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Additional Information
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|
Inception
|
Suitable
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Date
|
for IRAs
|
Abbreviation
|
Fund Number
|
Number
|
U.S. Growth Fund
|
|
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|
|
|
Investor Shares
|
1/6/1959
|
Yes
|
USGro
|
23
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921910105
|
Admiral Shares
|
8/13/2001
|
Yes
|
USGroAdml
|
523
|
921910600
|
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
43
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
Mutual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Principal.
The face value of a debt instrument or the amount of money put into an investment.
Russell 1000 Growth Index.
An index that measures the performance of those Russell 1000 companies with higher price/book ratios and higher predicted growth rates.
44
Securities.
Stocks, bonds, money market instruments, and other investments.
Standard & Poors 500 Index.
A widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies.
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
If you are a current Vanguard shareholder and would
|
If you would like more information about Vanguard
|
like information about your account, account
|
U.S. Growth Fund, the following documents are
|
transactions, and/or account statements, please call:
|
available free upon request:
|
|
|
Client Services Department
|
Annual/Semiannual Reports to Shareholders
|
Telephone: 800-662-2739 (CREW)
|
Additional information about the Funds investments is
|
Text telephone for people with hearing impairment:
|
available in the Funds annual and semiannual reports
|
800-749-7273
|
to shareholders. In the annual report, you will find a
|
|
|
Information Provided by the Securities and
|
discussion of the market conditions and investment
|
|
|
Exchange Commission (SEC)
|
strategies that significantly affected the Funds
|
|
|
You can review and copy information about the Fund
|
performance during its last fiscal year.
|
|
|
(including the SAI) at the SECs Public Reference Room
|
Statement of Additional Information (SAI)
|
in Washington, DC. To find out more about this public
|
The SAI provides more detailed information about the
|
service, call the SEC at 202-551-8090. Reports and
|
Fund and is incorporated by reference into (and thus
|
other information about the Fund are also available in
|
legally a part of) this prospectus.
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
To receive a free copy of the latest annual or semiannual
|
|
|
by electronic request at the following e-mail address:
|
report or the SAI, or to request additional information
|
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
about the Fund or other Vanguard funds, please visit
|
|
|
Section, Securities and Exchange Commission,
|
vanguard.com
or contact us as follows:
|
|
|
Washington, DC 20549-1520.
|
The Vanguard Group
|
|
|
Funds Investment Company Act file number: 811-01027
|
Investor Information Department
|
|
P.O. Box 2600
|
|
Valley Forge, PA 19482-2600
|
|
Telephone: 800-662-7447 (SHIP)
|
|
Text telephone for people with hearing impairment:
|
|
800-749-7273
|
|
|
|
|
|
© 2012 The Vanguard Group, Inc. All rights reserved.
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Vanguard Marketing Corporation, Distributor.
|
|
P 023 122012
|
|
Vanguard U.S. Growth Fund
|
Prospectus
|
|
December 27, 2012
|
|
Investor Shares for Participants
|
Vanguard U.S. Growth Fund Investor Shares (VWUSX)
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|
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|
|
This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
.
|
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
|
passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Contents
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Fund Summary
|
1
|
Financial Highlights
|
18
|
More on the Fund
|
5
|
Investing With Vanguard
|
20
|
The Fund and Vanguard
|
13
|
Accessing Fund Information Online
|
23
|
Investment Advisors
|
14
|
Glossary of Investment Terms
|
24
|
Dividends, Capital Gains, and Taxes
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16
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Share Price
|
17
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|
Fund Summary
Investment Objective
The Fund seeks to provide long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Investor Shares of the Fund.
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Shareholder Fees
|
|
(Fees paid directly from your investment)
|
|
|
Sales Charge (Load) Imposed on Purchases
|
None
|
Purchase Fee
|
None
|
Sales Charge (Load) Imposed on Reinvested Dividends
|
None
|
Redemption Fee
|
None
|
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
|
|
Management Expenses
|
0.43%
|
12b-1 Distribution Fee
|
None
|
Other Expenses
|
0.02%
|
Total Annual Fund Operating Expenses
|
0.45%
|
Example
The following example is intended to help you compare the cost of investing in the Fund’s Investor Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. This example assumes that the Shares provide a return of 5% a year and that
total annual fund
operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
|
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
$46
|
$144
|
$252
|
$567
|
1
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was
43
%.
Primary Investment Strategies
The Fund invests mainly in large-capitalization stocks of U.S. companies considered to have above-average earnings growth potential and reasonable stock prices in comparison with expected earnings. At least 80% of the Funds assets will be invested in stocks of U.S. companies. The Fund uses multiple investment advisors.
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. The Fund
is subject to the following risks, which could affect the Funds performance
:
Stock market risk
, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Investment style risk
, which is the chance that returns from large-capitalization growth stocks will trail returns from the overall stock market. Large-cap growth stocks tend to go through cycles of doing betteror worsethan other segments of the stock market or the stock market in general. These periods have, in the past, lasted for as long as several years.
Asset concentration risk
, which is the chance that the Funds performance may be hurt disproportionately by the poor performance of relatively few stocks. The Fund tends to invest a high percentage of assets in its ten largest holdings.
Manager risk
, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. Significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
2
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns compare with those of relevant market indexes, which have investment characteristics similar to those of the Fund. Keep in mind that the Fund’s past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard U.S. Growth Fund Investor Shares
1
1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 17.78%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 15.34% (quarter ended September 30, 2009), and the lowest return for a quarter was
–21.69% (quarter ended December 31, 2008).
|
|
|
|
Average Annual Total Returns for Periods Ended December 31,
2011
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
Vanguard U.S. Growth Fund Investor Shares
|
–0.68%
|
0.48%
|
0.04%
|
Comparative Indexes
|
|
|
|
(reflect no deduction for fees or expenses)
|
|
|
|
Russell 1000 Growth Index
|
2.64%
|
2.50%
|
2.60%
|
Standard & Poor's 500 Index
|
2.11
|
–0.25
|
2.92
|
3
Investment Advisors
Delaware Management Company
Wellington Management Company,
LLP
William Blair & Company, L.L.C.
Portfolio Managers
Christopher J. Bonavico, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Christopher M. Ericksen, CFA, Vice President, Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Daniel J. Prislin, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Jeffrey S. Van Harte, CFA, Senior Vice President, Chief Investment OfficerFocus Growth Equity at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Andrew J. Shilling, CFA, Senior Vice
President
and Equity Portfolio Manager of Wellington Management. He has managed a portion of the Fund since 2010.
James Golan, CFA, Principal and Portfolio Manager of William Blair & Company. He has co-managed a portion of the Fund since 2010.
David Ricci, CFA, Principal and Portfolio Manager of William Blair & Company. He has co-managed a portion of the Fund since 2011.
Tax Information
The Funds distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
Payments to Financial Intermediaries
The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.
4
More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance
for fluctuations in the securities markets. Look for this
symbol throughout the
prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
This prospectus offers the Fund‘s Investor Shares and is intended for participants in employer-sponsored retirement or savings plans. Another version—for investors who would like to open a personal investment account—can be obtained
on our website at
vanguard.com
or
by calling Vanguard at 800-662-7447.
|
Plain Talk About Fund Expenses
|
|
All mutual funds have operating expenses. These expenses, which are deducted
|
from a fund’s gross income, are expressed as a percentage of the net assets of
|
the fund. Assuming that operating expenses remain as stated in the Fees and
|
Expenses section, Vanguard U.S. Growth Fund Investor Shares’ expense ratio
|
would be
0.45%
, or
$4.50
per $1,000 of average net assets. The average
|
expense ratio for large-cap growth funds in
2011
was
1.37%
, or
$13.70
per
|
$1,000 of average net assets (derived from data provided by Lipper Inc., which
|
reports on the mutual fund industry).
|
|
Plain Talk About Costs of Investing
|
|
Costs are an important consideration in choosing a mutual fund. That’s because
|
you, as a shareholder, pay a proportionate share of the costs of operating a fund,
|
plus any transaction costs incurred when the fund buys or sells securities. These
|
costs can erode a substantial portion of the gross income or the capital
|
appreciation a fund achieves. Even seemingly small differences in expenses can,
|
over time, have a dramatic effect on a fund’s performance.
|
5
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Funds board of trustees, which oversees the Funds management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental. The Funds policy of investing at least 80% of its assets in securities issued by U.S. companies may be changed only upon 60 days notice to shareholders.
Market Exposure
The Fund invests mainly in common stocks of companies that, in the advisors opinions, offer favorable prospects for capital appreciation. These stocks tend to produce little current income. The Fund generally focuses on companies that are considered large-cap by the Funds investment advisors.
Stocks of publicly traded companies and funds that invest in stocks are often classified according to market value, or market capitalization. These classifications typically include small-cap, mid-cap, and large-cap. Its important to understand that, for both companies and stock funds, market-capitalization ranges change over time. Also, interpretations of size vary, and there are no official definitions of small-, mid-, and large-cap, even among Vanguard fund advisors. The asset-weighted median market capitalization of the Fund as of
August 31, 2012,
was
$33.6
billion.
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
6
To illustrate the volatility of stock prices, the following table shows the best, worst, and average annual total returns for the U.S. stock market over various periods as measured by the Standard & Poor‘s 500 Index, a widely used barometer of market activity. (Total returns consist of dividend income plus change in market price.) Note that the returns shown do not include the costs of buying and selling stocks or other expenses that a real-world investment portfolio would incur.
|
|
|
|
|
U.S. Stock Market Returns
|
|
|
|
|
(1926–2
011
)
|
|
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
20 Years
|
Best
|
54.2%
|
28.6%
|
19.9%
|
17.8%
|
Worst
|
–43.1
|
–12.4
|
–1.4
|
3.1
|
Average
|
11.7
|
9.9
|
10.5
|
11.2
|
The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926 through
2011
. You can see, for example, that although the average annual return on common stocks for
all
of the 5-year periods was
9.9%
, average annual returns for
individual
5-year periods ranged from –12.4% (from 1928 through 1932) to 28.6% (from 1995 through 1999). These average annual returns reflect
past
performance of common stocks; you should not regard them as an indication of
future
performance of either the stock market as a whole or the Fund in particular.
|
Plain Talk About Growth Funds and Value Funds
|
|
Growth investing and value investing are two styles employed by stock-fund
|
managers. Growth funds generally focus on stocks of companies believed to
|
have above-average potential for growth in revenue, earnings, cash flow, or other
|
similar criteria. These stocks typically have low dividend yields and above-average
|
prices in relation to measures such as earnings and book value. Value funds
|
typically emphasize stocks whose prices are below average in relation to those
|
measures; these stocks often have above-average dividend yields. Growth and
|
value stocks have historically produced similar long-term returns, though each
|
category has periods when it outperforms the other.
|
The Fund is subject to investment style risk, which is the chance that returns from large-capitalization growth stocks will trail returns from the overall stock market. Large-cap
growth
stocks tend to go through cycles of doing better—or worse—than
other segments of the stock market or
the stock market in general. These periods have, in the past, lasted for as long as several years.
7
Security Selection
The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.
Each advisor employs active investment management methods, which means that securities are bought and sold according to the advisors evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general. Each advisor will sell a security when, in the view of the advisor, it is no longer as attractive as an alternative investment.
Although each advisor uses a different process to select securities, under normal circumstances, the Fund will invest at least 80% of its assets in securities issued by U.S. companies.
Delaware Management
Company,
which manages approximately 42% of the Funds assets,
invests primarily in common stocks of large-capitalization, growth-oriented companies that it believes have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. The advisor uses a bottom-up approach, seeking companies that have large-end market potential, dominant business models, and strong free cash flow generation that is attractively priced compared with the intrinsic value of the securities. Delaware Management Company tends to hold a relatively focused portfolio with a limited number of stocks.
Wellington Management Company,
LLP
(Wellington Management)
, which manages approximately 40% of the Funds assets,
employs a traditional, bottom-up fundamental research approach to identify securities that possess sustainable growth at reasonable valuations. Wellington Management identifies companies that have demonstrated above-average growth in the past, then conducts a thorough review of each companys business model. The goal of this review is to identify companies that can sustain above-average growth because of their superior business models as represented by high returns on capital, strong management, and quality balance sheets. A disciplined valuation analysis follows to determine which securities are attractively priced.
8
William Blair & Company, L.L.C.
(William Blair & Company)
, which manages approximately 16% of the Funds assets,
uses an investment process that relies on thorough, in-depth fundamental analysis. William Blair & Company invests in companies that it believes are high-quality and have sustainable, above-average growth. In selecting stocks, the advisor considers some or all of the following company criteria: leadership position within the markets served, quality of the products or services provided, marketing capability, return on equity, accounting policies/financial transparency, and quality/depth of the management team.
The Vanguard Group, Inc.
(Vanguard), manages a small portion
(approximately 2%)
of the Funds assets to facilitate cash flows to and from the Funds advisors. Vanguard typically invests its portion of the Funds assets in stock index futures and/or shares of exchange-traded funds. For more details, see Other Investment Policies and Risks.
Because the Fund tends to invest a high percentage of assets in its ten largest holdings, the Fund is subject to asset concentration risk, which is the chance that the Funds performance may be hurt disproportionately by the poor performance of relatively few stocks.
The Fund is subject to manager risk, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. Significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.
Other Investment Policies and Risks
Although the Fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 20% of its assets in foreign securities, which may include depositary receipts. Foreign securities may be traded on U.S. or foreign markets. To the extent that it owns foreign securities, the Fund is subject to country risk and currency risk.
Country risk
is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries. In addition, the prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
Currency risk
is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.
9
The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Fund’s securities from falling in value during foreign market
downswings.
|
Plain Talk About Derivatives
|
|
Derivatives can take many forms. Some forms of derivatives, such as
|
exchange-traded futures and options on securities, commodities, or indexes,
|
have been trading on regulated exchanges for decades. These types of
|
derivatives are standardized contracts that can easily be bought and sold, and
|
whose market values are determined and published daily. Nonstandardized
|
derivatives (such as swap agreements
and forward foreign currency exchange
|
contracts
), on the other hand, tend to be more specialized or complex, and may
|
be harder to value.
|
Vanguard typically invests a small portion of the Fund’s assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds.
These s
tock index futures and ETFs
typically
provide returns similar to those of common stocks. Vanguard may purchase futures or ETFs when doing so will reduce the Fund’s transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
10
Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when an advisor believes that doing so is in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategiesfor instance, by allocating substantial assets to cash, commercial paper, or other less volatile instrumentsin response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.
Frequent Trading or Market-Timing
Background.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
11
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent tradin
g. The
board of trustees of each Vanguard fund
(other than money market funds and short-term bond funds)
has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it.
These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. A
lthough there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, a participant from exchanging into a fund account for 60 calendar days after the participant has exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period.
Changes to the Funds advisory structure during the fiscal year ended August 31, 2011, resulted in higher portfolio turnover for the year. The turnover rate for the Fund has since become more normalized.
The average turnover rate for large-cap growth funds was approximately 77%, as reported by Morningstar, Inc., on August 31, 2012.
12
|
Plain Talk About Turnover Rate
|
|
Before investing in a mutual fund, you should review its turnover rate. This gives
|
an indication of how transaction costs, which are not included in the funds
|
expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that brokerage
|
commissions and other transaction costs will have on its return. Also, funds with
|
high turnover rates may be more likely to generate capital gains that must be
|
distributed to shareholders.
|
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family
of 1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space,
and
equipmen
t.
Vanguard
Marketing Corporation
provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of
t
he Vanguard
funds
marketing costs.
|
Plain Talk About Vanguards Unique Corporate Structure
|
|
The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
|
the funds it oversees and thus indirectly by the shareholders in those funds.
|
Most other mutual funds are operated by management companies that may be
|
owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
13
Investment Advisors
The Fund uses a multimanager approach to invest its assets. Each advisor independently manages its assigned portion of the Funds assets, subject to the supervision and oversight of Vanguard and the Funds board of trustees. The board of trustees designates the proportion of Fund assets to be managed by each advisor and may change these proportions at any time.
Delaware Management Company, 2005 Market Street, Philadelphia, PA 19103, is an investment management firm and a series of Delaware Management
Business Trust (DMBT), a Delaware statutory trust. DMBT
is a subsidiary, and subject to the ultimate control, of Macquarie Group, Ltd. (Macquarie). Macquarie is a Sydney, Australia-headquartered global provider of banking, financial, advisory, and investment services. As of
August 31, 2012
, Delaware Management Company managed approximately
$177
billion in assets.
Wellington Management Company,
LLP
, 280 Congress Street, Boston, MA 02210, is a Massachusetts limited liability partnership and an investment counseling firm
that
provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 70 years. As of
August 31, 2012
, Wellington Management had investment management authority with respect to approximately
$748
billion in assets.
William Blair & Company, L.L.C., 222 West Adam Street, Chicago, IL 60608, is an independently owned full-service investment management firm founded in 1935. The firm manages assets for mutual funds, public and private employee benefits plans, foundations, endowments, institutions, and separate accounts. As of
August 31, 2012
, William Blair & Company managed approximately
$47
billion in assets.
The Fund pays each of its investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisors portion of the Fund relative to that of the Russell 1000 Growth Index over the preceding 36-month period (a 60-month period for William Blair & Company). When the performance adjustment is positive, the Funds expenses increase; when it is negative, expenses decrease.
For the fiscal year ended
August 31, 2012
, the aggregate advisory fee represented an effective annual rate of
0.17%
of the Funds average net assets
before a performance-based decrease of 0.01%
.
14
Under the terms of an SEC exemption, the Funds board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement or hire a new investment advisoreither as a replacement for an existing advisor or as an additional advisor. Any significant change in the Funds advisory arrangements will be communicated to shareholders in writing. In addition, as the Funds sponsor and overall manager, The Vanguard Group may provide investment advisory services to the Fund, on an at-cost basis, at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced, or that the terms of an existing advisory agreement be revised.
For a discussion of why the board of trustees approved the Funds investment advisory agreements, see the most recent semiannual report to
shareholders.
The managers primarily responsible for the day-to-day management of the Fund are:
Christopher J. Bonavico
, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1988; has managed investment portfolios since joining Delaware Management Company in 2005; and has co-managed a portion of the Fund since 2010. Education: B.S., University of Delaware.
Christopher M. Ericksen
, CFA, Vice President, Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1994; has managed investment portfolios since 2004; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.S., Carnegie Mellon University.
Daniel J. Prislin
, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1994; has managed investment portfolios since 1996; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.S. and M.B.A., University of California at Berkeley.
Jeffrey S. Van Harte
, CFA, Senior Vice President, Chief Investment OfficerFocus Growth Equity at Delaware Management Company. He has worked in investment management since 1980; has managed investment portfolios since 1984; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.A., California State University at Fullerton.
Andrew J. Shilling
, CFA, Senior Vice President and Equity Portfolio Manager of Wellington Management. He has worked in investment management for Wellington Management since 1994; has managed investment portfolios since 2000; and has managed a portion of the Fund since 2010. Education: B.A., Amherst College; M.B.A., Tuck School of Business, Dartmouth College.
