc. 15,700 2,884
  First American    
  Financial Corp. 73,700 2,879
  Voya Financial Inc. 73,000 2,830
* MGIC Investment Corp. 296,000 2,741
* Walker & Dunlop Inc. 97,500 2,543
* Santander Consumer    
  USA Holdings Inc. 120,600 2,463
  Extra Space Storage Inc. 21,800 1,682
  Lazard Ltd. Class A 38,800 1,680
  US Bancorp 40,250 1,651
* Heritage Insurance    
  Holdings Inc. 82,800 1,634
  General Growth    
  Properties Inc. 58,500 1,519
* E*TRADE Financial Corp. 57,100 1,503
  CoreSite Realty Corp. 27,900 1,435
  Bank of America Corp. 91,200 1,421
* Marcus & Millichap Inc. 30,300 1,394
  Lamar Advertising Co.    
  Class A 26,300 1,372
  Summit Hotel    
  Properties Inc. 115,700 1,350
  Ryman Hospitality    
  Properties Inc. 23,400 1,152
* Cowen Group Inc. Class A 234,400 1,069
  Hospitality Properties Trust 41,100 1,051
  Weingarten Realty Investors 31,500 1,043
  Chambers Street Properties 156,500 1,016
  CBL & Associates    
  Properties Inc. 65,000 894
  Bank of New York    
  Mellon Corp. 22,400 877
  CyrusOne Inc. 24,000 784
  Kimco Realty Corp. 26,500 647
  DuPont Fabros    
  Technology Inc. 24,500 634
* Credit Acceptance Corp. 3,000 591
  RLJ Lodging Trust 21,900 553
  Ventas Inc. 8,900 499
  SunTrust Banks Inc. 11,000 421
  Digital Realty Trust Inc. 6,200 405
  LaSalle Hotel Properties 13,500 383
  Hartford Financial    
  Services Group Inc. 8,100 371
  Public Storage 1,700 360
  Welltower Inc. 4,800 325
* INTL. FCStone Inc. 9,800 242
  OM Asset Management plc 12,600 194
  Care Capital Properties Inc. 4,750 156
  Hersha Hospitality    
  Trust Class A 6,800 154
      97,223
Health Care (14.8%)    
  Johnson & Johnson 93,107 8,691
  Pfizer Inc. 221,558 6,959
  Gilead Sciences Inc. 64,000 6,284
  UnitedHealth Group Inc. 48,300 5,603
  Merck & Co. Inc. 105,483 5,210
  Eli Lilly & Co. 61,720 5,165
  Bristol-Myers Squibb Co. 85,200 5,044
  AbbVie Inc. 86,200 4,690
* Express Scripts Holding Co. 53,300 4,315
  Amgen Inc. 29,900 4,136
  Anthem Inc. 25,900 3,626
  Aetna Inc. 30,800 3,370
  AmerisourceBergen    
  Corp. Class A 34,000 3,230
  Cardinal Health Inc. 41,500 3,188
* Charles River Laboratories    
  International Inc. 39,800 2,528
* Centene Corp. 43,900 2,381
* Infinity Pharmaceuticals Inc. 155,500 1,314
* Quintiles Transnational    
  Holdings Inc. 18,700 1,301
* INC Research Holdings Inc.    
  Class A 25,500 1,020
* HCA Holdings Inc. 12,400 959
  Cigna Corp. 6,500 878
* ICU Medical Inc. 4,600 504
  Abbott Laboratories 9,000 362
  Phibro Animal Health Corp.    
  Class A 8,600 272
* Amedisys Inc. 6,600 251
* Merrimack    
  Pharmaceuticals Inc. 13,300 113
* Allergan plc 400 109
      81,503
Industrials (10.4%)    
  Boeing Co. 39,150 5,127
  3M Co. 33,200 4,707
  Lockheed Martin Corp. 21,700 4,498
  General Dynamics Corp. 28,400 3,918
  Northrop Grumman Corp. 23,230 3,855
  General Electric Co. 146,480 3,694
* United Continental    
  Holdings Inc. 62,400 3,310

 

31

 