15
James Golan
, CFA, Principal and Portfolio Manager of William Blair & Company. He has worked in investment management since 1988; has been with William Blair & Company since 2000; has managed investment portfolios since 2005; and has co-managed a portion of the Fund since 2010. Education: B.A., DePauw University; M.B.A., J.L. Kellogg Graduate School of Management, Northwestern University.
David Ricci
, CFA, Principal and Portfolio Manager of William Blair & Company. He has worked in investment management at William Blair & Company since 1994; has managed investment portfolios since 2005; and has co-managed a portion of the Fund since 2011. Education: Sc.B., Brown University; M.B.A., Harvard Business School.
The
Statement of Additional Information
provides information about each portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
Dividends, Capital Gains, and Taxes
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net capital gains realized from the sale of its holdings. Income and capital gains distributions, if any, generally occur annually in December.
Your distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
and dividends as well as capital gains from the funds sale of investments. Income
|
consists of both the dividends that the fund earns from any stock holdings and the
|
interest it receives from any money market and bond investments. Capital gains are
|
realized whenever the fund sells securities for higher prices than it paid for them.
|
These capital gains are either short-term or long-term, depending on whether the
|
fund held the securities for one year or less or for more than one year.
|
16
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests. However, on those days the value of the
Funds
assets may be affected to the extent that the
Fund holds
foreign securities that trade on foreign markets that are open.
Stocks held by a Vanguard fund are valued at their
market value
when reliable market quotations are readily available. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
When a fund determines that market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the funds pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the funds pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement), or country-specific or regional/global (e.g., natural disaster, economic or political news, act of terrorism, interest rate change). Intervening events include price movements in U.S. markets that are deemed to affect the value of foreign securities. Fair-value pricing may be used for domestic securitiesfor example, if (1) trading in a security is halted and does not resume before the funds pricing time or if a security does not trade in the course of a day, and (2) the fund holds enough of the security that its price could affect the NAV.
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
17
Financial Highlights
The following financial highlights table is intended to help you understand the Investor Shares financial performance for the periods shown, and certain information reflects financial results for a single Investor Share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Investor Shares (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Table
|
|
The Investor Shares began fiscal year
2012
with a net asset value (price) of $
18.12
|
per share. During the year, each Investor Share earned $0
.068
from investment
|
income (interest and dividends) and $
2.679
from investments that had appreciated
|
in value or that were sold for higher prices than the Fund paid for them.
|
|
Shareholders received $0
.077
per share in the form of dividend distributions. A
|
portion of each years distributions may come from the prior years income or
|
capital gains.
|
|
The share price at the end of the year was $
20.79
, reflecting earnings of $
2.747
|
per share and distributions of $0
.077
per share. This was an increase of $
2.67
per
|
share (from $
18.12
at the beginning of the year to $
20.79
at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was
15.22
% for the year.
|
|
As of
August 31, 2012
, the Investor Shares had approximately $
3
billion in net
|
assets. For the year, the expense ratio was 0
.45
% ($
4.50
per $1,000 of net
|
assets), and the net investment income amounted to
0.35
% of average net
|
assets. The Fund sold and replaced securities valued at
43
% of its net assets.
|
18
|
|
|
|
|
|
U.S. Growth Fund Investor Shares
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$18.12
|
$14.75
|
$14.83
|
$17.89
|
$19.44
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
.068
|
.108
1
|
.105
|
.105
|
.089
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
2.679
|
3.370
|
(.099)
|
(3.049)
|
(1.523)
|
Total from Investment Operations
|
2.747
|
3.478
|
.006
|
(2.944)
|
(1.434)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(.077)
|
(.108)
|
(.086)
|
(.116)
|
(.116)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
—
|
—
|
Total Distributions
|
(.077)
|
(.108)
|
(.086)
|
(.116)
|
(.116)
|
Net Asset Value, End of Period
|
$20.79
|
$18.12
|
$14.75
|
$14.83
|
$17.89
|
Total Return
|
15.22%
|
23.58%
|
–0.02% –16.29%
|
–7.44%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$2,975
|
$2,893
|
$2,796
|
$2,956
|
$3,637
|
Ratio of Total Expenses to Average Net Assets
2
|
0.45%
|
0.44%
|
0.45%
|
0.49%
|
0.43%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
0.35%
|
0.61%
1
|
0.66%
|
0.79%
|
0.47%
|
Portfolio Turnover Rate
|
43%
|
89%
|
74%
|
101%
|
107%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.016 and 0.09%, respectively, resulting from a special dividend from Verisign Inc. in December, 2010.
2 Includes performance-based investment advisory fee (decreases) of (0.01%), (0.01%), (0.03%), (0.03%), and (0.03%).
19
Investing With Vanguard
The Fund is an investment option in your retirement or savings plan. Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.
If you have any questions about the Fund or Vanguard, including those about the Funds investment objective, strategies, or risks, contact Vanguard Participant Services, toll-free, at 800-523-1188.
If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.
Be sure to carefully read each topic that pertains to your transactions with Vanguard.
Vanguard reserves the right to change its policies without notice to shareholders.
Investment Options and Allocations
Your plans specific provisions may allow you to change your investment selections, the amount of your contributions, or how your contributions are allocated among the investment choices available to you. Contact your plan administrator or employee benefits office for more details.
Transactions
Transaction requests (e.g., a contribution, exchange, or redemption) must be in good order. Good order means that Vanguard has determined that (1) your transaction request includes complete information and (2) appropriate assets are already in your account or new assets have been received.
Processing times for your transaction requests may differ among recordkeepers or among transaction types. Your plans recordkeeper (which may also be Vanguard) will determine the necessary processing timeframes for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.
Your transaction will then be based on the next-determined NAV of the Funds Investor Shares. If your transaction request was received in good order before the close of regular trading on the New York Stock Exchange (NYSE) (generally 4 p.m., Eastern time), you will receive that days NAV and trade date. NAVs are calculated only on days the NYSE is open for trading.
20
If Vanguard is serving as your plan recordkeeper, and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.
Frequent-Trading Limitations
The exchange privilege (your ability to purchase shares of a fund using the proceeds from the simultaneous redemption of shares of another fund) may be available to you through your plan. Although we make every effort to maintain the exchange privilege, Vanguard reserves the right to revise or terminate this privilege, limit the amount of an exchange, or reject any exchange, at any time, without notice. Because excessive exchanges can disrupt the management of the Vanguard funds and increase their transaction costs, Vanguard places certain limits on the exchange privilege.
If you are exchanging
out of
any Vanguard fund (other than money market funds and short-term bond funds), you must wait 60 days before exchanging
back into
the fund. This policy applies,
regardless of the dollar amount
. Please note that the 60-day clock restarts after every exchange out of the fund.
The frequent-trading limitations
do not
apply to the following: exchange requests submitted by mail to Vanguard (exchange requests submitted by fax, if otherwise permitted,
are
subject to the limitations); exchanges of shares purchased with participant payroll or employer contributions or loan repayments; exchanges of shares purchased with reinvested dividend or capital gains distributions; distributions, loans, and in-service withdrawals from a plan; redemptions of shares as part of a plan termination or at the direction of the plan; redemptions of shares to pay fund or account fees; share or asset transfers or rollovers; reregistrations of shares within the same fund; conversions of shares from one share class to another in the same fund; and automated transactions executed during the first six months of a participants enrollment in the Vanguard Managed Account Program.
Before making an exchange to or from another fund available in your plan, consider the following:
Certain investment options, particularly funds made up of company stock or investment contracts, may be subject to unique restrictions.
Be sure to read the funds prospectus. Contact Vanguard Participant Services, toll-free, at 800-523-1188 for a copy.
Vanguard can accept exchanges only as permitted by your plan. Contact your plan administrator for details on other exchange policies that apply to your plan.
21
Plans for which Vanguard does not serve as recordkeeper:
If Vanguard does not serve as recordkeeper for your plan, your plans recordkeeper will establish accounts in Vanguard funds for the benefit of its clients. In such accounts, we cannot always monitor the trading activity of individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor participants trading activity with respect to Vanguard funds.
For those Vanguard funds that charge purchase
and/or
redemption fees, intermediaries that establish accounts in the Vanguard funds will be asked to assess
these
fees on participant accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If a firm other than Vanguard serves as recordkeeper for your plan, please read that firms materials carefully to learn of any other rules or fees that may apply.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, broker, or investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
No cancellations
Vanguard will not accept your request to cancel any transaction request once processing has begun. Please be careful when placing a transaction request.
Proof of a callers authority
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.
22
Uncashed Checks
Vanguard will not pay interest on uncashed checks.
Portfolio Holdings
We generally post on our website at
vanguard.com
, in the
Portfolio
section of the Funds Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. We also generally post the ten largest stock portfolio holdings of the Fund and the percentage of the Funds total assets that each of these holdings represents, as of the end of the most recent calendar quarter. This list is generally updated within 15 calendar days after the end of each calendar quarter. Please consult the Funds
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Funds portfolio holdings.
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Inception Date
|
Abbreviation
|
Fund Number
|
Number
|
U.S. Growth Fund
|
|
|
|
|
Investor Shares
|
1/6/1959
|
USGro
|
23
|
921910105
|
|
Accessing Fund Information Online
|
|
|
Vanguard Online at
Vanguard.com
Visit Vanguards education-oriented website for access to timely news and information about Vanguard funds and services and easy-to-use, interactive tools to help you create your own investment and retirement strategies.
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
23
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
Mutual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Principal.
The face value of a debt instrument or the amount of money put into an investment.
Russell 1000 Growth Index.
An index that measures the performance of those Russell 1000 companies with higher price/book ratios and higher predicted growth rates.
24
Securities.
Stocks, bonds, money market instruments, and other investments.
Standard & Poors 500 Index.
A widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies.
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
To receive a free copy of the latest annual or semiannual
|
If you would like more information about Vanguard
|
report or the SAI, or to request additional information
|
U.S. Growth Fund, the following documents are
|
about the Fund or other Vanguard funds, please visit
|
available free upon request:
|
vanguard.com
or contact us as follows:
|
|
Annual/Semiannual Reports to Shareholders
|
The Vanguard Group
|
Additional information about the Funds investments is
|
Participant Services
|
available in the Funds annual and semiannual reports
|
P.O. Box 2900
|
to shareholders. In the annual report, you will find a
|
Valley Forge, PA 19482-2900
|
discussion of the market conditions and investment
|
Telephone: 800-523-1188
|
strategies that significantly affected the Funds
|
Text telephone for people with hearing impairment:
|
performance during its last fiscal year.
|
800-749-7273
|
|
Statement of Additional Information (SAI)
|
Information Provided by the Securities and
|
The SAI provides more detailed information about the
|
Exchange Commission (SEC)
|
Fund and is incorporated by reference into (and thus
|
You can review and copy information about the Fund
|
legally a part of) this prospectus.
|
(including the SAI) at the SECs Public Reference Room
|
|
in Washington, DC. To find out more about this public
|
|
service, call the SEC at 202-551-8090. Reports and
|
|
other information about the Fund are also available in
|
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
|
by electronic request at the following e-mail address:
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
|
Section, Securities and Exchange Commission,
|
|
Washington, DC 20549-1520.
|
|
|
Funds Investment Company Act file number: 811-01027
|
|
|
|
|
|
© 2012 The Vanguard Group, Inc. All rights reserved.
|
|
Vanguard Marketing Corporation, Distributor.
|
|
|
I 023 122012
|
|
Vanguard U.S. Growth Fund
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Prospectus
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December 27, 2012
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Admiral Shares for Participants
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Vanguard U.S. Growth Fund Admiral Shares (VWUAX)
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This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
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The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
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passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Contents
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Fund Summary
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1
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Financial Highlights
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18
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More on the Fund
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5
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Investing With Vanguard
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20
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The Fund and Vanguard
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13
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Accessing Fund Information Online
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23
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Investment Advisors
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14
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Glossary of Investment Terms
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24
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Dividends, Capital Gains, and Taxes
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16
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Share Price
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17
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Fund Summary
Investment Objective
The Fund seeks to provide long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Admiral Shares of the Fund.
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Shareholder Fees
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(Fees paid directly from your investment)
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Sales Charge (Load) Imposed on Purchases
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None
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Purchase Fee
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None
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Sales Charge (Load) Imposed on Reinvested Dividends
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None
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Redemption Fee
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None
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Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
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Management Expenses
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0.29%
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12b-1 Distribution Fee
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None
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Other Expenses
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0.02%
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Total Annual Fund Operating Expenses
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0.31%
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Example
The following example is intended to help you compare the cost of investing in the Fund’s Admiral Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. This example assumes that the Shares provide a return of 5% a year and that
total annual fund
operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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$32
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$100
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$174
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$393
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1
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was
43
%.
Primary Investment Strategies
The Fund invests mainly in large-capitalization stocks of U.S. companies considered to have above-average earnings growth potential and reasonable stock prices in comparison with expected earnings. At least 80% of the Funds assets will be invested in stocks of U.S. companies. The Fund uses multiple investment advisors.
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. The Fund
is subject to the following risks, which could affect the Funds performance
:
Stock market risk
, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Investment style risk
, which is the chance that returns from large-capitalization growth stocks will trail returns from the overall stock market. Large-cap growth stocks tend to go through cycles of doing betteror worsethan other segments of the stock market or the stock market in general. These periods have, in the past, lasted for as long as several years.
Asset concentration risk
, which is the chance that the Funds performance may be hurt disproportionately by the poor performance of relatively few stocks. The Fund tends to invest a high percentage of assets in its ten largest holdings.
Manager risk
, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. Significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
2
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Admiral Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns compare with those of relevant market indexes, which have investment characteristics similar to those of the Fund. Keep in mind that the Fund’s past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard U.S. Growth Fund Admiral Shares
1
1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 17.89%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 15.46% (quarter ended September 30, 2009), and the lowest return for a quarter was
–21.62% (quarter ended December 31, 2008).
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Average Annual Total Returns for Periods Ended December 31,
2012
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1 Year
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5 Years
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10 Years
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Vanguard U.S. Growth Fund Admiral Shares
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–0.53%
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0.66%
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0.23%
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Comparative Indexes
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(reflect no deduction for fees or expenses)
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Russell 1000 Growth Index
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2.64%
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2.50%
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2.60%
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Standard & Poor's 500 Index
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2.11
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–0.25
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2.92
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3
Investment Advisors
Delaware Management Company
Wellington Management Company,
LLP
William Blair & Company, L.L.C.
Portfolio Managers
Christopher J. Bonavico, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Christopher M. Ericksen, CFA, Vice President, Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Daniel J. Prislin, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Jeffrey S. Van Harte, CFA, Senior Vice President, Chief Investment OfficerFocus Growth Equity at Delaware Management Company. He has co-managed a portion of the Fund since 2010.
Andrew J. Shilling, CFA, Senior Vice
President
and Equity Portfolio Manager of Wellington Management. He has managed a portion of the Fund since 2010.
James Golan, CFA, Principal and Portfolio Manager of William Blair & Company. He has co-managed a portion of the Fund since 2010.
David Ricci, CFA, Principal and Portfolio Manager of William Blair & Company. He has co-managed a portion of the Fund since 2011.
Tax Information
The Funds distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
Payments to Financial Intermediaries
The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.
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More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance
for fluctuations in the securities markets. Look for this
symbol throughout the
prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
This prospectus offers the Fund‘s Admiral Shares and is intended for participants in employer-sponsored retirement or savings plans. Another version—for investors who would like to open a personal investment account—can be obtained
on our website at
vanguard.com
or
by calling Vanguard at 800-662-7447.
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Plain Talk About Fund Expenses
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All mutual funds have operating expenses. These expenses, which are deducted
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from a fund’s gross income, are expressed as a percentage of the net assets of
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the fund. Assuming that operating expenses remain as stated in the Fees and
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Expenses section, Vanguard U.S. Growth Fund Admiral Shares’ expense ratio
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would be
0.31%
, or
$3.10
per $1,000 of average net assets. The average
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expense ratio for large-cap growth funds in
2011
was
1.37%
, or
$13.70
per
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$1,000 of average net assets (derived from data provided by Lipper Inc., which
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reports on the mutual fund industry).
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Plain Talk About Costs of Investing
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Costs are an important consideration in choosing a mutual fund. That’s because
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you, as a shareholder, pay a proportionate share of the costs of operating a fund,
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plus any transaction costs incurred when the fund buys or sells securities. These
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costs can erode a substantial portion of the gross income or the capital
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appreciation a fund achieves. Even seemingly small differences in expenses can,
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over time, have a dramatic effect on a fund’s performance.
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5
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Funds board of trustees, which oversees the Funds management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental. The Funds policy of investing at least 80% of its assets in securities issued by U.S. companies may be changed only upon 60 days notice to shareholders.
Market Exposure
The Fund invests mainly in common stocks of companies that, in the advisors opinions, offer favorable prospects for capital appreciation. These stocks tend to produce little current income. The Fund generally focuses on companies that are considered large-cap by the Funds investment advisors.
Stocks of publicly traded companies and funds that invest in stocks are often classified according to market value, or market capitalization. These classifications typically include small-cap, mid-cap, and large-cap. Its important to understand that, for both companies and stock funds, market-capitalization ranges change over time. Also, interpretations of size vary, and there are no official definitions of small-, mid-, and large-cap, even among Vanguard fund advisors. The asset-weighted median market capitalization of the Fund as of
August 31, 2012,
was
$33.6
billion.
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
6
To illustrate the volatility of stock prices, the following table shows the best, worst, and average annual total returns for the U.S. stock market over various periods as measured by the Standard & Poor‘s 500 Index, a widely used barometer of market activity. (Total returns consist of dividend income plus change in market price.) Note that the returns shown do not include the costs of buying and selling stocks or other expenses that a real-world investment portfolio would incur.
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U.S. Stock Market Returns
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(1926–2
011
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1 Year
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5 Years
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10 Years
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20 Years
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Best
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54.2%
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28.6%
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19.9%
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17.8%
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Worst
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–43.1
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–12.4
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–1.4
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3.1
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Average
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11.7
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9.9
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10.5
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11.2
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The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926 through
2011
. You can see, for example, that although the average annual return on common stocks for
all
of the 5-year periods was
9.9%
, average annual returns for
individual
5-year periods ranged from –12.4% (from 1928 through 1932) to 28.6% (from 1995 through 1999). These average annual returns reflect
past
performance of common stocks; you should not regard them as an indication of
future
performance of either the stock market as a whole or the Fund in particular.
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Plain Talk About Growth Funds and Value Funds
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Growth investing and value investing are two styles employed by stock-fund
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managers. Growth funds generally focus on stocks of companies believed to
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have above-average potential for growth in revenue, earnings, cash flow, or other
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similar criteria. These stocks typically have low dividend yields and above-average
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prices in relation to measures such as earnings and book value. Value funds
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typically emphasize stocks whose prices are below average in relation to those
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measures; these stocks often have above-average dividend yields. Growth and
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value stocks have historically produced similar long-term returns, though each
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category has periods when it outperforms the other.