Structured Broad Market Fund

      Market
      Value
    Shares ($000)
  Illinois Tool Works Inc. 39,700 3,268
  Cintas Corp. 37,700 3,233
* JetBlue Airways Corp. 124,000 3,195
* Hawaiian Holdings Inc. 125,600 3,100
  Southwest Airlines Co. 78,000 2,967
  PACCAR Inc. 53,000 2,765
* Spirit AeroSystems    
  Holdings Inc. Class A 56,200 2,717
  Alaska Air Group Inc. 27,500 2,185
  Aircastle Ltd. 58,800 1,212
  Comfort Systems USA Inc. 32,900 897
  Interface Inc. Class A 29,400 660
* Dycom Industries Inc. 8,400 608
  Global Brass & Copper    
  Holdings Inc. 29,100 597
* Aerojet Rocketdyne    
  Holdings Inc. 27,500 445
  John Bean    
  Technologies Corp. 5,600 214
* PAM Transportation    
  Services Inc. 4,800 158
  SkyWest Inc. 9,400 157
      57,487
Information Technology (18.6%)  
  Apple Inc. 171,540 18,921
  Microsoft Corp. 143,497 6,351
  International Business    
  Machines Corp. 32,142 4,660
  Accenture plc Class A 45,100 4,432
  Texas Instruments Inc. 81,100 4,016
  MasterCard Inc. Class A 41,700 3,758
* Electronic Arts Inc. 51,200 3,469
* Google Inc. Class A 5,280 3,371
  CDW Corp. 81,100 3,314
  Hewlett-Packard Co. 125,000 3,201
* Manhattan Associates Inc. 50,871 3,169
* Blackhawk Network    
  Holdings Inc. 72,000 3,052
  Computer Sciences Corp. 49,200 3,020
  Intel Corp. 99,490 2,999
* Google Inc. Class C 4,792 2,916
  Booz Allen Hamilton    
  Holding Corp. Class A 107,500 2,818
  EarthLink Holdings Corp. 360,000 2,801
* Aspen Technology Inc. 73,200 2,775
* Sykes Enterprises Inc. 107,200 2,734
  MAXIMUS Inc. 45,100 2,686
  Broadridge Financial    
  Solutions Inc. 42,700 2,363
* Facebook Inc. Class A 22,000 1,978
*,^ Ambarella Inc. 27,100 1,566
* ARRIS Group Inc. 48,480 1,259
  Science Applications    
  International Corp. 30,600 1,230
  Jabil Circuit Inc. 50,800 1,136
* Tech Data Corp. 16,200 1,110
  Skyworks Solutions Inc. 10,200 859
* Ciena Corp. 39,000 808
* Synaptics Inc. 9,000 742
* Sigma Designs Inc. 102,500 706
  CSG Systems    
  International Inc. 18,000 554
  Cisco Systems Inc. 19,450 511
  Visa Inc. Class A 7,300 509
* Gigamon Inc. 20,100 402
* ePlus Inc. 4,900 387
  DST Systems Inc. 2,590 272
  QAD Inc. Class A 10,000 256
  Oracle Corp. 6,548 236
* Cimpress NV 2,900 221
* Avid Technology Inc. 22,900 182
  Avago Technologies Ltd.    
  Class A 1,400 175
* Super Micro Computer Inc. 5,800 158
      102,083
Materials (2.7%)    
  LyondellBasell Industries    
  NV Class A 43,000 3,584
  Sherwin-Williams Co. 12,300 2,740
  International Paper Co. 67,200 2,540
*,^ Trinseo SA 91,500 2,310
  Avery Dennison Corp. 32,700 1,850
  Sealed Air Corp. 27,500 1,289
* AEP Industries Inc. 7,500 430
  KMG Chemicals Inc. 18,400 355
      15,098
Telecommunication Services (2.6%)  
  Verizon    
  Communications Inc. 164,357 7,151
  AT&T Inc. 185,787 6,053
  CenturyLink Inc. 34,300 862
      14,066
Utilities (3.2%)    
  Public Service Enterprise    
  Group Inc. 84,900 3,579
  Edison International 56,000 3,532
  Exelon Corp. 107,100 3,181
  American Electric    
  Power Co. Inc. 42,200 2,400
  Vectren Corp. 55,900 2,348
  WGL Holdings Inc. 30,700 1,770
  FirstEnergy Corp. 22,800 714
      17,524
Total Common Stocks    
(Cost $464,275)   547,483

 

32

 

Structured Broad Market Fund

      Market
      Value
    Shares ($000)
Temporary Cash Investments (1.9%)1  
Money Market Fund (1.9%)    
2,3 Vanguard Market    
  Liquidity Fund, 0.189%  10,280,472 10,280
 