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The Fund is subject to investment style risk, which is the chance that returns from large-capitalization growth stocks will trail returns from the overall stock market. Large-cap growth stocks tend to go through cycles of doing better—or worse—than
other segments of the stock market or
the stock market in general. These periods have, in the past, lasted for as long as several years.
7
Security Selection
The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.
Each advisor employs active investment management methods, which means that securities are bought and sold according to the advisors evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general. Each advisor will sell a security when, in the view of the advisor, it is no longer as attractive as an alternative investment.
Although each advisor uses a different process to select securities, under normal circumstances, the Fund will invest at least 80% of its assets in securities issued by U.S. companies.
Delaware Management
Company,
which manages approximately 42% of the Funds assets,
invests primarily in common stocks of large-capitalization, growth-oriented companies that it believes have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. The advisor uses a bottom-up approach, seeking companies that have large-end market potential, dominant business models, and strong free cash flow generation that is attractively priced compared with the intrinsic value of the securities. Delaware Management Company tends to hold a relatively focused portfolio with a limited number of stocks.
Wellington Management Company,
LLP
(Wellington Management)
, which manages approximately 40% of the Funds assets,
employs a traditional, bottom-up fundamental research approach to identify securities that possess sustainable growth at reasonable valuations. Wellington Management identifies companies that have demonstrated above-average growth in the past, then conducts a thorough review of each companys business model. The goal of this review is to identify companies that can sustain above-average growth because of their superior business models as represented by high returns on capital, strong management, and quality balance sheets. A disciplined valuation analysis follows to determine which securities are attractively priced.
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William Blair & Company, L.L.C.
(William Blair & Company)
, which manages approximately 16% of the Funds assets,
uses an investment process that relies on thorough, in-depth fundamental analysis. William Blair & Company invests in companies that it believes are high-quality and have sustainable, above-average growth. In selecting stocks, the advisor considers some or all of the following company criteria: leadership position within the markets served, quality of the products or services provided, marketing capability, return on equity, accounting policies/financial transparency, and quality/depth of the management team.
The Vanguard Group, Inc.
(Vanguard), manages a small portion
(approximately 2%)
of the Funds assets to facilitate cash flows to and from the Funds advisors. Vanguard typically invests its portion of the Funds assets in stock index futures and/or shares of exchange-traded funds. For more details, see Other Investment Policies and Risks.
Because the Fund tends to invest a high percentage of assets in its ten largest holdings, the Fund is subject to asset concentration risk, which is the chance that the Funds performance may be hurt disproportionately by the poor performance of relatively few stocks.
The Fund is subject to manager risk, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. Significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.
Other Investment Policies and Risks
Although the Fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 20% of its assets in foreign securities, which may include depositary receipts. Foreign securities may be traded on U.S. or foreign markets. To the extent that it owns foreign securities, the Fund is subject to country risk and currency risk.
Country risk
is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries. In addition, the prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
Currency risk
is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.
9
The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Fund’s securities from falling in value during foreign market
downswings.
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Plain Talk About Derivatives
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Derivatives can take many forms. Some forms of derivatives, such as
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exchange-traded futures and options on securities, commodities, or indexes,
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have been trading on regulated exchanges for decades. These types of
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derivatives are standardized contracts that can easily be bought and sold, and
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whose market values are determined and published daily. Nonstandardized
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derivatives (such as swap agreements
and forward foreign currency exchange
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contracts
), on the other hand, tend to be more specialized or complex, and may
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be harder to value.
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Vanguard typically invests a small portion of the Fund’s assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds.
These s
tock index futures and ETFs
typically
provide returns similar to those of common stocks. Vanguard may purchase futures or ETFs when doing so will reduce the Fund’s transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
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Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when an advisor believes that doing so is in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategiesfor instance, by allocating substantial assets to cash, commercial paper, or other less volatile instrumentsin response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.
Frequent Trading or Market-Timing
Background.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
11
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent tradin
g. The
board of trustees of each Vanguard fund
(other than money market funds and short-term bond funds)
has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it.
These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. A
lthough there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, a participant from exchanging into a fund account for 60 calendar days after the participant has exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period.
Changes to the Funds advisory structure during the fiscal year ended August 31, 2011, resulted in higher portfolio turnover for the year. The turnover rate for the Fund has since become more normalized.
The average turnover rate for large-cap growth funds was approximately 77%, as reported by Morningstar, Inc., on August 31, 2012.
12
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Plain Talk About Turnover Rate
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Before investing in a mutual fund, you should review its turnover rate. This gives
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an indication of how transaction costs, which are not included in the funds
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expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that brokerage
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commissions and other transaction costs will have on its return. Also, funds with
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high turnover rates may be more likely to generate capital gains that must be
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distributed to shareholders.
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The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family
of 1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space,
and
equipmen
t.
Vanguard
Marketing Corporation
provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of
t
he Vanguard
funds
marketing costs.
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Plain Talk About Vanguards Unique Corporate Structure
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The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
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the funds it oversees and thus indirectly by the shareholders in those funds.
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Most other mutual funds are operated by management companies that may be
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owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
13
Investment Advisors
The Fund uses a multimanager approach to invest its assets. Each advisor independently manages its assigned portion of the Funds assets, subject to the supervision and oversight of Vanguard and the Funds board of trustees. The board of trustees designates the proportion of Fund assets to be managed by each advisor and may change these proportions at any time.
Delaware Management Company, 2005 Market Street, Philadelphia, PA 19103, is an investment management firm and a series of Delaware Management
Business Trust (DMBT), a Delaware statutory trust. DMBT
is a subsidiary, and subject to the ultimate control, of Macquarie Group, Ltd. (Macquarie). Macquarie is a Sydney, Australia-headquartered global provider of banking, financial, advisory, and investment services. As of
August 31, 2012
, Delaware Management Company managed approximately
$177
billion in assets.
Wellington Management Company,
LLP
, 280 Congress Street, Boston, MA 02210, is a Massachusetts limited liability partnership and an investment counseling firm
that
provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 70 years. As of
August 31, 2012
, Wellington Management had investment management authority with respect to approximately
$748
billion in assets.
William Blair & Company, L.L.C., 222 West Adam Street, Chicago, IL 60608, is an independently owned full-service investment management firm founded in 1935. The firm manages assets for mutual funds, public and private employee benefits plans, foundations, endowments, institutions, and separate accounts. As of
August 31, 2012
, William Blair & Company managed approximately
$47
billion in assets.
The Fund pays each of its investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisors portion of the Fund relative to that of the Russell 1000 Growth Index over the preceding 36-month period (a 60-month period for William Blair & Company). When the performance adjustment is positive, the Funds expenses increase; when it is negative, expenses decrease.
For the fiscal year ended
August 31, 2012
, the aggregate advisory fee represented an effective annual rate of
0.17%
of the Funds average net assets
before a performance-based decrease of 0.01%
.
14
Under the terms of an SEC exemption, the Funds board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement or hire a new investment advisoreither as a replacement for an existing advisor or as an additional advisor. Any significant change in the Funds advisory arrangements will be communicated to shareholders in writing. In addition, as the Funds sponsor and overall manager, The Vanguard Group may provide investment advisory services to the Fund, on an at-cost basis, at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced, or that the terms of an existing advisory agreement be revised.
For a discussion of why the board of trustees approved the Funds investment advisory agreements, see the most recent semiannual report to shareholders.
The managers primarily responsible for the day-to-day management of the Fund are:
Christopher J. Bonavico
, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1988; has managed investment portfolios since joining Delaware Management Company in 2005; and has co-managed a portion of the Fund since 2010. Education: B.S., University of Delaware.
Christopher M. Ericksen
, CFA, Vice President, Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1994; has managed investment portfolios since 2004; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.S., Carnegie Mellon University.
Daniel J. Prislin
, CFA, Vice President, Senior Portfolio Manager, and Equity Analyst at Delaware Management Company. He has worked in investment management since 1994; has managed investment portfolios since 1996; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.S. and M.B.A., University of California at Berkeley.
Jeffrey S. Van Harte
, CFA, Senior Vice President, Chief Investment OfficerFocus Growth Equity at Delaware Management Company. He has worked in investment management since 1980; has managed investment portfolios since 1984; has been with Delaware Management Company since 2005; and has co-managed a portion of the Fund since 2010. Education: B.A., California State University at Fullerton.
Andrew J. Shilling
, CFA, Senior Vice President and Equity Portfolio Manager of Wellington Management. He has worked in investment management for Wellington Management since 1994; has managed investment portfolios since 2000; and has managed a portion of the Fund since 2010. Education: B.A., Amherst College; M.B.A., Tuck School of Business, Dartmouth College.
15
James Golan
, CFA, Principal and Portfolio Manager of William Blair & Company. He has worked in investment management since 1988; has been with William Blair & Company since 2000; has managed investment portfolios since 2005; and has co-managed a portion of the Fund since 2010. Education: B.A., DePauw University; M.B.A., J.L. Kellogg Graduate School of Management, Northwestern University.
David Ricci
, CFA, Principal and Portfolio Manager of William Blair & Company. He has worked in investment management at William Blair & Company since 1994; has managed investment portfolios since 2005; and has co-managed a portion of the Fund since 2011. Education: Sc.B., Brown University; M.B.A., Harvard Business School.
The
Statement of Additional Information
provides information about each portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
Dividends, Capital Gains, and Taxes
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net capital gains realized from the sale of its holdings. Income and capital gains distributions, if any, generally occur annually in December.
Your distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
and dividends as well as capital gains from the funds sale of investments. Income
|
consists of both the dividends that the fund earns from any stock holdings and the
|
interest it receives from any money market and bond investments. Capital gains are
|
realized whenever the fund sells securities for higher prices than it paid for them.
|
These capital gains are either short-term or long-term, depending on whether the
|
fund held the securities for one year or less or for more than one year.
|
16
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests. However, on those days the value of the
Funds
assets may be affected to the extent that the
Fund holds
foreign securities that trade on foreign markets that are open.
Stocks held by a Vanguard fund are valued at their
market value
when reliable market quotations are readily available. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
When a fund determines that market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the funds pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the funds pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement), or country-specific or regional/global (e.g., natural disaster, economic or political news, act of terrorism, interest rate change). Intervening events include price movements in U.S. markets that are deemed to affect the value of foreign securities. Fair-value pricing may be used for domestic securitiesfor example, if (1) trading in a security is halted and does not resume before the funds pricing time or if a security does not trade in the course of a day, and (2) the fund holds enough of the security that its price could affect the NAV.
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
17
Financial Highlights
The following financial highlights table is intended to help you understand the Admiral Shares financial performance for the periods shown, and certain information reflects financial results for a single Admiral Share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Admiral Shares (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Table
|
|
The Admiral Shares began fiscal year
2012
with a net asset value (price) of $
46.94
|
per share. During the year, each Admiral Share earned $0
.258
from investment
|
income (interest and dividends) and $
6.924
from investments that had appreciated
|
in value or that were sold for higher prices than the Fund paid for them.
|
|
Shareholders received $0
.272
per share in the form of dividend distributions. A
|
portion of each years distributions may come from the prior years income or
|
capital gains.
|
|
The share price at the end of the year was $
53.85
, reflecting earnings of $
7.182
|
per share and distributions of $0
.272
per share. This was an increase of $
6.91
per
|
share (from $
46.94
at the beginning of the year to $
53.85
at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was
15.38
% for the year.
|
|
As of
August 31, 2012
, the Admiral Shares had approximately $
869
million in net
|
assets. For the year, the expense ratio was
0.31
% ($
3.10
per $1,000 of net
|
assets), and the net investment income amounted to
0.49
% of average net
|
assets. The Fund sold and replaced securities valued at
43
% of its net assets.
|
18
|
|
|
|
|
|
U.S. Growth Fund Admiral Shares
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$46.94
|
$38.20
|
$38.41
|
$46.37
|
$50.42
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
.258
|
.345
1
|
.338
|
.335
|
.325
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
6.924
|
8.734
|
(.256)
|
(7.919)
|
(3.950)
|
Total from Investment Operations
|
7.182
|
9.079
|
.082
|
(7.584)
|
(3.625)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(.272)
|
(.339)
|
(.292)
|
(.376)
|
(.425)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
—
|
—
|
Total Distributions
|
(.272)
|
(.339)
|
(.292)
|
(.376)
|
(.425)
|
Net Asset Value, End of Period
|
$53.85
|
$46.94
|
$38.20
|
$38.41
|
$46.37
|
Total Return
|
15.38%
|
23.77%
|
0.13% –16.15%
|
–7.28%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$869
|
$678
|
$737
|
$838
|
$1,116
|
Ratio of Total Expenses to Average Net Assets
2
|
0.31%
|
0.30%
|
0.29%
|
0.30%
|
0.24%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
0.49%
|
0.75%
1
|
0.82%
|
0.98%
|
0.66%
|
Portfolio Turnover Rate
|
43%
|
89%
|
74%
|
101%
|
107%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.041 and 0.09%, respectively, resulting from a special dividend from Verisign Inc. in December, 2010.
2 Includes performance-based investment advisory fee (decreases) of (0.01%), (0.01%), (0.03%), (0.03%), and (0.03%).
19
Investing With Vanguard
The Fund is an investment option in your retirement or savings plan. Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.
If you have any questions about the Fund or Vanguard, including those about the Funds investment objective, strategies, or risks, contact Vanguard Participant Services, toll-free, at 800-523-1188.
If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.
Be sure to carefully read each topic that pertains to your transactions with Vanguard.
Vanguard reserves the right to change its policies without notice to shareholders.
Investment Options and Allocations
Your plans specific provisions may allow you to change your investment selections, the amount of your contributions, or how your contributions are allocated among the investment choices available to you. Contact your plan administrator or employee benefits office for more details.
Transactions
Transaction requests (e.g., a contribution, exchange, or redemption) must be in good order. Good order means that Vanguard has determined that (1) your transaction request includes complete information and (2) appropriate assets are already in your account or new assets have been received.
Processing times for your transaction requests may differ among recordkeepers or among transaction types. Your plans recordkeeper (which may also be Vanguard) will determine the necessary processing timeframes for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.
Your transaction will then be based on the next-determined NAV of the Funds Admiral Shares. If your transaction request was received in good order before the close of regular trading on the New York Stock Exchange (NYSE) (generally 4 p.m., Eastern time), you will receive that days NAV and trade date. NAVs are calculated only on days the NYSE is open for trading.
20
If Vanguard is serving as your plan recordkeeper, and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.
Frequent-Trading Limitations
The exchange privilege (your ability to purchase shares of a fund using the proceeds from the simultaneous redemption of shares of another fund) may be available to you through your plan. Although we make every effort to maintain the exchange privilege, Vanguard reserves the right to revise or terminate this privilege, limit the amount of an exchange, or reject any exchange, at any time, without notice. Because excessive exchanges can disrupt the management of the Vanguard funds and increase their transaction costs, Vanguard places certain limits on the exchange privilege.
If you are exchanging
out of
any Vanguard fund (other than money market funds and short-term bond funds), you must wait 60 days before exchanging
back into
the fund. This policy applies,
regardless of the dollar amount
. Please note that the 60-day clock restarts after every exchange out of the fund.
The frequent-trading limitations
do not
apply to the following: exchange requests submitted by mail to Vanguard (exchange requests submitted by fax, if otherwise permitted,
are
subject to the limitations); exchanges of shares purchased with participant payroll or employer contributions or loan repayments; exchanges of shares purchased with reinvested dividend or capital gains distributions; distributions, loans, and in-service withdrawals from a plan; redemptions of shares as part of a plan termination or at the direction of the plan; redemptions of shares to pay fund or account fees; share or asset transfers or rollovers; reregistrations of shares within the same fund; conversions of shares from one share class to another in the same fund; and automated transactions executed during the first six months of a participants enrollment in the Vanguard Managed Account Program.
Before making an exchange to or from another fund available in your plan, consider the following:
Certain investment options, particularly funds made up of company stock or investment contracts, may be subject to unique restrictions.
Be sure to read the funds prospectus. Contact Vanguard Participant Services, toll-free, at 800-523-1188 for a copy.
Vanguard can accept exchanges only as permitted by your plan. Contact your plan administrator for details on other exchange policies that apply to your plan.
21
Plans for which Vanguard does not serve as recordkeeper:
If Vanguard does not serve as recordkeeper for your plan, your plans recordkeeper will establish accounts in Vanguard funds for the benefit of its clients. In such accounts, we cannot always monitor the trading activity of individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor participants trading activity with respect to Vanguard funds.
For those Vanguard funds that charge purchase
and/or
redemption fees, intermediaries that establish accounts in the Vanguard funds will be asked to assess
these
fees on participant accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If a firm other than Vanguard serves as recordkeeper for your plan, please read that firms materials carefully to learn of any other rules or fees that may apply.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, broker, or investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
No cancellations
Vanguard will not accept your request to cancel any transaction request once processing has begun. Please be careful when placing a transaction request.
Proof of a callers authority
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.
22
Uncashed Checks
Vanguard will not pay interest on uncashed checks.
Portfolio Holdings
We generally post on our website at
vanguard.com
, in the
Portfolio
section of the Funds Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. We also generally post the ten largest stock portfolio holdings of the Fund and the percentage of the Funds total assets that each of these holdings represents, as of the end of the most recent calendar quarter. This list is generally updated within 15 calendar days after the end of each calendar quarter. Please consult the Funds
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Funds portfolio holdings.
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Inception Date
|
Abbreviation
|
Fund Number
|
Number
|
U.S. Growth Fund
|
|
|
|
|
Admiral Shares
|
8/13/2001
|
USGroAdml
|
523
|
921910600
|
Accessing Fund Information Online
Vanguard Online at
Vanguard.com
Visit Vanguards education-oriented website for access to timely news and information about Vanguard funds and services and easy-to-use, interactive tools to help you create your own investment and retirement strategies.
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
23
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
Mutual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Principal.
The face value of a debt instrument or the amount of money put into an investment.
Russell 1000 Growth Index.
An index that measures the performance of those Russell 1000 companies with higher price/book ratios and higher predicted growth rates.
24
Securities.
Stocks, bonds, money market instruments, and other investments.
Standard & Poors 500 Index.
A widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies.