    Face  
    Amount  
    ($000)  
U.S. Government and Agency Obligations (0.0%)
4,5 Federal Home Loan Bank    
  Discount Notes, 0.090%,    
  10/14/15 100 100
4,5 Federal Home Loan Bank    
  Discount Notes, 0.100%,    
  10/23/15 100 100
      200
Total Temporary Cash Investments  
(Cost $10,480)   10,480
Total Investments (101.4%)    
(Cost $474,755)   557,963
 
      Amount
      ($000)
Other Assets and Liabilities (-1.4%)  
Other Assets    
Investment in Vanguard   51
Receivables for Investment Securities Sold 1,164
Receivables for Accrued Income   577
Total Other Assets   1,792
Liabilities    
Payables for Investment Securities  
Purchased   (2,145)
Collateral for Securities on Loan   (6,872)
Payables to Vanguard   (297)
Other Liabilities   (25)
Total Liabilities   (9,339)
Net Assets (100%)   550,416

 

At September 30, 2015, net assets consisted of:
  Amount
  ($000)
Paid-in Capital 416,750
Undistributed Net Investment Income 8,121
Accumulated Net Realized Gains 42,384
Unrealized Appreciation (Depreciation)  
Investment Securities 83,208
Futures Contracts (47)
Net Assets 550,416
 
 
Institutional Shares—Net Assets  
Applicable to 738,427 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 24,544
Net Asset Value Per Share—  
Institutional Shares $33.24
 
 
Institutional Plus Shares—Net Assets  
Applicable to 7,915,727 outstanding  
$.001 par value shares of beneficial  
interest (unlimited authorization) 525,872
Net Asset Value Per Share—  
Institutional Plus Shares $66.43

See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $6,588,000.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures
investments, the fund’s effective common stock and temporary cash investment positions represent 100.0% and 1.4%, respectively,
of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is
the 7-day yield.
3 Includes $6,872,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the
full faith and credit of the U.S. government.
5 Securities with a value of $200,000 have been segregated as initial margin for open futures contracts.
See accompanying Notes, which are an integral part of the Financial Statements.

33

 

Structured Broad Market Fund

Statement of Operations

  Year Ended
  September 30, 2015
  ($000)
Investment Income  
Income  
Dividends 11,647
Interest1 5
Securities Lending 93
Total Income 11,745
Expenses  
The Vanguard Group—Note B  
Investment Advisory Services 480
Management and Administrative—Institutional Shares 27
Management and Administrative—Institutional Plus Shares 311
Marketing and Distribution—Institutional Shares
Marketing and Distribution—Institutional Plus Shares 43
Custodian Fees 11
Auditing Fees 33
Shareholders’ Reports—Institutional Shares 1
Shareholders’ Reports—Institutional Plus Shares
Total Expenses 906
Net Investment Income 10,839
Realized Net Gain (Loss)  
Investment Securities Sold 48,749
Futures Contracts 49
Realized Net Gain (Loss) 48,798
Change in Unrealized Appreciation (Depreciation)  
Investment Securities (44,212)
Futures Contracts (30)
Change in Unrealized Appreciation (Depreciation) (44,242)
Net Increase (Decrease) in Net Assets Resulting from Operations 15,395
1 Interest income from an affiliated company of the fund was $4,000.

 

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

34

 

Structured Broad Market Fund

Statement of Changes in Net Assets

  Year Ended September 30,
  2015 2014
  ($000) ($000)
Increase (Decrease) in Net Assets    
Operations    
Net Investment Income 10,839 9,385
Realized Net Gain (Loss) 48,798 63,591
Change in Unrealized Appreciation (Depreciation) (44,242) 28,712
Net Increase (Decrease) in Net Assets Resulting from Operations 15,395 101,688
Distributions    
Net Investment Income    
Institutional Shares (434) (270)
Institutional Plus Shares (9,024) (8,224)
Realized Capital Gain1    
Institutional Shares (3,078) (657)
Institutional Plus Shares (61,848) (19,311)
Total Distributions (74,384) (28,462)
Capital Share Transactions    
Institutional Shares 1,642 7,179
Institutional Plus Shares 65,576 (18,827)
Net Increase (Decrease) from Capital Share Transactions 67,218 (11,648)
Total Increase (Decrease) 8,229 61,578
Net Assets    
Beginning of Period 542,187 480,609
End of Period2 550,416 542,187

1 Includes fiscal 2015 and 2014 short-term gain distributions totaling $16,777,000 and $1,585,000, respectively. Short-term gain distributions
are treated as ordinary income dividends for tax purposes.
2 Net Assets—End of Period includes undistributed (overdistributed) net investment income of $8,121,000 and $6,740,000.