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
To receive a free copy of the latest annual or semiannual
|
If you would like more information about Vanguard
|
report or the SAI, or to request additional information
|
U.S. Growth Fund, the following documents are
|
about the Fund or other Vanguard funds, please visit
|
available free upon request:
|
vanguard.com
or contact us as follows:
|
|
Annual/Semiannual Reports to Shareholders
|
The Vanguard Group
|
Additional information about the Funds investments is
|
Participant Services
|
available in the Funds annual and semiannual reports
|
P.O. Box 2900
|
to shareholders. In the annual report, you will find a
|
Valley Forge, PA 19482-2900
|
discussion of the market conditions and investment
|
Telephone: 800-523-1188
|
strategies that significantly affected the Funds
|
Text telephone for people with hearing impairment:
|
performance during its last fiscal year.
|
800-749-7273
|
|
Statement of Additional Information (SAI)
|
Information Provided by the Securities and
|
The SAI provides more detailed information about the
|
Exchange Commission (SEC)
|
Fund and is incorporated by reference into (and thus
|
You can review and copy information about the Fund
|
legally a part of) this prospectus.
|
(including the SAI) at the SECs Public Reference Room
|
|
in Washington, DC. To find out more about this public
|
|
service, call the SEC at 202-551-8090. Reports and
|
|
other information about the Fund are also available in
|
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
|
by electronic request at the following e-mail address:
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
|
Section, Securities and Exchange Commission,
|
|
Washington, DC 20549-1520.
|
|
|
Funds Investment Company Act file number: 811-01027
|
|
|
|
|
|
© 2012 The Vanguard Group, Inc. All rights reserved.
|
|
Vanguard Marketing Corporation, Distributor.
|
|
|
I 523 122012
|
|
Vanguard International Growth Fund
|
Prospectus
|
|
December 27, 2012
|
|
Investor Shares & Admiral Shares
|
Vanguard International Growth Fund Investor Shares (VWIGX)
|
Vanguard International Growth Fund Admiral Shares (VWILX)
|
|
|
|
|
This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
.
|
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
|
passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
|
|
|
|
|
Contents
|
|
|
|
|
|
Fund Summary
|
1
|
Investing With Vanguard
|
26
|
More on the Fund
|
7
|
Purchasing Shares
|
26
|
The Fund and Vanguard
|
16
|
Converting Shares
|
29
|
Investment Advisors
|
17
|
Redeeming Shares
|
30
|
Dividends, Capital Gains, and Taxes
|
19
|
Exchanging Shares
|
34
|
Share Price
|
22
|
Frequent-Trading Limitations
|
34
|
Financial Highlights
|
23
|
Other Rules You Should Know
|
36
|
|
|
Fund and Account Updates
|
40
|
|
|
Contacting Vanguard
|
42
|
|
|
Additional Information
|
43
|
|
|
Glossary of Investment Terms
|
44
|
Fund Summary
Investment Objective
The Fund seeks to provide long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Investor Shares or Admiral Shares of the Fund.
|
|
|
Shareholder Fees
|
|
|
(Fees paid directly from your investment)
|
|
|
|
Investor Shares
|
Admiral Shares
|
Sales Charge (Load) Imposed on Purchases
|
None
|
None
|
Purchase Fee
|
None
|
None
|
Sales Charge (Load) Imposed on Reinvested Dividends
|
None
|
None
|
Redemption Fee
|
None
|
None
|
Account Service Fee (for fund account balances below $10,000)
|
$20/year
|
$20/year
|
|
|
Annual Fund Operating Expenses
|
|
|
(Expenses that you pay each year as a percentage of the value of your investment)
|
|
|
Investor Shares
|
Admiral Shares
|
Management Expenses
|
0.44%
|
0.32%
|
12b-1 Distribution Fee
|
None
|
None
|
Other Expenses
|
0.05%
|
0.04%
|
Total Annual Fund Operating Expenses
|
0.49%
|
0.36%
|
1
Examples
The following examples are intended to help you compare the cost of investing in the Fund’s Investor Shares or Admiral Shares with the cost of investing in other mutual funds. They illustrate the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. These examples assume that the Shares provide a return of 5% a year and that
total annual fund operating
expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
Investor Shares
|
$50
|
$157
|
$274
|
$616
|
Admiral Shares
|
$37
|
$116
|
$202
|
$456
|
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense examples, reduce the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was
30
%.
Primary Investment Strategies
The Fund invests predominantly in the stocks of companies located outside the United States and is expected to diversify its assets across developed and emerging markets in Europe, the Far East, and Latin America. In selecting stocks, the Fund’s advisors evaluate foreign markets around the world and choose large-, mid-, and small-capitalization companies considered to have above-average growth potential. The Fund uses multiple investment advisors.
2
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of global stock markets.
The Fund is subject to the following risks, which could affect the Funds performance:
Investment style risk
, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
Stock market risk
, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
Country/regional risk,
which is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Country/regional risk is especially high in emerging markets.
Currency risk
, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets.
Manager risk
, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
3
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the share classes presented compare with those of relevant market indexes, which have investment characteristics similar to those of the Fund. Returns for the indexes shown are adjusted for withholding
taxes.
Keep in mind that the Fund’s past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard International Growth Fund Investor Shares
1
1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 12.35%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 27.03% (quarter ended June 30, 2009), and the lowest return for a quarter was –23.22% (quarter ended December 31, 2008).
4
|
|
|
|
Average Annual Total Returns for Periods Ended December 31,
2011
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
Vanguard International Growth Fund Investor Shares
|
|
|
|
Return Before Taxes
|
13.68%
|
2.02%
|
5.57%
|
Return After Taxes on Distributions
|
13.93
|
2.89
|
4.73
|
Return After Taxes on Distributions and Sale of Fund Shares
|
8.53
|
1.81
|
4.71
|
Vanguard International Growth Fund Admiral Shares
|
|
|
|
Return Before Taxes
|
13.58%
|
1.85%
|
5.75%
|
Comparative Indexes
|
|
|
|
(reflect no deduction for fees or expenses)
|
|
|
|
MSCI ACWI ex USA Index
|
13.71%
|
2.92%
|
6.31%
|
Spliced International Index
|
13.71
|
5.00
|
4.51
|
Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are shown only for the Investor Shares and may differ for each share class. After-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned
Return After Taxes on Distributions and Sale of Fund Shares
will be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.
5
Investment Advisors
Baillie Gifford Overseas Ltd.
M&G Investment Management Limited
Schroder Investment Management North America Inc.
Portfolio Managers
James K. Anderson, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed a portion of the Fund since 2003.
Greg Aldridge, Portfolio Manager at M&G. He has
managed
a portion of the Fund since 2008.
Vi
rginie Maisonneuve, CFA, Head of Schroders Global and International Equities. She has co-managed a portion of the Fund since 2005.
Simon Webber, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has co-managed a portion of the Fund since 2009.
Purchase and Sale of Fund Shares
You may purchase or redeem shares online through our website (
vanguard.com)
, by mail (The Vanguard Group, P.O. Box 1110, Valley Forge, PA 19482-1110), or by telephone (800-662-2739). The following table provides the Funds minimum initial and subsequent investment requirements.
|
|
|
Account Minimums
|
Investor Shares
|
Admiral Shares
|
To open and maintain an account
|
$3,000
|
$50,000
|
To add to an existing account
|
Generally $100 (other than
|
Generally $100 (other than
|
|
by Automatic Investment
|
by Automatic Investment
|
|
Plan, which has no
|
Plan, which has no
|
|
established minimum)
|
established minimum)
|
Tax Information
The Funds distributions may be taxable as ordinary income or capital gain.
Payments to Financial Intermediaries
The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.
6
More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance
for fluctuations in the securities markets. Look for this
symbol throughout the
prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
Share Class Overview
The Fund offers two separate classes of shares: Investor Shares and Admiral Shares.
Both share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment performances will differ.
|
Plain Talk About Fund Expenses
|
|
All mutual funds have operating expenses. These expenses, which are deducted
|
from a fund’s gross income, are expressed as a percentage of the net assets of
|
the fund. Assuming that operating expenses remain as stated in the Fees and
|
Expenses section, Vanguard International Growth Fund’s expense ratios would be
|
as follows: for Investor Shares,
0.49%
, or
$4.90
per $1,000 of average net
|
assets; for Admiral Shares,
0.36%
, or
$3.60
per $1,000 of average net assets.
|
The average expense ratio for international equity funds in
2011
was
1.37%
, or
|
$13.70
per $1,000 of average net assets (derived from data provided by Lipper
|
Inc., which reports on the mutual fund industry).
|
|
Plain Talk About Costs of Investing
|
|
Costs are an important consideration in choosing a mutual fund. That’s because
|
you, as a shareholder, pay a proportionate share of the costs of operating a fund,
|
plus any transaction costs incurred when the fund buys or sells securities. These
|
costs can erode a substantial portion of the gross income or the capital
|
appreciation a fund achieves. Even seemingly small differences in expenses can,
|
over time, have a dramatic effect on a fund’s performance.
|
7
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Funds board of trustees, which oversees the Funds management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental.
Market Exposure
The Fund invests mainly in common stocks of non-U.S. companies that are considered to have above-average potential for growth. The asset-weighted median market capitalization of the Fund as of
August 31, 2012
, was $
32
billion.
The Fund is subject to investment style risk, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
|
Plain Talk About Growth Funds and Value Funds
|
|
Growth investing and value investing are two styles employed by stock-fund
|
managers. Growth funds generally focus on stocks of companies believed to
|
have above-average potential for growth in revenue, earnings, cash flow, or other
|
similar criteria. These stocks typically have low dividend yields and above-average
|
prices in relation to measures such as earnings and book value. Value funds
|
typically emphasize stocks whose prices are below average in relation to those
|
measures; these stocks often have above-average dividend yields. Growth and
|
value stocks have historically produced similar long-term returns, though each
|
category has periods when it outperforms the other.
|
8
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
To illustrate the volatility of international stock prices, the following table shows the best, worst, and average annual total returns for foreign stock markets over various periods as measured by the MSCI EAFE Index, a widely used barometer of international market activity. (Total returns consist of dividend income plus change in market price.) Note that the returns shown do not include the costs of buying and selling stocks or other expenses that a real-world investment portfolio would incur.
|
|
|
|
|
International Stock Market Returns
|
|
|
|
|
(1970–
2011
)
|
|
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
20 Years
|
Best
|
69.4%
|
36.1%
|
22.0%
|
15.5%
|
Worst
|
–43.4
|
–
4.7
|
0.8
|
3.1
|
Average
|
11.3
|
10.0
|
10.5
|
11.0
|
The table covers all of the 1-, 5-, 10-, and 20-year periods from 1970 through
2011
. These average
annual
returns reflect
past
performance of international stocks; you should not regard them as an indication of
future
performance of either foreign markets as a whole or the Fund in particular.
9
Note that the MSCI EAFE Index does not take into account returns for emerging markets, which can be substantially more volatile, and substantially less liquid, than the more developed markets included in the Index. In addition, because the MSCI EAFE Index tracks the European and Pacific developed markets collectively, the returns in the preceding table do not reflect the variability of returns for these markets individually. To illustrate this variability, the following table shows returns for different international markets—as well as for the U.S. market for comparison—from
2002
through
2011
, as measured by their respective indexes.
|
|
|
|
|
Returns for Various Stock Markets
1
|
|
|
|
|
European
|
Pacific
|
Emerging
|
U.S.
|
|
Market
2
|
Market
2
|
Markets
2
|
Market
|
2002
|
–18.38%
|
–9.29%
|
–6.17%
|
–22.10%
|
2003
|
38.54
|
38.48
|
55.82
|
28.68
|
2004
|
20.88
|
18.98
|
25.55
|
10.88
|
2005
|
9.42
|
22.64
|
34.00
|
4.91
|
2006
|
33.72
|
12.20
|
32.17
|
15.79
|
2007
|
13.86
|
5.30
|
39.39
|
5.49
|
2008
|
–46.42
|
–36.42
|
–53.33
|
–37.00
|
2009
|
35.83
|
24.18
|
78.51
|
26.46
|
2010
|
3.88
|
15.92
|
18.88
|
15.06
|
2011
|
–11.06
|
–13.74
|
–18.42
|
2.11
|
1 European market returns are measured by the MSCI Europe Index; Pacific market returns are measured by the MSCI Pacific Index; emerging markets returns are measured by the MSCI Emerging Markets Index; and U.S. market returns are measured by the Standard & Poor‘s 500 Index.
2
MSCI
Index returns are adjusted for withholding taxes
.
Keep in mind that these returns reflect
past
performance of the various indexes; you should not consider them as an indication of
future
performance of the indexes or of the Fund in particular.
10
The Fund is subject to country/regional risk and currency risk. Country/regional risk is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Currency risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.
|
Plain Talk About International Investing
|
|
U.S. investors who invest abroad will encounter risks not typically associated
|
with U.S. companies because foreign stock and bond markets operate differently
|
from the U.S. markets. For instance, foreign companies are not subject to the
|
same accounting, auditing, and financial-reporting standards and practices as
|
U.S. companies, and their stocks may not be as liquid as those of similar U.S.
|
firms. In addition, foreign stock exchanges, brokers, and companies
may be
|
subject to
less government supervision and regulation than their counterparts in
|
the United States. These factors, among others, could negatively affect the
|
returns U.S. investors receive from foreign investments.
|
Security Selection
The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.
Each advisor employs active investment management methods, which means that securities are bought and sold according to the advisors evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general. Each advisor will sell a security when, in the view of the advisor, it is no longer as attractive as an alternative investment.
Baillie Gifford Overseas Ltd.
(Baillie Gifford), which manages approximately
49%
of the Funds assets, follows an investment approach based on making long-term investments in well-researched and well-managed businesses that the advisor believes enjoy sustainable competitive advantages in their marketplaces. Baillie Gifford uses a fundamental approach to identify quality growth companies. The firm considers sustainable earnings and free cash-flow growth to be critical factors in evaluating a companys prospects.
11
Companies are screened first for quality and then for value. Baillie Gifford looks for companies with attractive industry backgrounds, strong competitive positions within those industries, high-quality earnings, and a positive approach toward shareholders. The main fundamental factors considered in this bottom-up analysis are earnings growth, cash-flow growth, profitability, debt and interest coverage, and valuation.
To determine how to allocate its portion of the Funds assets geographically, Baillie Gifford constantly evaluates economic, market, and political trends worldwide. Among the factors considered are currency exchange rates, growth potential of economies and securities markets, technological developments, and political and social conditions.
Schroder Investment Management North America Inc.
(Schroders), which manages approximately
38%
of the Funds assets, seeks high-quality, reasonably priced, securities of international companies with strong growth prospects and a sustainable competitive advantage. Schroders believes that in-depth fundamental research, incorporating a comprehensive macroeconomic viewpoint, is the most reliable means of finding those companies and identifying where their growth is undervalued by the market. Schroders relies on a team-oriented matrix approach to drive research, security selection, and portfolio construction. Initial local research draws on the extensive knowledge of, and recommendations generated by,
approximately
70 regional analysts located
across the globe
. The strongest ideas of these local analysts are then overlaid with the global perspective of an international team of global sector specialists and regionally focused managers. In Schroders view, this knowledge matrix (global sector/regional expertise) provides an optimal framework for identifying strong investment candidates and building high-quality portfolios across multiple regions and sectors. While the input of the teams Global Sector Specialists is an important source of investment ideas and research, the investment decision making for the Fund rests with the Funds portfolio managers.
M&G Investment Management Limited
(M&G), which manages approximately
11
% of the Funds assets, uses a long-term, bottom-up approach to portfolio management that focuses on quality companies with scarce assets that deliver high returns and exhibit growth potential. Scarce assets can include traditional tangible assets (such as land or property), intangible assets (such as a strong brand or reputation), and organizational assets (such as a unique corporate culture). The team seeks to identify companies that fall into three categories: qualityhigh quality companies with scarce assets that support sustainable superior returns; growthcompanies that use scarce assets to grow faster than their competitors; and transformingcompanies that are emerging from a heavy investment cycle that may lead to a strong rebound in returns.
The Vanguard Group, Inc.
(Vanguard) manages a small portion (approximately
2%
) of the Funds assets to facilitate cash flows to and from the Funds advisors. Vanguard typically invests its portion of the Funds assets in stock index futures and/or shares of exchange-traded funds. For more details, see Other Investment Policies and Risks.
12
The Fund is subject to manager risk, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
Other Investment Policies and Risks
In addition to investing in stocks of foreign companies, the Fund may make other kinds of investments to achieve its objective.
The Fund may invest in foreign issuers through American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), or similar investment vehicles. The Fund may also invest in convertible securities.
The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a countrys currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Funds securities from falling in value during foreign market downswings.
|
Plain Talk About Derivatives
|
|
Derivatives can take many forms. Some forms of derivatives, such as
|
exchange-traded futures and options on securities, commodities, or indexes,
|
have been trading on regulated exchanges for decades. These types of
|
derivatives are standardized contracts that can easily be bought and sold, and
|
whose market values are determined and published daily. Nonstandardized
|
derivatives (such as swap agreements and forward foreign currency exchange
|
contracts), on the other hand, tend to be more specialized or complex, and may
|
be harder to value.
|
13
Vanguard typically invests a small portion of the Funds assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds.
These s
tock index futures and ETFs
typically
provide returns similar to those of common stocks. Vanguard may purchase futures or ETFs when doing so will reduce the Funds transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when
an advisor believes that doing so is
in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond
its
normal limits in derivatives or
exchange-traded funds
that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategiesfor instance, by allocating substantial assets to cash, commercial paper, or other less volatile instrumentsin response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective
.
14
Frequent Trading or Market-Timing
Background.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent trading
.
The board of trustees of each Vanguard fund
(other than money market funds and short-term bond funds)
has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it.
These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders.
Although there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, an investors purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
15
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. The average turnover rate for international stock funds was approximately
73%,
as reported by Morningstar, Inc., on
August 31, 2012
.
|
Plain Talk About Turnover Rate
|
|
Before investing in a mutual fund, you should review its turnover rate. This gives
|
an indication of how transaction costs, which are not included in the funds
|
expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that brokerage
|
commissions and other transaction costs will have on its return. Also, funds with
|
high turnover rates may be more likely to generate capital gains that must be
|
distributed to shareholders as taxable income.
|
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family of
1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space,
and
equipmen
t.
Vanguard
Marketing Corporation
provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of
t
he Vanguard
funds
marketing costs.
16
|
Plain Talk About Vanguards Unique Corporate Structure
|
|
The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
|
the funds it oversees and thus indirectly by the shareholders in those funds.
|
Most other mutual funds are operated by management companies that may be
|
owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
Investment Advisors
The Fund uses a multimanager approach. Each advisor independently manages its assigned portion of the Funds assets, subject to the supervision and oversight of Vanguard and the Funds board of trustees. The board of trustees designates the proportion of the Fund assets to be managed by each advisor and may change these proportions at any time.
Baillie Gifford Overseas Ltd., Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, Scotland, is an investment advisory firm founded in 1983. Baillie Gifford Overseas Ltd. is wholly owned by a Scottish investment company, Baillie Gifford & Co. Founded in 1908, Baillie Gifford & Co., one of the largest independently owned investment management firms in the United Kingdom, manages money primarily for institutional clients. Baillie Gifford began managing a portion of the Fund in 2003. Baillie Gifford & Co. had assets under management that totaled approximately $130 billion as of
August 31, 2012
.