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

35

 

Structured Broad Market Fund

Financial Highlights

Institutional Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $37.28 $32.59 $27.10 $21.03 $20.70
Investment Operations          
Net Investment Income . 662 . 632 . 573 .544 .3851
Net Realized and Unrealized Gain (Loss)          
on Investments .394 5.996 5.492 5.973 .338
Total from Investment Operations 1.056 6.628 6.065 6.517 .723
Distributions          
Dividends from Net Investment Income (.630) (.564) (.575) (. 447) (.393)
Distributions from Realized Capital Gains (4.466) (1.374)
Total Distributions (5.096) (1.938) (.575) (. 447) (.393)
Net Asset Value, End of Period $33.24 $37.28 $32.59 $27.10 $21.03
 
Total Return 2.80% 21.10% 22.85% 31.43% 3.37%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $25 $26 $16 $7 $6
Ratio of Total Expenses to          
Average Net Assets 0.20% 0.24% 0.24% 0.24% 0.24%
Ratio of Net Investment Income to          
Average Net Assets 1.86% 1.67% 1.94% 2.19% 1.64%
Portfolio Turnover Rate 66% 60% 63% 58% 56%
1 Calculated based on average shares outstanding.

 

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

36

 

Structured Broad Market Fund

Financial Highlights

Institutional Plus Shares          
 
For a Share Outstanding Year Ended September 30,
Throughout Each Period 2015 2014 2013 2012 2011
Net Asset Value, Beginning of Period $74.52 $65.15 $54.17 $42.02 $41.36
Investment Operations          
Net Investment Income 1.355 1.303 1.186 1.122 .7961
Net Realized and Unrealized Gain (Loss)          
on Investments .781 11.981 10.980 11.951 .672
Total from Investment Operations 2.136 13.284 12.166 13.073 1.468
Distributions          
Dividends from Net Investment Income (1.302) (1.169) (1.186) (. 923) (. 808)
Distributions from Realized Capital Gains (8.924) (2.745)
Total Distributions (10.226) (3.914) (1.186) (. 923) (. 808)
Net Asset Value, End of Period $66.43 $74.52 $65.15 $54.17 $42.02
 
Total Return 2.84% 21.16% 22.95% 31.56% 3.43%
 
Ratios/Supplemental Data          
Net Assets, End of Period (Millions) $526 $516 $465 $379 $290
Ratio of Total Expenses to          
Average Net Assets 0.16% 0.17% 0.17% 0.17% 0.17%
Ratio of Net Investment Income to          
Average Net Assets 1.90% 1.74% 2.01% 2.26% 1.71%
Portfolio Turnover Rate 66% 60% 63% 58% 56%
1 Calculated based on average shares outstanding.

 

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

37

 

Structured Broad Market Fund

Notes to Financial Statements

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

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

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

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

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

During the year ended September 30, 2015, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of aggregate settlement values at each quarter-end during the period.

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

38

 

Structured Broad Market Fund

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

5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counter-parties, 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 counter-party risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Net Assets for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

6. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”) participate in a $3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.06% of the undrawn amount of the facility; these fees are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under this facility bear interest at a rate equal to the higher of the federal funds rate or LIBOR reference rate plus an agreed-upon spread.

The fund had no borrowings outstanding at September 30, 2015, or at any time during the period then ended.

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

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

39

 

Structured Broad Market Fund

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

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At September 30, 2015, the fund had contributed to Vanguard capital in the amount of $51,000, representing 0.01% of the fund’s net assets and 0.02% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

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

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

The following table summarizes the market value of the fund’s investments as of September 30, 2015, based on the inputs used to value them:

  Level 1 Level 2 Level 3
Investments ($000) ($000) ($000)
Common Stocks 547,483
Temporary Cash Investments 10,280 200
Futures Contracts—Assets1 51
Total 557,814 200
1 Represents variation margin on the last day of the reporting period.

 

D. At September 30, 2015, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:

      ($000)
      Aggregate  
    Number of Settlement Unrealized
    Long (Short) Value Appreciation
Futures Contracts Expiration Contracts Long (Short) (Depreciation)
S&P 500 Index December 2015 5 2,386 (44)
E-mini S&P 500 Index December 2015 5 477 (3)
        (47)

 

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

40

 

Structured Broad Market Fund

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

For tax purposes, at September 30, 2015, the fund had $8,654,000 of ordinary income and $42,082,000 of long-term capital gains available for distribution.

At September 30, 2015, the cost of investment securities for tax purposes was $474,758,000. Net unrealized appreciation of investment securities for tax purposes was $83,205,000, consisting of unrealized gains of $104,429,000 on securities that had risen in value since their purchase and $21,224,000 in unrealized losses on securities that had fallen in value since their purchase.

F. During the year ended September 30, 2015, the fund purchased $375,098,000 of investment securities and sold $371,485,000 of investment securities, other than temporary cash investments.

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

  Year Ended September 30,
  2015 2014
  Amount Shares Amount Shares
  ($000) (000) ($000) (000)
Institutional Shares        
Issued 6,643 195
Issued in Lieu of Cash Distributions 1,642 49 536 16
Redeemed
Net Increase (Decrease) —Institutional Shares 1,642 49 7,179 211
Institutional Plus Shares        
Issued 3,000 45 7,200 110
Issued in Lieu of Cash Distributions 62,576 940 20,486 310
Redeemed (46,513) (627)
Net Increase (Decrease) —Institutional Plus Shares 65,576 985 (18,827) (207)

 

At September 30, 2015, one shareholder was the record or beneficial owner of 95% of the fund’s net assets. If the shareholder were to redeem its investment in the fund, the redemption might result in an increase in the fund’s expense ratio, cause the fund to incur higher transaction costs, or lead to the realization of taxable capital gains.

H. Management has determined that no material events or transactions occurred subsequent to September 30, 2015, that would require recognition or disclosure in these financial statements.

41

 

Report of Independent Registered
Public Accounting Firm

To the Board of Trustees of Vanguard Quantitative Funds and the Shareholders of Vanguard Structured Large-Cap Equity Fund and Vanguard Structured Broad Market Fund:

In our opinion, the accompanying statements of net assets and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Vanguard Structured Large-Cap Equity Fund and Vanguard Structured Broad Market Fund (constituting separate portfolios of Vanguard Quantitative Funds, hereafter referred to as the “Funds”) at September 30, 2015, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2015 by correspondence with the custodian and brokers, by agreement to the underlying ownership records of the transfer agent and the application of alternative auditing procedures where securities purchased had not been received, provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 10, 2015

42

 

 
Special 2015 tax information (unaudited) for Vanguard Structured Equity Funds

This information for the fiscal year ended September 30, 2015, is included pursuant to provisions of the Internal Revenue Code.

For non-resident alien shareholders, 100% of short-term capital gain dividends distributed by the Structured Broad Market Fund are qualified short-term capital gains.

The funds distributed capital gain dividends (from net long-term capital gains) to shareholders during the fiscal year as follows:

Fund ($000)
Structured Large-Cap Equity Fund
Structured Broad Market Fund 48,149

 

The funds distributed qualified dividend income to shareholders during the fiscal year as follows:

Fund ($000)
Structured Large-Cap Equity Fund 13,746
Structured Broad Market Fund 9,458

 

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends-received deduction is as follows:

Fund Percentage
Structured Large-Cap Equity Fund 98.9%
Structured Broad Market Fund 91.1

 

43

 

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.

44

 

Six Months Ended September 30, 2015      
  Beginning Ending Expenses
  Account Value Account Value Paid During
  3/31/2015 9/30/2015 Period
Based on Actual Fund Return      
Structured Large-Cap Equity Fund      
Institutional Shares $1,000.00 $946.83 $0.88
Institutional Plus Shares 1,000.00 946.91 0.73
Structured Broad Market Fund      
Institutional Shares $1,000.00 $949.17 $0.88
Institutional Plus Shares 1,000.00 949.27 0.73
Based on Hypothetical 5% Yearly Return      
Structured Large-Cap Equity Fund      
Institutional Shares $1,000.00 $1,024.17 $0.91
Institutional Plus Shares 1,000.00 1,024.32 0.76
Structured Broad Market Fund      
Institutional Shares $1,000.00 $1,024.17 $0.91
Institutional Plus Shares 1,000.00 1,024.32 0.76

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that
period are: for the Structured Large-Cap Equity Fund, 0.18% for Institutional Shares and 0.15% for Institutional Plus Shares; for the Structured
Broad Market Fund, 0.18% for Institutional Shares and 0.15% for Institutional Plus Shares. The dollar amounts shown as “Expenses Paid” are
equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most
recent six-month period, then divided by the number of days in the most recent 12-month period (183/365).