M&G Investment Management Limited, Laurence Pountney Hill, London, EC4R
0HH, England, is an advisory firm and wholly owned subsidiary of the Prudential plc. M&G is a company incorporated in the United Kingdom, based in London, England, and is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States. M&G, a separate business unit within the Prudential group, launched Great Britains first unit trust (mutual fund) in 1931. M&G began managing a portion of the Fund in 2008. As of
August 31, 2012
, M&G managed approximately $351 billion in assets.
17
Schroder Investment Management North America Inc., 875 Third Avenue, 22nd Floor, New York, NY 10022-6225, is a registered investment advisor that is part of a worldwide group of financial services companies that are wholly owned by Schroders plc. Schroders currently serves as investment advisor to the Fund, other mutual funds, and a broad range of institutional investors. As of
August 31, 2012
, Schroders plc, through its affiliates, managed approximately $327 billion in assets. Schroder Investment Management North America Ltd. (Schroder Limited), 31 Gresham Street, London, EC2V 7QA, England, has served as the sub-advisor for the Schroders portion of the Fund.
The Fund pays each of its investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisors portion of the Fund relative to that of the MSCI ACWI ex USA Index over the preceding 36-month period. When the performance adjustment is positive, the Funds expenses increase; when it is negative, expenses decrease.
As of August 31, 2012,
Schroder Investment Management North America Inc. pays 50% of its advisory fee to Schroder Limited for providing sub-advisory services.
For the fiscal year ended
August 31, 2012
, the aggregate advisory fee represented an effective annual rate of
0.15%
of the Funds average net assets
before a performance-based increase of 0.04%
.
Under the terms of an SEC exemption, the Funds board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement or hire a new investment advisoreither as a replacement for an existing advisor or as an additional advisor. Any significant change in the Funds advisory arrangements will be communicated to shareholders in writing. In addition, as the Funds sponsor and overall manager, The Vanguard Group may provide investment advisory services to the Fund, on an at-cost basis, at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced, or that the terms of an existing advisory agreement be revised.
For a discussion of why the board of trustees approved the Funds investment advisory agreements, see the most recent semiannual report to shareholder
s.
18
The managers primarily responsible for the day-to-day management of the Fund are:
James K. Anderson
, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed assets with Baillie Gifford since 1985 and has managed a portion of the Fund since 2003. Education: B.A., University College, Oxford; Diploma, Bologna Center of Johns Hopkins University; M.A., Carleton Ottawa University.
Greg Aldridge
, Portfolio Manager at M&G. He has worked in investment management with M&G since 2004; has managed investment portfolios since 2007; and has
m
anaged a portion of the Fund since 2008. Education: M.A., Cambridge University; M.B.A., INSE
AD.
Vi
rginie Maisonneuve
, CFA, Head of Schroders Global and International Equities. She has worked in investment management and has managed assets since 1987; has managed assets for Schroders since 2004; and has co-managed a portion of the Fund since 2005. Education: a degree from the Peoples University in Beijing, China, and a Diplôme de Grande Ecole de Commerce (equivalent to an M.B.A.) from the ESLSCA in Paris, France.
Simon Webber
, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has worked in investment management for Schroders since 1999; has managed assets since 2001; and has co-managed a portion of the Fund since 2009. Education: B.Sc., University of Manchester.
The
Statement of Additional Information
provides information about each portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
Dividends, Capital Gains, and Taxes
Fund Distributions
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net capital gains realized from the sale of its holdings. Income and capital gains distributions, if any, generally occur annually in December. You can receive distributions of income or capital gains in cash, or you can have them automatically reinvested in more shares of the Fund.
19
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
and dividends as well as capital gains from the funds sale of investments. Income
|
consists of both the dividends that the fund earns from any stock holdings and the
|
interest it receives from any money market and bond investments. Capital gains are
|
realized whenever the fund sells securities for higher prices than it paid for them.
|
These capital gains are either short-term or long-term, depending on whether the
|
fund held the securities for one year or less or for more than one year.
|
Basic Tax Points
Vanguard will send you a statement each year showing the tax status of all your distributions. In addition, investors in taxable accounts should be aware of the following basic federal income tax points:
Distributions are taxable to you whether or not you reinvest these amounts in additional Fund shares.
Distributions declared in Decemberif paid to you by the end of Januaryare taxable as if received in December.
Any dividend and short-term capital gains distributions that you receive are taxable to you as ordinary income. If you are an individual and meet certain holding-period requirements with respect to your Fund shares, you may be eligible for reduced tax rates on qualified dividend income,if any, distributed by the Fund.
The special tax treatment of qualified dividend income will expire for taxable years beginning on or after January 1, 2013, unless Congress enacts legislation providing otherwise
.
Any distributions of net long-term capital gains are taxable to you as long-term capital gains, no matter how long youve owned shares in the Fund.
Capital gains distributions may vary considerably from year to year as a result of the Funds normal investment activities and cash flows.
A sale or exchange of Fund shares is a taxable event. This means that you may have a capital gain to report as income, or a capital loss to report as a deduction, when you complete your tax return.
Any conversion between classes of shares of the
same
fund is a
nontaxable
event. By contrast, an exchange between classes of shares of
different
funds is a
taxable
event.
Dividend and capital gains distributions that you receive, as well as your gains or losses from any sale or exchange of Fund shares, may be subject to state and local income taxes.
20
This prospectus provides general tax information only. If you are investing through a tax-deferred retirement account, such as an IRA, special tax rules apply. Please consult your tax advisor for detailed information about any tax consequences for you.
|
Plain Talk About Buying a Dividend
|
|
Unless you are investing through a tax-deferred retirement account (such as an
|
IRA), you should consider avoiding a purchase of fund shares shortly before the
|
fund makes a distribution, because doing so can cost you money in taxes. This is
|
known as buying a dividend. For example: On December 15, you invest $5,000,
|
buying 250 shares for $20 each. If the fund pays a distribution of $1 per share on
|
December 16, its share price will drop to $19 (not counting market change). You
|
still have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250 shares
|
x $1 = $250 in distributions), but you
owe tax
on the $250 distribution you
|
receivedeven if you reinvest it in more shares. To avoid buying a dividend,
|
check a funds distribution schedule before you invest.
|
General Information
Backup withholding.
By law, Vanguard must withhold 28% of any taxable distributions or redemptions from your account if you do not:
Provide us with your correct taxpayer identification number;
Certify that the taxpayer identification number is correct; and
Confirm that you are not subject to backup withholding.
Similarly, Vanguard must withhold taxes from your account if the IRS instructs us to do so.
Foreign investors.
Vanguard funds offered for sale in the United States (Vanguard U.S. funds), including the Fund offered in this prospectus, generally are not sold outside the United States, except to certain qualified investors. Non-U.S. investors should be aware that U.S. withholding and estate taxes
and certain U.S. tax reporting requirements may
apply to any investments in Vanguard U.S. funds. Foreign investors should visit the Non-U.S. Investors page on our website at
vanguard.com
for information on Vanguards non-U.S. products.
Invalid addresses.
If a dividend or capital gains distribution check mailed to your address of record is returned as undeliverable, Vanguard will automatically reinvest the distribution and all future distributions until you provide us with a valid mailing address. Reinvestments will receive the net asset value calculated on the date of the reinvestment.
21
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests. However, on those days the value of the Funds assets may be affected to the extent that the Fund holds foreign securities that trade on foreign markets that are open.
Stocks held by a Vanguard fund are valued at their
market value
when reliable market quotations are readily available. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
When a fund determines that market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the funds pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the funds pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement), or country-specific or regional/global (e.g., natural disaster, economic or political news, act of terrorism, interest rate change). Intervening events include price movements in U.S. markets that are deemed to affect the value of foreign securities. Fair-value pricing may be used for domestic securitiesfor example, if (1) trading in a security is halted and does not resume before the funds pricing time or if a security does not trade in the course of a day, and (2) the fund holds enough of the security that its price could affect the NAV.
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
22
Financial Highlights
The following financial highlights tables are intended to help you understand the Funds financial performance for the periods shown, and certain information reflects financial results for a single Fund share. The total returns in each table represent the rate that an investor would have earned or lost each period on an investment in the Fund (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Tables
|
|
This explanation uses the Funds Investor Shares as an example. The Investor
|
Shares began fiscal year
2012
with a net asset value (price) of $
18.27
per share.
|
During the year, each Investor Share earned $0
.361
from investment income
|
(interest and dividends). There was a decline of $0
.607
per share in the value of
|
investments held or sold by the Fund, resulting in a net decline of $0
.246
per
|
share from investment operations.
|
|
Shareholders received $0
.334
per share in the form of dividend distributions. A
|
portion of each years distributions may come from the prior years income or
|
capital gains.
|
|
The share price at the end of the year was $
17.69
, reflecting losses of $0
.246
per
|
share and distributions of $0
.334
per share. This was a decrease of $
0.58
per
|
share (from $
18.27
at the beginning of the year to $
17.69
at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was
1.14
% for the year.
|
|
As of
August 31, 2012
, the Investor Shares had approximately $
9.1
billion in net
|
assets. For the year, the expense ratio was
0.49
% ($
4.90
per $1,000 of net
|
assets), and the net investment income amounted to
2.04
% of average net
|
assets. The Fund sold and replaced securities valued at
30
% of its net assets.
|
23
|
|
|
|
|
|
International Growth Fund Investor Shares
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$18.27
|
$16.27
|
$15.73
|
$20.43
|
$26.13
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
.361
|
.351
|
.291
|
.398
1
|
.473
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
(.607)
|
1.954
|
.535
|
(3.633)
|
(3.431)
|
Total from Investment Operations
|
(.246)
|
2.305
|
.826
|
(3.235)
|
(2.958)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(.334)
|
(.305)
|
(.286)
|
(.562)
|
(.528)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
(.903)
|
(2.214)
|
Total Distributions
|
(.334)
|
(.305)
|
(.286)
|
(1.465)
|
(2.742)
|
Net Asset Value, End of Period
|
$17.69
|
$18.27
|
$16.27
|
$15.73
|
$20.43
|
Total Return
2
|
–1.14%
|
14.10%
|
5.19%
|
–13.75% –12.83%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$9,115
|
$10,878
|
$10,493
|
$10,226
|
$11,969
|
Ratio of Total Expenses to Average Net Assets
3
|
0.49%
|
0.47%
|
0.49%
|
0.53%
|
0.47%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
2.04%
|
1.85%
|
1.74%
|
2.84%
1
|
2.07%
|
Portfolio Turnover Rate
|
30%
|
43%
|
44%
|
51%
|
55%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.061 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 Total returns do not include transaction or account service fees that may have applied in the periods shown.
3 Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, and 0.02%.
24
|
|
|
|
|
|
International Growth Fund Admiral Shares
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$58.17
|
$51.81
|
$50.08
|
$65.09
|
$83.26
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
1.229
|
1.192
|
1.009
|
1.340
1
|
1.649
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
(1.945)
|
6.209
|
1.708
|
(11.571)
|
(10.929)
|
Total from Investment Operations
|
(.716)
|
7.401
|
2.717
|
(10.231)
|
(9.280)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(1.144)
|
(1.041)
|
(.987)
|
(1.909)
|
(1.845)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
(2.870)
|
(7.045)
|
Total Distributions
|
(1.144)
|
(1.041)
|
(.987)
|
(4.779)
|
(8.890)
|
Net Asset Value, End of Period
|
$56.31
|
$58.17
|
$51.81
|
$50.08
|
$65.09
|
Total Return
2
|
–1.01%
|
14.21%
|
5.36%
|
–13.57% –12.67%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$7,523
|
$6,487
|
$4,353
|
$3,934
|
$4,845
|
Ratio of Total Expenses to Average
|
|
|
|
|
|
Net Assets
3
|
0.36%
|
0.34%
|
0.33%
|
0.34%
|
0.28%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
2.17%
|
1.98%
|
1.90%
|
3.03%
1
|
2.26%
|
Portfolio Turnover Rate
|
30%
|
43%
|
44%
|
51%
|
55%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.194 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 Total returns do not include transaction or account service fees that may have applied in the periods shown.
3 Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, and 0.02%.
25
Investing With Vanguard
This section of the prospectus explains the basics of doing business with Vanguard.
Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as Vanguard Marketing Corporation or another broker-dealer. If you hold Vanguard fund shares directly with Vanguard, you should
carefully read each topic
within this section
that pertains to your relationship with Vanguard.
If you hold Vanguard fund shares indirectly through an intermediary, please see
Investing With Vanguard Through Other Firms
, and also refer to your account agreement with the intermediary for information about transacting in that account.
Vanguard reserves the right to change the following policies without notice
.
Please call or check online for current information.
See
Contacting Vanguard.
For Vanguard fund shares held directly with Vanguard
, each fund you hold in an account is a separate fund account. For example, if you hold three funds in a nonretirement account titled in your own name, two funds in a nonretirement account titled jointly with your spouse, and one fund in an individual retirement account, you have six fund accountsand this is true even if you hold the same fund in multiple accounts. Note that each reference to you in this prospectus applies to any one or more registered account owners or persons authorized to transact on your account.
Purchasing Shares
Vanguard reserves the right, without notice, to increase or decrease the minimum amount required to open, convert shares to, or maintain a fund account, or to add to an existing fund account.
Investment minimums may differ for certain categories of investors.
Account Minimums for Investor Shares
To open and maintain an account.
$3,000.
Add to an existing account.
Generally $100 (other than by Automatic Investment Plan, which has no established minimum).
Account Minimums for Admiral Shares
To open and maintain an account.
$50,000. If you request Admiral Shares when you open a new account, but the investment amount does not meet the account minimum for Admiral Shares, your investment will be placed in Investor Shares of the Fund. Institutional clients should contact Vanguard for information on special eligibility rules that may apply to them.
Add to an existing account.
Generally $100 (other than by Automatic Investment Plan, which has no established minimum).
26
How to Initiate a Purchase Request
Be sure to check
Exchanging Shares, Frequent-Trading Limitations,
and
Other Rules You Should Know
before placing your purchase request.
Online.
You may open certain types of accounts, request a purchase of shares, and request an exchange through our website
or our mobile application i
f you are registered
for online access
.
By telephone.
You may call Vanguard to begin the account registration process or request that the account-opening forms be sent to you. You may also call Vanguard to request a purchase of shares in your account
or to request an exchange
. See
Contacting Vanguard
.
By mail.
You may send Vanguard your account registration form and check to open a new fund account. To add to an existing fund account, you may send your check with an Invest-by-Mail form (from a transaction confirmation or your account statement), with a deposit slip (available online), or with a written request. You may also send a written request to Vanguard to make an exchange. For a list of Vanguard addresses, see
Contacting Vanguard
.
How to Pay for a Purchase
By electronic bank transfer.
You may purchase shares of a Vanguard fund through an electronic transfer of money from a bank account. To establish the electronic bank transfer option on an account, you must designate the bank account online, complete a special form, or fill out the appropriate section of your account registration form. After the option is set up on your account, you can purchase shares by electronic bank transfer on a regular schedule (Automatic Investment Plan) or from time to time. Your purchase request can be initiated online (if you are
r
egistered
for online access
), by telephone, or by mail.
By wire.
Wiring instructions vary for different types of purchases. Please call Vanguard for instructions and policies on purchasing shares by wire. See
Contacting Vanguard.
By check.
You ma
y m
ake initial or additional purchases to your fund account
by sending a check or through our mobile application.
Also see
How to Initiate a Purchase Request
.
M
ake your check payable to Vanguard and include the appropriate fund number (e.g., Vanguardxx). For a list of Fund numbers (for share classes in this prospectus), see
Additional Information
.
By exchange.
You may purchase shares of a Vanguard fund using the proceeds from the simultaneous redemption of shares of another Vanguard fund. You may initiate an exchange online (if you are
r
egistered
for online access
), by telephone, or by written request. See
Exchanging Shares
.
27
Trade Date
The trade date for any purchase request received in good order will depend on the day and time Vanguard receives your request, the manner in which you are paying, and the type of fund you are purchasing. Your purchase will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the New York Stock Exchange (NYSE) is open for trading (a business day).
For purchases by
check
into all funds other than money market funds, and for purchases by
exchange
,
wire
, or
electronic bank transfer
(not using an Automatic Investment Plan) into all funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the same day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the next business day.
For purchases by
check
into money market funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the next business day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the second business day following the day Vanguard receives the purchase request. Because money market instruments must be purchased with federal funds and it takes a money market mutual fund one business day to convert check proceeds into federal funds, the trade date for the purchase will be one business day later than for other funds.
For purchases by electronic bank transfer using an
Automatic Investment Plan
: Your trade date generally will be one business day before the date you designated for withdrawal from your bank account.
If your purchase request is not accurate and complete, it may be rejected. See
Other Rules You Should KnowGood Order
.
For further information about purchase transactions, consult our website at
vanguard.com
or see
Contacting Vanguard
.
Other Purchase Rules You Should Know
Admiral Shares.
Please note that Admiral Shares generally are
not
available for:
SIMPLE IRAs and Individual 403(b)(7) Custodial Accounts or
Certain retirement plan accounts receiving special administrative services from Vanguard, including Vanguard Individual 401(k) Plans.
28
Check purchases.
All purchase checks must be written in U.S. dollars and must be drawn on a U.S. bank. Vanguard does not accept cash, travelers checks, or money orders. In addition, Vanguard may refuse starter checks and checks that are not made payable to Vanguard.
New accounts.
We are required by law to obtain from you certain personal information that we will use to verify your identity. If you do not provide the information, we may not be able to open your account. If we are unable to verify your identity, Vanguard reserves the right, without notice, to close your account or take such other steps as we deem reasonable.
Refused or rejected purchase requests.
Vanguard reserves the right to stop selling fund shares or to reject any purchase request at any time and without notice, including, but not limited to, purchases requested by exchange from another Vanguard fund. This also includes the right to reject any purchase request because of a history of frequent trading by the investor or because the purchase may negatively affect a funds operation or performance.
Large purchases.
Please call Vanguard before attempting to invest a large dollar amount.
No cancellations.
Vanguard will not accept your request to cancel any purchase request once processing has begun. Please be careful when placing a purchase request.
Converting Shares
When a conversion occurs, you receive shares of one class in place of shares of another class of the same fund. At the time of conversion, the dollar value of the new shares you receive equals the dollar value of the old shares that were converted. In other words, the conversion has no effect on the value of your investment in the fund at the time of the conversion. However, the number of shares you own after the conversion may be greater than or less than the number of shares you owned before the conversion, depending on the net asset values of the two share classes.
A conversion between share classes of the same fund is a
nontaxable
event.
Trade Date
The trade date for any conversion request received in good order will depend on the day and time Vanguard receives your request. Your conversion will be executed using the NAVs of the different share classes on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day).
29
For a conversion request received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. For a conversion request received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day. See
Other Rules You Should Know.
Conversions From Investor Shares to Admiral Shares
Self-directed conversions.
If your account balance in the Fund is at least $50,000, you may ask Vanguard to convert your Investor Shares to Admiral Shares. You
may
request a conversion
through our website
(if you are registered
for online access
), by telephone, or by mail. Institutional clients should contact Vanguard for information on special eligibility rules that may apply to them. See
Contacting Vanguard
.