45

 

Glossary

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

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

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

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

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

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

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

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

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

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

46

 

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

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

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

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

47

 

The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 194 Vanguard funds.

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

InterestedTrustee1 Rajiv L. Gupta
  Born 1945. Trustee Since December 2001.2 Principal
F. William McNabb III Occupation(s) During the Past Five Years and Other
Born 1957. Trustee Since July 2009. Chairman of Experience: Chairman and Chief Executive Officer
the Board. Principal Occupation(s) During the Past (retired 2009) and President (2006–2008) of
Five Years and Other Experience: Chairman of the Rohm and Haas Co. (chemicals); Director of Tyco
Board of The Vanguard Group, Inc., and of each of International PLC (diversified manufacturing and
the investment companies served by The Vanguard services), Hewlett-Packard Co. (electronic computer
Group, since January 2010; Director of The Vanguard manufacturing), and Delphi Automotive PLC
Group since 2008; Chief Executive Officer and (automotive components); Senior Advisor at New
President of The Vanguard Group, and of each of Mountain Capital.
the investment companies served by The Vanguard  
Group, since 2008; Director of Vanguard Marketing Amy Gutmann
Corporation; Managing Director of The Vanguard Born 1949. Trustee Since June 2006. Principal
Group (1995–2008). Occupation(s) During the Past Five Years and
  Other Experience: President of the University of
IndependentTrustees Pennsylvania; Christopher H. Browne Distinguished
  Professor of Political Science, School of Arts and
Emerson U. Fullwood Sciences, and Professor of Communication, Annenberg
Born 1948. Trustee Since January 2008. Principal School for Communication, with secondary faculty
Occupation(s) During the Past Five Years and appointments in the Department of Philosophy, School
Other Experience: Executive Chief Staff and of Arts and Sciences, and at the Graduate School of
Marketing Officer for North America and Corporate Education, University of Pennsylvania; Trustee of the
Vice President (retired 2008) of Xerox Corporation National Constitution Center; Chair of the Presidential
(document management products and services); Commission for the Study of Bioethical Issues.
Executive in Residence and 2009–2010 Distinguished  
Minett Professor at the Rochester Institute of JoAnn Heffernan Heisen
Technology; Director of SPX Corporation (multi-industry Born 1950. Trustee Since July 1998. Principal
manufacturing), the United Way of Rochester, Occupation(s) During the Past Five Years and Other
Amerigroup Corporation (managed health care), the Experience: Corporate Vice President and Chief
University of Rochester Medical Center, Monroe Global Diversity Officer (retired 2008) and Member
Community College Foundation, and North Carolina of the Executive Committee (1997–2008) of Johnson
A&T University. & Johnson (pharmaceuticals/medical devices/
  consumer products); Director of Skytop Lodge
  Corporation (hotels), the University Medical Center
  at Princeton, the Robert Wood Johnson Foundation,
  and the Center for Talent Innovation; Member of
  the Advisory Board of the Institute for Women’s
  Leadership at Rutgers University.

 

 

F. Joseph Loughrey Executive Officers  
Born 1949. Trustee Since October 2009. Principal    
Occupation(s) During the Past Five Years and Other Glenn Booraem  
Experience: President and Chief Operating Officer Born 1967. Treasurer Since May 2015. Principal
(retired 2009) of Cummins Inc. (industrial machinery); Occupation(s) During the Past Five Years and
Chairman of the Board of Hillenbrand, Inc. (specialized Other Experience: Principal of The Vanguard Group,
consumer services), and of Oxfam America; Director Inc.; Treasurer of each of the investment companies
of SKF AB (industrial machinery), Hyster-Yale Materials served by The Vanguard Group; Controller of each of
Handling, Inc. (forklift trucks), the Lumina Foundation the investment companies served by The Vanguard
for Education, and the V Foundation for Cancer Group (2010–2015); Assistant Controller of each of
Research; Member of the Advisory Council for the the investment companies served by The Vanguard
College of Arts and Letters and of the Advisory Board Group (2001–2010).  
to the Kellogg Institute for International Studies, both
at the University of Notre Dame. Thomas J. Higgins  
Born 1957. Chief Financial Officer Since September
Mark Loughridge 2008. Principal Occupation(s) During the Past Five
Born 1953. Trustee Since March 2012. Principal Years and Other Experience: Principal of The Vanguard
Occupation(s) During the Past Five Years and Other Group, Inc.; Chief Financial Officer of each of the
Experience: Senior Vice President and Chief Financial investment companies served by The Vanguard Group;
Officer (retired 2013) at IBM (information technology Treasurer of each of the investment companies served
services); Fiduciary Member of IBM’s Retirement Plan by The Vanguard Group (1998–2008).
Committee (2004–2013); Director of the Dow Chemical
Company; Member of the Council on Chicago Booth. Peter Mahoney  
Born 1974. Controller Since May 2015. Principal
Scott C. Malpass Occupation(s) During the Past Five Years and
Born 1962. Trustee Since March 2012. Principal Other Experience: Head of Global Fund Accounting
Occupation(s) During the Past Five Years and Other at The Vanguard Group, Inc.; Controller of each of the
Experience: Chief Investment Officer and Vice investment companies served by The Vanguard Group;
President at the University of Notre Dame; Assistant Head of International Fund Services at The Vanguard
Professor of Finance at the Mendoza College of Group (2008–2014).  
Business at Notre Dame; Member of the Notre Dame
403(b) Investment Committee; Board Member of Heidi Stam  
TIFF Advisory Services, Inc., and Catholic Investment Born 1956. Secretary Since July 2005. Principal
Services, Inc. (investment advisors); Member of Occupation(s) During the Past Five Years and Other
the Investment Advisory Committee of Major Experience: Managing Director of The Vanguard
League Baseball. Group, Inc.; General Counsel of The Vanguard Group;
Secretary of The Vanguard Group and of each of the
André F. Perold investment companies served by The Vanguard Group;
Born 1952. Trustee Since December 2004. Principal Director and Senior Vice President of Vanguard
Occupation(s) During the Past Five Years and Other Marketing Corporation.  
Experience: George Gund Professor of Finance and    
Banking, Emeritus at the Harvard Business School Vanguard Senior ManagementTeam
(retired 2011); Chief Investment Officer and Managing Mortimer J. Buckley Chris D. McIsaac
Partner of HighVista Strategies LLC (private investment Kathleen C. Gubanich James M. Norris
firm); Director of Rand Merchant Bank; Overseer of Paul A. Heller Thomas M. Rampulla
the Museum of Fine Arts Boston. Martha G. King Glenn W. Reed
John T. Marcante Karin A. Risi
Peter F. Volanakis
Born 1955. Trustee Since July 2009. Principal    
Occupation(s) During the Past Five Years and Other Chairman Emeritus and Senior Advisor
Experience: President and Chief Operating Officer    
(retired 2010) of Corning Incorporated (communications John J. Brennan  
equipment); Trustee of Colby-Sawyer College;    
Member of the Advisory Board of the Norris Cotton  Chairman, 1996–2009  
Cancer Center and of the Advisory Board of the    
Parthenon Group (strategy consulting). Chief Executive Officer and President, 1996–2008
   
   
Founder  
  John C. Bogle  
  Chairman and Chief Executive Officer, 1974–1996

 

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

 

 

  P.O. Box 2600
  Valley Forge, PA 19482-2600
 
 
 
Connect with Vanguard® > vanguard.com  
 
 
 
Fund Information > 800-662-7447 CFA® is a registered trademark owned by CFA Institute.
Direct Investor Account Services > 800-662-2739  
Institutional Investor Services > 800-523-1036  
Text Telephone for People  
Who Are Deaf or Hard of Hearing> 800-749-7273  
 
This material may be used in conjunction  
with the offering of shares of any Vanguard  
fund only if preceded or accompanied by  
the fund’s current prospectus.  
 
All comparative mutual fund data are from Lipper, a  
Thomson Reuters Company, or Morningstar, Inc., unless  
otherwise noted.  
 
You can obtain a free copy of Vanguard’s proxy voting  
guidelines by visiting vanguard.com/proxyreporting or by  
calling Vanguard at 800-662-2739. The guidelines are  
also available from the SEC’s website, sec.gov. In  
addition, you may obtain a free report on how your fund  
voted the proxies for securities it owned during the 12  
months ended June 30. To get the report, visit either  
vanguard.com/proxyreporting or sec.gov.  
 