Automatic conversions.
Vanguard conducts periodic reviews of account balances and may, if your account balance in the Fund exceeds $50,000, automatically convert your Investor Shares to Admiral Shares. You will be notified before an automatic conversion occurs and will have an opportunity to instruct Vanguard not to effect the conversion. Institutional clients should contact Vanguard for information on special eligibility rules that may apply to them.
Mandatory Conversions to Investor Shares
If an account no longer meets the balance requirements for Admiral Shares, Vanguard may automatically convert the shares in the account to Investor Shares. A decline in the account balance because of market movement may result in such a conversion. Vanguard will notify the investor in writing before any mandatory conversion occurs.
Redeeming Shares
How to Initiate a Redemption Request
Be sure to check
Exchanging Shares, Frequent-Trading Limitations
, and
Other Rules You Should Know
before placing your redemption request.
Online.
You may request a redemption of shares or request an exchange through our website
or our mobile application
if you are registered
for online access.
By telephone.
You may call Vanguard to request a redemption of shares or an exchange. See
Contacting Vanguard
.
By mail.
You may send a written request to Vanguard to redeem from a fund account or to make an exchange. See
Contacting Vanguard
.
30
How to Receive Redemption Proceeds
By electronic bank transfer.
You may have the proceeds of a fund redemption sent directly to a designated bank account. To establish the electronic bank transfer option on an account, you must designate a bank account online, complete a special form, or fill out the appropriate section of your account registration form. After the option is set up on your account, you can redeem shares by electronic bank transfer on a regular schedule (Automatic Withdrawal Plan) or from time to time. Your redemption request can be initiated
online (if you are registered for online access)
, by telephone, or by mail.
By wire.
To receive your proceeds by wire, you may instruct Vanguard to wire your redemption proceeds ($100 minimum) to a previously designated bank account. To establish the wire redemption option, you generally must designate a bank account online, complete a special form, or fill out the appropriate section of your account registration form.
By exchange.
You may have the proceeds of a Vanguard fund redemption invested directly in shares of another Vanguard fund. You may initiate an exchange online (if you are
r
egistered
for online access
), by telephone, or by written request. See
Exchanging Shares
.
By check.
If you have not chosen another redemption method, Vanguard will mail you a redemption check, generally payable to all registered account owners, normally within two business days of your trade date, generally to the address of record.
Trade Date
The trade date for any redemption request received in good order will depend on the day and time Vanguard receives your request and the manner in which you are redeeming. Your redemption will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day).
For redemptions by
check
,
exchange
, or
wire
: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
Note on timing of wire redemptions from money market funds: For telephone requests received by Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Prime Money Market Fund), the redemption proceeds generally will leave Vanguard by the close of business the same day. For telephone requests received by Vanguard on a business day after those cut-off times, or on a nonbusiness day, and for all requests other than by telephone, the redemption proceeds generally will leave Vanguard by the close of business on the next business day.
31
Note on timing of wire redemptions from all other funds: For requests received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the redemption proceeds generally will leave Vanguard by the close of business on the next business day. For requests received by Vanguard on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the redemption proceeds generally will leave Vanguard by the close of business on the second business day after Vanguard receives the request.
For redemptions by electronic bank transfer using an
Automatic Withdrawal Plan
: Your trade date generally will be the date you designated for withdrawal of funds (redemption of shares) from your Vanguard account. Proceeds of redeemed shares generally will be credited to your designated bank account two business days after your trade date. If the date you designated for withdrawal of funds from your Vanguard account falls on a weekend, holiday, or other nonbusiness day, your trade date generally will be the previous business day.
For redemptions by
electronic bank transfer
not using an Automatic Withdrawal Plan: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
If your redemption request is not accurate and complete, it may be rejected. If we are unable to send your redemption proceeds by wire or electronic bank transfer because the receiving institution rejects the transfer, Vanguard will make additional efforts to complete your transaction. If Vanguard is still unable to complete the transaction, we may send the proceeds of the redemption to you by check, generally payable to all registered account owners, or use your proceeds to purchase new shares of the fund from which you sold shares for the purpose of the wire or electronic bank transfer transaction. See
Other Rules You Should KnowGood Order
.
For further information about redemption transactions, consult our website at
vanguard.com
or see
Contacting Vanguard
.
Other Redemption Rules You Should Know
Documentation for certain accounts.
Special documentation may be required to redeem from certain types of accounts, such as trust, corporate, nonprofit, or retirement accounts. Please call us
before
attempting to redeem from these types of accounts.
32
Potentially disruptive redemptions.
Vanguard reserves the right to pay all or part of a redemption in kindthat is, in the form of securitiesif we reasonably believe that a cash redemption would negatively affect the funds operation or performance or that the shareholder may be engaged in market-timing or frequent trading. Under these circumstances, Vanguard also reserves the right to delay payment of the redemption proceeds for up to seven calendar days. By calling us
before
you attempt to redeem a large dollar amount, you may avoid in-kind or delayed payment of your redemption. Please see
Frequent-Trading Limitations
for information about Vanguards policies to limit frequent trading.
Recently purchased shares.
Although you can redeem shares at any time, proceeds may not be made available to you until the fund collects payment for your purchase. This may take up to
seven
calendar days for shares purchased by check or by electronic bank transfer. If you have written a check on a fund with checkwriting privileges, that check may be rejected if your fund account does not have a sufficient available balance.
Share certificates.
Share certificates are no longer issued for Vanguard funds. Shares currently held in certificates
cannot be redeemed, exchanged, converted, or transferred (reregistered) until you return the certificates (unsigned) to Vanguard by registered mail. For the correct address, see
Contacting Vanguard
.
Address change.
If you change your address online or by telephone, there may be up to a 14-day restriction on your ability to request check redemptions online and by telephone. You can request a redemption in writing at any time. Confirmations of address changes are sent to both the old and new addresses.
Payment to a different person or address.
At your request, we can make your redemption check payable, or wire your redemption proceeds, to a different person or send it to a different address. However, this generally requires the written consent of all registered account owners and may require a signature guarantee or a notarized signature. You may obtain a signature guarantee from some commercial or savings banks, credit unions, trust companies, or member firms of a U.S. stock exchange.
No cancellations.
Vanguard will not accept your request to cancel any redemption request once processing has begun. Please be careful when placing a redemption request.
Emergency circumstances.
Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days. In addition, Vanguard funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.
33
Exchanging Shares
An exchange occurs when you use the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund. You can make exchange requests online (if you
are re
gistered
for online access
), by telephone, or by written request. See
Purchasing Shares
and
Redeeming Shares
.
If the NYSE is open for regular trading (generally until 4 p.m., Eastern time, on a business day) at the time an exchange request is received in good order, the trade date generally will be the same day. See
Other Rules You Should KnowGood Order
for additional information on all transaction requests.
Vanguard will not accept your request to cancel any exchange request once processing has begun. Please be careful when placing an exchange request.
Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. See
Frequent-Trading Limitations
for additional restrictions on exchanges.
Frequent-Trading Limitations
Because excessive transactions can disrupt management of a fund and increase the funds costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other than money market funds and short-term bond funds) limits an investors purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent-trading
limits.
For Vanguard Retirement Investment Program pooled plans, the limitations apply to exchanges made online or by phone.
These frequent-trading limitations
do not
apply to the following:
Purchases of shares with reinvested dividend or capital gains distributions.
Transactions through Vanguards Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online
®
.
Redemptions of shares to pay fund or account fees.
Transaction requests submitted by mail to Vanguard from shareholders who hold their accounts directly with Vanguard. (Transaction requests submitted by fax, if otherwise permitted,
are
subject to the limitations.)
Transfers and reregistrations of shares within the same fund.
34
Purchases of shares by asset transfer or direct rollover.
Conversions of shares from one share class to another in the same fund.
Checkwriting redemptions.
Section 529 college savings plans.
Certain approved institutional portfolios and asset allocation programs, as well as trades made by Vanguard funds that invest in other Vanguard funds. (Please note that
shareholders
of Vanguards funds of funds
are
subject to the limitations.)
For participants in employer-sponsored defined contribution plans,* the frequent-trading limitations
do not
apply to:
Purchases of shares with participant payroll or employer contributions or loan repayments.
Purchases of shares with reinvested dividend or capital gains distributions.
Distributions, loans, and in-service withdrawals from a plan.
Redemptions of shares as part of a plan termination or at the direction of the plan.
Automated transactions executed during the first six months of a participants enrollment in the Vanguard Managed Account Program.
Redemptions of shares to pay fund or account fees.
Share or asset transfers or rollovers.
Reregistrations of shares.
Conversions of shares from one share class to another in the same fund.
Exchange requests submitted by written request to Vanguard. (Exchange requests submitted by fax, if otherwise permitted,
are
subject to the limitations.)
* The following Vanguard fund accounts are subject to the frequent-trading limitations: SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and Vanguard Individual 401(k) Plans.
Accounts Held by Institutions (Other Than Defined Contribution Plans)
Vanguard will systematically monitor for frequent trading in institutional clients accounts. If we detect suspicious trading activity, we will investigate and take appropriate action, which may include applying to a clients accounts the 60-day policy previously described, prohibiting a clients purchases of fund shares, and/or revoking the clients exchange privilege.
35
Accounts Held by Intermediaries
When intermediaries establish accounts in Vanguard funds for the benefit of their clients, we cannot always monitor the trading activity of the individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor their clients trading activities with respect to Vanguard funds.
For those Vanguard funds that charge purchase and/or redemption fees, intermediaries will be asked to assess these fees on client accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If you invest with Vanguard through an intermediary, please read that firms materials carefully to learn of any other rules or fees that may apply.
Other Rules You Should Know
Prospectus and Shareholder Report Mailings
Vanguard attempts to eliminate the unnecessary expense of duplicate mailings by sending just one summary prospectus (or prospectus) and/or shareholder report when two or more shareholders have the same last name and address. You may request individual prospectuses and reports by contacting our Client Services Department in writing, by telephone, or online.
Vanguard.com
Registration.
If you are a registered user of
vanguard.com,
you can review your account holdings; buy, sell, or exchange shares of most Vanguard funds; and perform most other transactions
through our website
. You must register for this service online.
Electronic delivery.
Vanguard can deliver your account statements, transaction confirmations, prospectuses, and shareholder reports electronically. If you are a registered user of
vanguard.com
, you can consent to the electronic delivery of these documents by logging on and changing your mailing
preferences
under Account
Maintenance
. You can revoke your electronic consent at any time
through our website
, and we will begin to send paper copies of these documents within 30 days of receiving your revocation.
36
Telephone Transactions
Automatic.
When we set up your account, well automatically enable you to do business with us by telephone,
unless you instruct us otherwise in writing.
Tele-Account
®
.
To obtain fund and account information through Vanguards automated telephone service, you must first establish a Personal Identification Number (PIN) by calling Tele-Account at 800-662-6273.
Proof of a callers authority.
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.
Good Order
We reserve the right to reject any transaction instructions that are not in good order. Good order generally means that your instructions:
Are provided by the person(s) authorized in accordance with Vanguards policies and procedures to access the account and request transactions.
Include the fund name and account number.
Include the amount of the transaction (stated in dollars, shares, or percentage).
Written instructions also must include:
Signature guarantees or notarized signatures, if required for the type of transaction.
(Call Vanguard for specific requirements.)
Any supporting documentation that may be required.
The requirements vary among types of accounts and transactions. For more information, consult our website at
vanguard.com
or see
Contacting Vanguard.
Vanguard reserves the right, without notice, to revise the requirements for good order.
Future Trade-Date Requests
Vanguard does not accept requests to hold a purchase, conversion, redemption, or exchange transaction for a future date. All such requests will receive trade dates as previously described in
Purchasing Shares
,
Converting Shares
,
Redeeming Shares,
and
Exchanging Shares
. Vanguard reserves the right to return future-dated purchase checks.
37
Accounts With More Than One Owner
If an account has more than one owner or authorized person, Vanguard generally will accept instructions from any one owner or authorized person.
Responsibility for Fraud
Vanguard will not be responsible for any account losses because of fraud if we reasonably believe that the person transacting business on an account is authorized to do so. Please take precautions to protect yourself from fraud. Keep your account information private, and immediately review any account statements or other information that we provide to you. It is important that you contact Vanguard immediately about any transactions or changes to your account that you believe to be unauthorized.
Uncashed Checks
Please cash your distribution or redemption checks promptly. Vanguard will not pay interest on uncashed checks.
Dormant Accounts
If your account has no activity in it for a period of time, Vanguard may be required to transfer it to a state under the states abandoned property law.
Unusual Circumstances
If you experience difficulty contacting Vanguard online or by telephone, you can send us your transaction request by regular or express mail. See
Contacting Vanguard
for addresses.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as
Vanguard Marketing Corporation
, a bank,
a
broker, or
an
investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
Please see
Frequent
-
Trading Limitations
Accounts Held by Intermediaries
for information about the assessment of any purchase or redemption fees and the monitoring of frequent trading for accounts held by intermediaries.
38
Account Service Fee
V
anguard charges a $20 account service fee o
n f
und accounts that have a balance below $10,000 for any reason, including market fluctuation. The account service fee applies to both retirement
and
nonretirement fund accounts and will be assessed on fund accounts in all Vanguard funds, regardless of a funds minimum initial investment amount. The fee, which will be collected by redeeming fund shares in the amount of $20, will be deducted from a fund account only once per calendar year.
If you register on
vanguard.com
and elect to receive electronic delivery of statements, reports, and other materials for all of your fund accounts, the account service fee for balances below $10,000 will not be charged, so long as that election remains in effect.
The account service fee also
does not
apply to the following:
Money market sweep accounts owned in connection with a Vanguard Brokerage Services
®
account.
Accounts held through intermediaries.
Accounts held by Voyager, Voyager Select, and Flagship clients. Eligibility is based on total household assets held at Vanguard, with a minimum of $50,000 to qualify for Vanguard Voyager Services
®
, $500,000 for Vanguard Voyager Select Services
®
, and $1 million for Vanguard Flagship Services
®
. Vanguard determines eligibility by aggregating assets of all qualifying accounts held by the investor and immediate family members who reside at the same address. Aggregate assets include investments in Vanguard mutual funds, Vanguard ETFs
®
, certain annuities through Vanguard, the Vanguard 529 Plan, and certain small-business accounts. Assets in employer-sponsored retirement plans for which Vanguard provides recordkeeping services may be included in determining eligibility if the investor also has a personal account holding Vanguard mutual funds. Note that assets held in a Vanguard Brokerage Services account (other than Vanguard funds, including Vanguard ETFs) are not included when determining a households eligibility.
Participant accounts in employer-sponsored defined contribution plans.* Please consult your enrollment materials for the rules that apply to your account.
Section 529 college savings plans.
* The following Vanguard fund accounts have alternative fee structures: SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, Vanguard Retirement Investment Program pooled plans, and Vanguard Individual 401(k) Plans.
Low-Balance Accounts
The Fund reserves the right to liquidate a fund account whose balance falls below the minimum initial investment for any reason, including market fluctuation. This policy applies to nonretirement fund accounts and accounts that are held through intermediaries.
39
Right to Change Policies
In addition to the rights expressly stated elsewhere in this prospectus, Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time; (2) accept initial purchases by telephone; (3) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners, or if Vanguard reasonably believes a fraudulent transaction may occur or has occurred; (4) temporarily freeze any account and/or suspend account services upon initial notification to Vanguard of the death of the shareholder until Vanguard receives required documentation in good order; (5) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fees charged to a group of shareholders; and (6) redeem an account or suspend account privileges, without the owners permission to do so, in cases of threatening conduct or activity Vanguard believes to be suspicious, fraudulent, or illegal. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard reasonably believes they are deemed to be in the best interest of a fund.
Share Classes
Vanguard reserves the right, without notice, to change the eligibility requirements of its share classes, including the types of clients who are eligible to purchase each share class.
Fund and Account Updates
Confirmation Statements
We will send (or provide
through our website,
whichever you prefer) a confirmation of your trade date and the amount of your transaction when you buy, sell, exchange, or convert shares. However, we will not send confirmations reflecting only checkwriting redemptions or the reinvestment of dividend or capital gains distributions. For any month in which you had a checkwriting redemption, a Checkwriting Activity Statement will be sent to you itemizing the checkwriting redemptions for that month. Promptly review each confirmation statement that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on a confirmation statement, or Vanguard will consider the transaction properly processed.
40
Portfolio Summaries
We will send (or provide
through our website,
whichever you prefer) quarterly portfolio summaries to help you keep track of your accounts throughout the year. Each summary shows the market value of your account at the close of the statement period, as well as all distributions, purchases, redemptions, exchanges, transfers, and conversions for the current calendar quarter. Promptly review each summary that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on the summary, or Vanguard will consider the transaction properly processed.
Tax Information Statements
For most accounts, we are required to provide annual tax forms to assist you in preparing your income tax returns. These forms, which are generally mailed in January, will report the previous years dividends, capital gains distributions, proceeds from the sale of shares from taxable accounts, and distributions from IRAs and other retirement plans. Registered users of
vanguard.com
can also view these forms
through our website
. Vanguard may also provide you with additional tax-related documentation. For more information, consult our website at
vanguard.com
or see
Contacting Vanguard
.
Annual and Semiannual Reports
We will send (or provide
through our website,
whichever you prefer) reports about Vanguard International Growth Fund twice a year, in April and October. These reports include overviews of the financial markets and provide the following specific Fund information:
Performance assessments and comparisons with industry benchmarks.
Reports from the advisors.
Financial statements with listings of Fund holdings.
Portfolio Holdings
We generally post on our website at
vanguard.com,
in the
Portfolio
section of the Funds Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. We also generally post the ten largest stock portfolio holdings of the Fund and the percentage of the Funds total assets that each of these holdings represents, as of the end of the most recent calendar quarter. This list is generally updated within 15 calendar days after the end of each calendar quarter. Please consult the Funds
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Funds portfolio holdings.
41
|
|
Contacting Vanguard
|
|
|
|
Web
|
|
Vanguard.com
|
For the most complete source of Vanguard news
|
|
For fund, account, and service information
|
|
For most account transactions
|
|
For literature requests
|
|
24 hours a day, 7 days a week
|
|
Phone
|
|
Vanguard Tele-Account
®
800-662-6273
|
For automated fund and account information
|
(ON-BOARD)
|
Toll-free, 24 hours a day, 7 days a week
|
|
|
Investor Information 800-662-7447 (SHIP) For fund and service information
|
(Text telephone for people with hearing
|
For literature requests
|
impairment at 800-749-7273)
|
Hours of operation: Monday–Friday, 8 a.m. to 10 p.m.,
|
|
Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
|
Client Services 800-662-2739 (CREW)
|
For account information
|
(Text telephone for people with hearing
|
For most account transactions
|
impairment at 800-749-7273)
|
Hours of operation: Monday–Friday, 8 a.m. to 10 p.m.,
|
|
Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
|
Institutional Division
|
For information and services for large institutional investors
|
888-809-8102
|
Hours of operation: Monday–Friday, 8:30 a.m. to 9 p.m.,
|
|
Eastern time
|
Financial Advisor and
Intermediary
|
For information and services for financial intermediaries
|
Sales Support 800-997-2798
|
including financial advisors, broker-dealers, trust institutions,
|
|
and insurance companies
|
|
Hours of operation: Monday–Friday, 8:30 a.m. to 7 p.m.,
|
|
Eastern time
|
Vanguard Addresses
Please be sure to use the correct address. Use of an incorrect address could delay the processing of your transaction.
|
|
Regular Mail (Individuals)
|
The Vanguard Group
|
|
P.O. Box 1110
|
|
Valley Forge, PA 19482-1110
|
Regular Mail (Institutions)
|
The Vanguard Group
|
|
P.O. Box 2900
|
|
Valley Forge, PA 19482-2900
|
Registered, Express, or Overnight
|
The Vanguard Group
|
|
455 Devon Park Drive
|
|
Wayne, PA 19087-1815
|
42
|
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
|
Inception
|
Suitable
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Date
|
for IRAs
|
Abbreviation
|
Fund Number
|
Number
|
International Growth Fund
|
|
|
|
|
|
Investor Shares
|
9/30/1981
|
Yes
|
IntlGr
|
81
|
921910204
|
Admiral Shares
|
8/13/2001
|
Yes
|
IntlGrAdml
|
581
|
921910501
|
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
43
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
MSCI ACWI ex USA Index.
An index that tracks stock markets in countries included in the MSCI EAFE Index plus Canada and a number of emerging markets, but excluding the U.
S
.
Mu
tual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Securities.
Stocks, bonds, money market instruments, and other investments.
Spliced International Index.
An index that reflects performance of the MSCI EAFE Index through May 31, 2010, and performance of the MSCI ACWI ex USA
Index
thereafter.
44
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
If you are a current Vanguard shareholder and would
|
If you would like more information about Vanguard
|
like information about your account, account
|
International Growth Fund, the following documents
|
transactions, and/or account statements, please call:
|
are available free upon request:
|
|
|
Client Services Department
|
Annual/Semiannual Reports to Shareholders
|
Telephone: 800-662-2739 (CREW)
|
Additional information about the Funds investments is
|
Text telephone for people with hearing impairment:
|
available in the Funds annual and semiannual reports
|
800-749-7273
|
to shareholders. In the annual report, you will find a
|
|
|
Information Provided by the Securities and
|
discussion of the market conditions and investment
|
|
|
Exchange Commission (SEC)
|
strategies that significantly affected the Funds
|
|
|
You can review and copy information about the Fund
|
performance during its last fiscal year.
|
|
|
(including the SAI) at the SECs Public Reference Room
|
Statement of Additional Information (SAI)
|
in Washington, DC. To find out more about this public
|
The SAI provides more detailed information about the
|
service, call the SEC at 202-551-8090. Reports and
|
Fund and is incorporated by reference into (and thus
|
other information about the Fund are also available in
|
legally a part of) this prospectus.
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
To receive a free copy of the latest annual or semiannual
|
|
|
by electronic request at the following e-mail address:
|
report or the SAI, or to request additional information
|
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
about the Fund or other Vanguard funds, please visit
|
|
|
Section, Securities and Exchange Commission,
|
vanguard.com
or contact us as follows:
|
|
|
Washington, DC 20549-1520.
|
The Vanguard Group
|
|
|
Funds Investment Company Act file number: 811-01027
|
Investor Information Department
|
|
P.O. Box 2600
|
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Valley Forge, PA 19482-2600
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Telephone: 800-662-7447 (SHIP)
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Text telephone for people with hearing impairment:
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800-749-7273
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© 2012 The Vanguard Group, Inc. All rights reserved.
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Vanguard Marketing Corporation, Distributor.
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P 081 122012
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Vanguard International Growth Fund
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Prospectus
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December 27, 2012
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Investor Shares for Participants
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Vanguard International Growth Fund Investor Shares (VWIGX)
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This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
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The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
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passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Contents
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Fund Summary
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1
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Financial Highlights
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20
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More on the Fund
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5
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Investing With Vanguard
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22
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The Fund and Vanguard
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14
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Accessing Fund Information Online
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25
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Investment Advisors
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15
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Glossary of Investment Terms
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26
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Dividends, Capital Gains, and Taxes
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18
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Share Price
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18
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Fund Summary
Investment Objective
The Fund seeks to provide long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Investor Shares of the Fund.
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Shareholder Fees
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(Fees paid directly from your investment)
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Sales Charge (Load) Imposed on Purchases
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None
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Purchase Fee
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None
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Sales Charge (Load) Imposed on Reinvested Dividends
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None
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Redemption Fee
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None
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Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
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Management Expenses
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0.44%
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12b-1 Distribution Fee
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None
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Other Expenses
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0.05%
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Total Annual Fund Operating Expenses
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0.49%
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Example
The following example is intended to help you compare the cost of investing in the Fund’s Investor Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. This example assumes that the Shares provide a return of 5% a year and that
total annual fund
operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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$50
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$157
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$274
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$616
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1
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was
30
%.
Primary Investment Strategies
The Fund invests predominantly in the stocks of companies located outside the United States and is expected to diversify its assets across developed and emerging markets in Europe, the Far East, and Latin America. In selecting stocks, the Funds advisors evaluate foreign markets around the world and choose large-, mid-, and small-capitalization companies considered to have above-average growth potential. The Fund uses multiple investment advisors.
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of global stock markets.
The Fund is subject to the following risks, which could affect the Funds performance:
Investment style risk
, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
Stock market risk
, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
Country/regional risk,
which is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Country/regional risk is especially high in emerging markets.
2
•
Currency risk
, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets.
•
Manager risk
, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns compare with those of relevant market indexes, which have investment characteristics similar to those of the Fund. Returns for the indexes shown are adjusted for withholding taxes. Keep in mind that the Fund’s past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard International Growth Fund Investor Shares
1
1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 12.35%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 27.03% (quarter ended June 30, 2009), and the lowest return for a quarter was –23.22% (quarter ended December 31, 2008).
3
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Average Annual Total Returns for Periods Ended December 31,
2011
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1 Year
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5 Years
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10 Years
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Vanguard International Growth Fund Investor Shares
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13.68%
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2.02%
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5.57%
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Comparative Indexes
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(reflect no deduction for fees or expenses)
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MSCI ACWI ex USA Index
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13.71%
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2.92%
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6.31%
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Spliced International Index
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13.71
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5.00
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4.51
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Investment Advisors
Baillie Gifford Overseas Ltd.
M&G Investment Management Limited
Schroder Investment Management North America Inc.
Portfolio Managers
James K. Anderson, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed a portion of the Fund since 2003.
Greg Aldridge, Portfolio Manager at M&G. He has
managed
a portion of the Fund since 2008.
Vi
rginie Maisonneuve, CFA, Head of Schroders Global and International Equities. She has co-managed a portion of the Fund since 2005.
Simon Webber, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has co-managed a portion of the Fund since 2009.
Tax Information
The Funds distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
Payments to Financial Intermediaries
The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.
4
More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance
for fluctuations in the securities markets. Look for this
symbol throughout the
prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
This prospectus offers the Fund‘s Investor Shares and is intended for participants in employer-sponsored retirement or savings plans. Another version—for investors who would like to open a personal investment account—can be obtained
on our website at
vanguard.com
or
by calling Vanguard at 800-662-7447.
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Plain Talk About Fund Expenses
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All mutual funds have operating expenses. These expenses, which are deducted
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from a fund’s gross income, are expressed as a percentage of the net assets of
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the fund. Assuming that operating expenses remain as stated in the Fees and
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Expenses section, Vanguard International Growth Fund Investor Shares’ expense
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ratio would be
0.49%
, or
$4.90
per $1,000 of average net assets. The average
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expense ratio for international equity funds in
2011
was
1.37%
, or
$13.70
per
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$1,000 of average net assets (derived from data provided by Lipper Inc., which
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reports on the mutual fund industry).
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Plain Talk About Costs of Investing
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Costs are an important consideration in choosing a mutual fund. That’s because
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you, as a shareholder, pay a proportionate share of the costs of operating a fund,
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plus any transaction costs incurred when the fund buys or sells securities. These
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costs can erode a substantial portion of the gross income or the capital
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appreciation a fund achieves. Even seemingly small differences in expenses can,
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over time, have a dramatic effect on a fund’s performance.
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5
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Funds board of trustees, which oversees the Funds management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental.
Market Exposure
The Fund invests mainly in common stocks of non-U.S. companies that are considered to have above-average potential for growth. The asset-weighted median market capitalization of the Fund as of
August 31, 2012
, was $
32
billion.
The Fund is subject to investment style risk, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
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Plain Talk About Growth Funds and Value Funds
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Growth investing and value investing are two styles employed by stock-fund
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managers. Growth funds generally focus on stocks of companies believed to
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have above-average potential for growth in revenue, earnings, cash flow, or other
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similar criteria. These stocks typically have low dividend yields and above-average
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prices in relation to measures such as earnings and book value. Value funds
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typically emphasize stocks whose prices are below average in relation to those
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measures; these stocks often have above-average dividend yields. Growth and
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value stocks have historically produced similar long-term returns, though each
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category has periods when it outperforms the other.
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6
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
To illustrate the volatility of international stock prices, the following table shows the best, worst, and average annual total returns for foreign stock markets over various periods as measured by the MSCI EAFE Index, a widely used barometer of international market activity. (Total returns consist of dividend income plus change in market price.) Note that the returns shown do not include the costs of buying and selling stocks or other expenses that a real-world investment portfolio would incur.
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International Stock Market Returns
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(1970–
2011
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1 Year
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5 Years
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10 Years
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20 Years
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Best
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69.4%
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36.1%
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22.0%
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15.5%
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Worst
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–43.4
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–4.7
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0.8
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3.1
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Average
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11.3
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10.0
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10.5
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11.0
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The table covers all of the 1-, 5-, 10-, and 20-year periods from 1970 through
2011
. These average
annual
returns reflect
past
performance of international stocks; you should not regard them as an indication of
future
performance of either foreign markets as a whole or the Fund in particular.
7
Note that the MSCI EAFE Index does not take into account returns for emerging markets, which can be substantially more volatile, and substantially less liquid, than the more developed markets included in the Index. In addition, because the MSCI EAFE Index tracks the European and Pacific developed markets collectively, the returns in the preceding table do not reflect the variability of returns for these markets individually. To illustrate this variability, the following table shows returns for different international markets—as well as for the U.S. market for comparison—from
2002
through
2011
, as measured by their respective indexes.
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Returns for Various Stock Markets
1
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European
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Pacific
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Emerging
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U.S.
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Market
2
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Market
2
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Markets
2
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Market
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2002
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–18.38%
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–9.29%
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–6.17%
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–22.10%
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2003
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38.54
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38.48
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55.82
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28.68
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2004
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20.88
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18.98
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25.55
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10.88
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2005
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9.42
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22.64
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34.00
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4.91
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2006
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33.72
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12.20
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32.17
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15.79
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2007
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13.86
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5.30
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39.39
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5.49
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2008
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–46.42
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–36.42
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–53.33
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–37.00
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2009
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35.83
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24.18
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78.51
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26.46
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2010
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3.88
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15.92
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18.88
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15.06
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2011
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–11.06
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–13.74
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–18.42
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2.11
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1 European market returns are measured by the MSCI Europe Index; Pacific market returns are measured by the MSCI Pacific Index; emerging markets returns are measured by the MSCI Emerging Markets Index; and U.S. market returns are measured by the Standard & Poor‘s 500 Index.
2
MSCI
Index returns are adjusted for withholding taxes
.
Keep in mind that these returns reflect
past
performance of the various indexes; you should not consider them as an indication of
future
performance of the indexes or of the Fund in particular.
8
The Fund is subject to country/regional risk and currency risk. Country/regional risk is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Currency risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.
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Plain Talk About International Investing
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U.S. investors who invest abroad will encounter risks not typically associated
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with U.S. companies because foreign stock and bond markets operate differently
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from the U.S. markets. For instance, foreign companies are not subject to the
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same accounting, auditing, and financial-reporting standards and practices as
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U.S. companies, and their stocks may not be as liquid as those of similar U.S.
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firms. In addition, foreign stock exchanges, brokers, and companies
may be
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subject to
less government supervision and regulation than their counterparts in
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the United States. These factors, among others, could negatively affect the
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returns U.S. investors receive from foreign investments.
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Security Selection
The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.
Each advisor employs active investment management methods, which means that securities are bought and sold according to the advisors evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general. Each advisor will sell a security when, in the view of the advisor, it is no longer as attractive as an alternative investment.
Baillie Gifford Overseas Ltd.
(Baillie Gifford), which manages approximately
49%
of the Funds assets, follows an investment approach based on making long-term investments in well-researched and well-managed businesses that the advisor believes enjoy sustainable competitive advantages in their marketplaces. Baillie Gifford uses a fundamental approach to identify quality growth companies. The firm considers sustainable earnings and free cash-flow growth to be critical factors in evaluating a companys prospects.
9
Companies are screened first for quality and then for value. Baillie Gifford looks for companies with attractive industry backgrounds, strong competitive positions within those industries, high-quality earnings, and a positive approach toward shareholders. The main fundamental factors considered in this bottom-up analysis are earnings growth, cash-flow growth, profitability, debt and interest coverage, and valuation.
To determine how to allocate its portion of the Funds assets geographically, Baillie Gifford constantly evaluates economic, market, and political trends worldwide. Among the factors considered are currency exchange rates, growth potential of economies and securities markets, technological developments, and political and social conditions.
Schroder Investment Management North America Inc.
(Schroders), which manages approximately
38%
of the Funds assets, seeks high-quality, reasonably priced, securities of international companies with strong growth prospects and a sustainable competitive advantage. Schroders believes that in-depth fundamental research, incorporating a comprehensive macroeconomic viewpoint, is the most reliable means of finding those companies and identifying where their growth is undervalued by the market. Schroders relies on a team-oriented matrix approach to drive research, security selection, and portfolio construction. Initial local research draws on the extensive knowledge of, and recommendations generated by,
approximately
70 regional analysts located
across the globe
. The strongest ideas of these local analysts are then overlaid with the global perspective of an international team of global sector specialists and regionally focused managers. In Schroders view, this knowledge matrix (global sector/regional expertise) provides an optimal framework for identifying strong investment candidates and building high-quality portfolios across multiple regions and sectors. While the input of the teams Global Sector Specialists is an important source of investment ideas and research, the investment decision making for the Fund rests with the Funds portfolio managers.
M&G Investment Management Limited
(M&G), which manages approximately
11
% of the Funds assets, uses a long-term, bottom-up approach to portfolio management that focuses on quality companies with scarce assets that deliver high returns and exhibit growth potential. Scarce assets can include traditional tangible assets (such as land or property), intangible assets (such as a strong brand or reputation), and organizational assets (such as a unique corporate culture). The team seeks to identify companies that fall into three categories: qualityhigh quality companies with scarce assets that support sustainable superior returns; growthcompanies that use scarce assets to grow faster than their competitors; and transformingcompanies that are emerging from a heavy investment cycle that may lead to a strong rebound in returns.
The Vanguard Group, Inc.
(Vanguard) manages a small portion (approximately
2%
) of the Funds assets to facilitate cash flows to and from the Funds advisors. Vanguard typically invests its portion of the Funds assets in stock index futures and/or shares of exchange-traded funds. For more details, see Other Investment Policies and Risks.
10
The Fund is subject to manager risk, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
Other Investment Policies and Risks
In addition to investing in stocks of foreign companies, the Fund may make other kinds of investments to achieve its objective.
The Fund may invest in foreign issuers through American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), or similar investment vehicles. The Fund may also invest in convertible securities.
The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a countrys currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Funds securities from falling in value during foreign market downswings.
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Plain Talk About Derivatives
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Derivatives can take many forms. Some forms of derivatives, such as
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exchange-traded futures and options on securities, commodities, or indexes,
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have been trading on regulated exchanges for decades. These types of
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derivatives are standardized contracts that can easily be bought and sold, and
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whose market values are determined and published daily. Nonstandardized
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derivatives (such as swap agreements and forward foreign currency exchange
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contracts), on the other hand, tend to be more specialized or complex, and may
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be harder to value.
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11
Vanguard typically invests a small portion of the Funds assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds.
These s
tock index futures and ETFs
typically
provide returns similar to those of common stocks. Vanguard may purchase futures or ETFs when doing so will reduce the Funds transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when an
advisor believes that
doing so is in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or
exchange-traded funds
that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategiesfor instance, by allocating substantial assets to cash, commercial paper, or other less volatile instrumentsin response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.
12
Frequent Trading or Market-Timing
Backg
round.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent tradin
g. Th
e board of trustees of each Vanguard fund
(other than money market funds and short-term bond funds)
has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it.
These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. A
lthough there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, a participant from exchanging into a fund account for 60 calendar days after the participant has exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
13
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. The average turnover rate for international stock funds was approximately
73%,
as reported by Morningstar, Inc., on
August 31, 2012
.
|
Plain Talk About Turnover Rate
|
|
Before investing in a mutual fund, you should review its turnover rate. This gives
|
an indication of how transaction costs, which are not included in the funds
|
expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that brokerage
|
commissions and other transaction costs will have on its return. Also, funds with
|
high turnover rates may be more likely to generate capital gains that must be
|
distributed to shareholders.
|
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family of
1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space,
and
equipmen
t.
Vanguard
Marketing Corporation
provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of
t
he Vanguard
funds
marketing costs.
14
|
Plain Talk About Vanguards Unique Corporate Structure
|
|
The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
|
the funds it oversees and thus indirectly by the shareholders in those funds.
|
Most other mutual funds are operated by management companies that may be
|
owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
Investment Advisors
The Fund uses a multimanager approach. Each advisor independently manages its assigned portion of the Funds assets, subject to the supervision and oversight of Vanguard and the Funds board of trustees. The board of trustees designates the proportion of the Fund assets to be managed by each advisor and may change these proportions at any time.
Baillie Gifford Overseas Ltd., Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, Scotland, is an investment advisory firm founded in 1983. Baillie Gifford Overseas Ltd. is wholly owned by a Scottish investment company, Baillie Gifford & Co. Founded in 1908, Baillie Gifford & Co., one of the largest independently owned investment management firms in the United Kingdom, manages money primarily for institutional clients. Baillie Gifford began managing a portion of the Fund in 2003. Baillie Gifford & Co. had assets under management that totaled approximately $130 billion as of
August 31, 2012
.
M&G Investment Management Limited, Laurence Pountney Hill, London, EC4R
0HH, England, is an advisory firm and wholly owned subsidiary of the Prudential plc. M&G is a company incorporated in the United Kingdom, based in London, England, and is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States. M&G, a separate business unit within the Prudential group, launched Great Britains first unit trust (mutual fund) in 1931. M&G began managing a portion of the Fund in 2008. As of
August 31, 2012
, M&G managed approximately $351 billion in assets.