You can review and copy information about your fund at  
the SEC’s Public Reference Room in Washington, D.C. To  
find out more about this public service, call the SEC at  
202-551-8090. Information about your fund is also  
available on the SEC’s website, and you can receive  
copies of this information, for a fee, by sending a  
request in either of two ways: via email addressed to  
publicinfo@sec.gov or via regular mail addressed to the  
Public Reference Section, Securities and Exchange  
Commission, Washington, DC 20549-1520.  
 
  © 2015 The Vanguard Group, Inc.
  All rights reserved.
  Vanguard Marketing Corporation, Distributor.
 
  Q08700 112015

 


Item 2: Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.

Item 3: Audit Committee Financial Expert. The following members of the Audit Committee have been determined by the Registrant’s Board of Trustees to be Audit Committee Financial Experts serving on its Audit Committee, and to be independent: Rajiv L. Gupta, Amy Gutmann, JoAnn Heffernan Heisen, F. Joseph Loughrey, Mark Loughridge, Scott C. Malpass, and André F. Perold.

Item 4: Principal Accountant Fees and Services.

(a) Audit Fees.

Audit Fees of the Registrant

Fiscal Year Ended September 30, 2015: $101,000
Fiscal Year Ended September 30, 2014: $98,000

Aggregate Audit Fees of Registered Investment Companies in the Vanguard Group.

Fiscal Year Ended September 30, 2015: $7,000,200
Fiscal Year Ended September 30, 2014: $6,605,127

Includes fees billed in connection with audits of the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc. and Vanguard Marketing Corporation.

(b) Audit-Related Fees.

Fiscal Year Ended September 30, 2015: $2,899,096
Fiscal Year Ended September 30, 2014: $2,176,479

Includes fees billed in connection with assurance and related services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(c) Tax Fees.

Fiscal Year Ended September 30, 2015: $353,389
Fiscal Year Ended September 30, 2014: $316,869

Includes fees billed in connection with tax compliance, planning, and advice services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

 

(d) All Other Fees.

Fiscal Year Ended September 30, 2015: $202,313
Fiscal Year Ended September 30, 2014: $198,163

Includes fees billed for services related to tax reported information provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(e) (1) Pre-Approval Policies. The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit and non-audit services provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.

     In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Chairman of the Audit Committee would be called on to consider and, if appropriate, pre-approve audit or permitted non-audit services in an amount sufficient to complete services through the next Audit Committee meeting, and to determine if such services would be consistent with maintaining the accountant’s independence. At the next scheduled Audit Committee meeting, services and fees would be presented to the Audit Committee for formal consideration, and, if appropriate, approval by the entire Audit Committee. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.

     The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Vanguard complex, whether such services are provided to: the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., or other entities controlled by The Vanguard Group, Inc. that provide ongoing services to the Registrant.

     (2) No percentage of the principal accountant’s fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant’s engagement were not performed by persons other than full-time, permanent employees of the principal accountant.

(g) Aggregate Non-Audit Fees.

Fiscal Year Ended September 30, 2015: $555,702
Fiscal Year Ended September 30, 2014: $515,032

 

Includes fees billed for non-audit services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.

(h) For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant’s independence.

Item 5: Audit Committee of Listed Registrants.

Not Applicable.

Item 6: Investments.

Not Applicable.

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

Not Applicable.

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

Not Applicable.

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

Not Applicable.

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

Not Applicable.

Item 11: Controls and Procedures.

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

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

 

Item 12: Exhibits.

(a) Code of Ethics.
(b) Certifications.

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

  VANGUARD QUANTITATIVE FUNDS
 
 
BY: /s/ F. WILLIAM MCNABB III*
F. WILLIAM MCNABB III 
CHIEF EXECUTIVE OFFICER 
 
Date: November 18, 2015

 

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

  VANGUARD QUANTITATIVE FUNDS
 

 

BY:

/s/ F. WILLIAM MCNABB III*
 F. WILLIAM MCNABB III
 CHIEF EXECUTIVE OFFICER

 

Date: November 18, 2015

 

 

VANGUARD QUANTITATIVE FUNDS

 

BY:

/s/ THOMAS J. HIGGINS*
  THOMAS J. HIGGINS
CHIEF FINANCIAL OFFICER 

 

Date: November 18, 2015

 

* By: /s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on April 22, 2014 see file Number2-17620, Incorporated by Reference.