Schroder Investment Management North America Inc., 875 Third Avenue, 22nd Floor, New York, NY 10022-6225, is a registered investment advisor that is part of a worldwide group of financial services companies that are wholly owned by Schroders plc. Schroders currently serves as investment advisor to the Fund, other mutual funds, and a broad range of institutional investors. As of
August 31, 2012
, Schroders plc,
15
through its affiliates, managed approximately $327 billion in assets. Schroder Investment Management North America Ltd. (Schroder Limited), 31 Gresham Street, London, EC2V 7QA, England, has served as the sub-advisor for the Schroders portion of the Fund.
The Fund pays each of its investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisors portion of the Fund relative to that of the MSCI ACWI ex USA Index over the preceding 36-month period. When the performance adjustment is positive, the Funds expenses increase; when it is negative, expenses decrease.
As of August 31, 2012,
Schroder Investment Management North America Inc. pays 50% of its advisory fee to Schroder Limited for providing sub-advisory services.
For the fiscal year ended
August 31, 2012
, the aggregate advisory fee represented an effective annual rate of
0.15%
of the Funds average net assets
before a performance-based increase of 0.04%
.
Under the terms of an SEC exemption, the Funds board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement or hire a new investment advisoreither as a replacement for an existing advisor or as an additional advisor. Any significant change in the Funds advisory arrangements will be communicated to shareholders in writing. In addition, as the Funds sponsor and overall manager, The Vanguard Group may provide investment advisory services to the Fund, on an at-cost basis, at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced, or that the terms of an existing advisory agreement be revised.
For a discussion of why the board of trustees approved the Funds investment advisory agreements, see the most recent semiannual report to shareholders.
16
The managers primarily responsible for the day-to-day management of the Fund are:
James K. Anderson
, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed assets with Baillie Gifford since 1985 and has managed a portion of the Fund since 2003. Education: B.A., University College, Oxford; Diploma, Bologna Center of Johns Hopkins University; M.A., Carleton Ottawa University.
Greg Aldridge
, Portfolio Manager at M&G. He has worked in investment management with M&G since 2004; has managed investment portfolios since 2007; and has
m
anaged a portion of the Fund since 2008. Education: M.A., Cambridge University; M.B.A., INSE
AD.
Vi
rginie Maisonneuve
, CFA, Head of Schroders Global and International Equities. She has worked in investment management and has managed assets since 1987; has managed assets for Schroders since 2004; and has co-managed a portion of the Fund since 2005. Education: a degree from the Peoples University in Beijing, China, and a Diplôme de Grande Ecole de Commerce (equivalent to an M.B.A.) from the ESLSCA in Paris, France.
Simon Webber
, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has worked in investment management for Schroders since 1999; has managed assets since 2001; and has co-managed a portion of the Fund since 2009. Education: B.Sc., University of Manchester.
The
Statement of Additional Information
provides information about each portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
17
Dividends, Capital Gains, and Taxes
Fund Distributions
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net capital gains realized from the sale of its holdings. Income and capital gains distributions, if any, generally occur annually in December.
Your distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
and dividends as well as capital gains from the funds sale of investments. Income
|
consists of both the dividends that the fund earns from any stock holdings and the
|
interest it receives from any money market and bond investments. Capital gains are
|
realized whenever the fund sells securities for higher prices than it paid for them.
|
These capital gains are either short-term or long-term, depending on whether the
|
fund held the securities for one year or less or for more than one year.
|
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests. However, on those days the value of the Fund's assets may be affected to the extent that the Fund holds foreign securities that trade on foreign markets that are open.
18
Stocks held by a Vanguard fund are valued at their
market value
when reliable market quotations are readily available. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
When a fund determines that market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the funds pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the funds pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement), or country-specific or regional/global (e.g., natural disaster, economic or political news, act of terrorism, interest rate change). Intervening events include price movements in U.S. markets that are deemed to affect the value of foreign securities. Fair-value pricing may be used for domestic securitiesfor example, if (1) trading in a security is halted and does not resume before the funds pricing time or if a security does not trade in the course of a day, and (2) the fund holds enough of the security that its price could affect the NAV.
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
19
Financial Highlights
The following financial highlights table is intended to help you understand the Investor Shares financial performance for the periods shown, and certain information reflects financial results for a single Investor Share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Investor Shares (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Table
|
|
The Investor Shares began fiscal year
2012
with a net asset value (price) of
|
$
18.27
per share. During the year, each Investor Share earned $0
.361
from
|
investment income (interest and dividends). There was a decline of $
0.607
per
|
share in the value of investments held or sold by the Fund, resulting in a net
|
decline of $0
.246
per share from investment operations.
|
|
Shareholders received $0
.334
per share in the form of dividend distributions. A
|
portion of each years distributions may come from the prior years income or
|
capital gains.
|
|
The share price at the end of the year was $
17.69
, reflecting losses of $0
.246
per
|
share and distributions of $0
.334
per share. This was a decrease of $
0.58
per
|
share (from $
18.27
at the beginning of the year to $
17.69
at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was
1.14
% for the year.
|
|
As of
August 31, 2012
, the Investor Shares had approximately $
9.1
billion in net
|
assets. For the year, the expense ratio was
0.49
% ($
4.90
per $1,000 of net
|
assets), and the net investment income amounted to
2.04
% of average net
|
assets. The Fund sold and replaced securities valued at
30
% of its net assets.
|
20
|
|
|
|
|
|
International Growth Fund Investor Shares
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$18.27
|
$16.27
|
$15.73
|
$20.43
|
$26.13
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
.361
|
.351
|
.291
|
.398
1
|
.473
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
(.607)
|
1.954
|
.535
|
(3.633)
|
(3.431)
|
Total from Investment Operations
|
(.246)
|
2.305
|
.826
|
(3.235)
|
(2.958)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(.334)
|
(.305)
|
(.286)
|
(.562)
|
(.528)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
(.903)
|
(2.214)
|
Total Distributions
|
(.334)
|
(.305)
|
(.286)
|
(1.465)
|
(2.742)
|
Net Asset Value, End of Period
|
$17.69
|
$18.27
|
$16.27
|
$15.73
|
$20.43
|
Total Return
|
–1.14%
|
14.10%
|
5.19%
|
–13.75%
|
–12.83%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$9,115
|
$10,878
|
$10,493
|
$10,226
|
$11,969
|
Ratio of Total Expenses to Average Net Assets
2
|
0.49%
|
0.47%
|
0.49%
|
0.53%
|
0.47%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
2.04%
|
1.85%
|
1.74%
|
2.84%
1
|
2.07%
|
Portfolio Turnover Rate
|
30%
|
43%
|
44%
|
51%
|
55%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.061 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, and 0.02%..
21
Investing With Vanguard
The Fund is an investment option in your retirement or savings plan. Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.
If you have any questions about the Fund or Vanguard, including those about the Funds investment objective, strategies, or risks, contact Vanguard Participant Services, toll-free, at 800-523-1188.
If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.
Be sure to carefully read each topic that pertains to your transactions with Vanguard.
Vanguard reserves the right to change its policies without notice to shareholders.
Investment Options and Allocations
Your plans specific provisions may allow you to change your investment selections, the amount of your contributions, or how your contributions are allocated among the investment choices available to you. Contact your plan administrator or employee benefits office for more details.
Transactions
Transaction requests (e.g., a contribution, exchange, or redemption) must be in good order. Good order means that Vanguard has determined that (1) your transaction request includes complete information and (2) appropriate assets are already in your account or new assets have been received.
Processing times for your transaction requests may differ among recordkeepers or among transaction types. Your plans recordkeeper (which may also be Vanguard) will determine the necessary processing timeframes for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.
Your transaction will then be based on the next-determined NAV of the Funds Investor Shares. If your transaction request was received in good order before the close of regular trading on the New York Stock Exchange (NYSE) (generally 4 p.m., Eastern time), you will receive that days NAV and trade date. NAVs are calculated only on days the NYSE is open for trading.
If Vanguard is serving as your plan recordkeeper, and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.
22
Frequent-Trading Limitations
The exchange privilege (your ability to purchase shares of a fund using the proceeds from the simultaneous redemption of shares of another fund) may be available to you through your plan. Although we make every effort to maintain the exchange privilege, Vanguard reserves the right to revise or terminate this privilege, limit the amount of an exchange, or reject any exchange, at any time, without notice. Because excessive exchanges can disrupt the management of the Vanguard funds and increase their transaction costs, Vanguard places certain limits on the exchange privilege.
If you are exchanging
out of
any Vanguard fund (other than money market funds and short-term bond funds), you must wait 60 days before exchanging
back into
the fund. This policy applies,
regardless of the dollar amount
. Please note that the 60-day clock restarts after every exchange out of the fund.
The frequent-trading limitations
do not
apply to the following: exchange requests submitted by mail to Vanguard (exchange requests submitted by fax, if otherwise permitted,
are
subject to the limitations); exchanges of shares purchased with participant payroll or employer contributions or loan repayments; exchanges of shares purchased with reinvested dividend or capital gains distributions; distributions, loans, and in-service withdrawals from a plan; redemptions of shares as part of a plan termination or at the direction of the plan; redemptions of shares to pay fund or account fees; share or asset transfers or rollovers; reregistrations of shares within the same fund; conversions of shares from one share class to another in the same fund; and automated transactions executed during the first six months of a participants enrollment in the Vanguard Managed Account Program.
Before making an exchange to or from another fund available in your plan, consider the following:
Certain investment options, particularly funds made up of company stock or investment contracts, may be subject to unique restrictions.
Be sure to read the funds prospectus. Contact Vanguard Participant Services, toll-free, at 800-523-1188 for a copy.
Vanguard can accept exchanges only as permitted by your plan. Contact your plan administrator for details on other exchange policies that apply to your plan.
23
Plans for which Vanguard does not serve as recordkeeper:
If Vanguard does not serve as recordkeeper for your plan, your plans recordkeeper will establish accounts in Vanguard funds for the benefit of its clients. In such accounts, we cannot always monitor the trading activity of individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor participants trading activity with respect to Vanguard funds.
For those Vanguard funds that charge purchase
and/or
redemption fees, intermediaries that establish accounts in the Vanguard funds will be asked to assess
these
fees on participant accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If a firm other than Vanguard serves as recordkeeper for your plan, please read that firms materials carefully to learn of any other rules or fees that may apply.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, broker, or investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
No cancellations
Vanguard will not accept your request to cancel any transaction request once processing has begun. Please be careful when placing a transaction request.
Proof of a callers authority
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.
24
Uncashed Checks
Vanguard will not pay interest on uncashed checks.
Portfolio Holdings
We generally post on our website at
vanguard.com
, in the
Portfolio
section of the Fund’s Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. We also generally post the ten largest stock portfolio holdings of the Fund and the percentage of the Fund’s total assets that each of these holdings represents, as of the end of the most recent calendar quarter. This list is generally updated within 15 calendar days after the end of each calendar quarter. Please consult the Fund’s
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Fund’s portfolio holdings.
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Inception Date
|
Abbreviation
|
Fund Number
|
Number
|
International Growth Fund
|
|
|
|
|
Investor Shares
|
9/30/1981
|
IntlGr
|
81
|
921910204
|
Accessing Fund Information Online
Vanguard Online at
Vanguard.com
Visit Vanguard’s education-oriented website for access to timely news and information about Vanguard funds and services and easy-to-use, interactive tools to help you create your own investment and retirement strategies.
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
25
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
MSCI ACWI ex USA Index.
An index that tracks stock markets in countries included in the MSCI EAFE Index plus Canada and a number of emerging markets, but excluding the U.
S
.
Mu
tual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Securities.
Stocks, bonds, money market instruments, and other investments.
Spliced International Index.
An index that reflects performance of the MSCI EAFE Index through May 31, 2010, and performance of the MSCI ACWI ex USA
Index
thereafter.
26
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
27
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This page intentionally left blank.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
To receive a free copy of the latest annual or semiannual
|
If you would like more information about Vanguard
|
report or the SAI, or to request additional information
|
International Growth Fund, the following documents
|
about the Fund or other Vanguard funds, please visit
|
are available free upon request:
|
vanguard.com
or contact us as follows:
|
|
Annual/Semiannual Reports to Shareholders
|
The Vanguard Group
|
Additional information about the Funds investments is
|
Participant Services
|
available in the Funds annual and semiannual reports
|
P.O. Box 2900
|
to shareholders. In the annual report, you will find a
|
Valley Forge, PA 19482-2900
|
discussion of the market conditions and investment
|
Telephone: 800-523-1188
|
strategies that significantly affected the Funds
|
Text telephone for people with hearing impairment:
|
performance during its last fiscal year.
|
800-749-7273
|
|
Statement of Additional Information (SAI)
|
Information Provided by the Securities and
|
The SAI provides more detailed information about the
|
Exchange Commission (SEC)
|
Fund and is incorporated by reference into (and thus
|
You can review and copy information about the Fund
|
legally a part of) this prospectus.
|
(including the SAI) at the SECs Public Reference Room
|
|
in Washington, DC. To find out more about this public
|
|
service, call the SEC at 202-551-8090. Reports and
|
|
other information about the Fund are also available in
|
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
|
by electronic request at the following e-mail address:
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
|
Section, Securities and Exchange Commission,
|
|
Washington, DC 20549-1520.
|
|
|
Funds Investment Company Act file number: 811-01027
|
|
|
|
|
|
© 2012 The Vanguard Group, Inc. All rights reserved.
|
|
Vanguard Marketing Corporation, Distributor.
|
|
|
I 081 122012
|
|
Vanguard International Growth Fund
|
Prospectus
|
|
December 27, 2012
|
|
Admiral Shares for Participants
|
Vanguard International Growth Fund Admiral Shares (VWILX)
|
|
|
|
|
This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
.
|
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
|
passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
|
|
|
|
|
Contents
|
|
|
|
|
|
Fund Summary
|
1
|
Financial Highlights
|
20
|
More on the Fund
|
5
|
Investing With Vanguard
|
22
|
The Fund and Vanguard
|
14
|
Accessing Fund Information Online
|
25
|
Investment Advisors
|
15
|
Glossary of Investment Terms
|
26
|
Dividends, Capital Gains, and Taxes
|
18
|
|
|
Share Price
|
18
|
|
|
Fund Summary
Investment Objective
The Fund seeks to provide long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Admiral Shares of the Fund.
|
|
Shareholder Fees
|
|
(Fees paid directly from your investment)
|
|
|
Sales Charge (Load) Imposed on Purchases
|
None
|
Purchase Fee
|
None
|
Sales Charge (Load) Imposed on Reinvested Dividends
|
None
|
Redemption Fee
|
None
|
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
|
|
Management Expenses
|
0.32%
|
12b-1 Distribution Fee
|
None
|
Other Expenses
|
0.04%
|
Total Annual Fund Operating Expenses
|
0.36%
|
Example
The following example is intended to help you compare the cost of investing in the Fund’s Admiral Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. This example assumes that the Shares provide a return of 5% a year and that
total annual fund
operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
|
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
$37
|
$116
|
$202
|
$456
|
1
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was
30
%.
Primary Investment Strategies
The Fund invests predominantly in the stocks of companies located outside the United States and is expected to diversify its assets across developed and emerging markets in Europe, the Far East, and Latin America. In selecting stocks, the Funds advisors evaluate foreign markets around the world and choose large-, mid-, and small-capitalization companies considered to have above-average growth potential. The Fund uses multiple investment advisors.
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of global stock markets.
The Fund is subject to the following risks, which could affect the Funds performance:
Investment style risk
, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
Stock market risk
, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
Country/regional risk,
which is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Country/regional risk is especially high in emerging markets.
2
•
Currency risk
, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Currency risk is especially high in emerging markets.
•
Manager risk
, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Admiral Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns compare with those of relevant market indexes, which have investment characteristics similar to those of the Fund. Returns for the indexes shown are adjusted for withholding taxes. Keep in mind that the Fund’s past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard International Growth Fund Admiral Shares
1
1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 12.50%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 27.11% (quarter ended June 30, 2009), and the lowest return for a quarter was –23.16% (quarter ended December 31, 2008).
3
|
|
|
|
Average Annual Total Returns for Periods Ended December 31,
2011
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
Vanguard International Growth Fund Admiral Shares
|
13.58%
|
1.85%
|
5.75%
|
Comparative Indexes
|
|
|
|
(reflect no deduction for fees or expenses)
|
|
|
|
MSCI ACWI ex USA Index
|
13.71%
|
2.92%
|
6.31%
|
Spliced International Index
|
13.71
|
5.00
|
4.51
|
Investment Advisors
Baillie Gifford Overseas Ltd.
M&G Investment Management Limited
Schroder Investment Management North America Inc.
Portfolio Managers
James K. Anderson, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed a portion of the Fund since 2003.
Greg Aldridge, Portfolio Manager at M&G. He has
managed
a portion of the Fund since 2008.
Vi
rginie Maisonneuve, CFA, Head of Schroders Global and International Equities. She has co-managed a portion of the Fund since 2005.
Simon Webber, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has co-managed a portion of the Fund since 2009.
Tax Information
The Funds distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
Payments to Financial Intermediaries
The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.
4
More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance
for fluctuations in the securities markets. Look for this
symbol throughout the
prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
This prospectus offers the Fund‘s Admiral Shares and is intended for participants in employer-sponsored retirement or savings plans. Another version—for investors who would like to open a personal investment account—can be obtained
on our website at
vanguard.com
or
by calling Vanguard at 800-662-7447.
|
Plain Talk About Fund Expenses
|
|
All mutual funds have operating expenses. These expenses, which are deducted
|
from a fund’s gross income, are expressed as a percentage of the net assets of
|
the fund. Assuming that operating expenses remain as stated in the Fees and
|
Expenses section, Vanguard International Growth Fund Admiral Shares’ expense
|
ratio would be
0.36%
, or
$3.60
per $1,000 of average net assets. The average
|
expense ratio for international equity funds in
2011
was
1.37%
, or
$13.70
per
|
$1,000 of average net assets (derived from data provided by Lipper Inc., which
|
reports on the mutual fund industry).
|
|
Plain Talk About Costs of Investing
|
|
Costs are an important consideration in choosing a mutual fund. That’s because
|
you, as a shareholder, pay a proportionate share of the costs of operating a fund,
|
plus any transaction costs incurred when the fund buys or sells securities. These
|
costs can erode a substantial portion of the gross income or the capital
|
appreciation a fund achieves. Even seemingly small differences in expenses can,
|
over time, have a dramatic effect on a fund’s performance.
|
5
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Funds board of trustees, which oversees the Funds management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental.
Market Exposure
The Fund invests mainly in common stocks of non-U.S. companies that are considered to have above-average potential for growth. The asset-weighted median market capitalization of the Fund as of
August 31, 2012
, was $
32
billion.
The Fund is subject to investment style risk, which is the chance that returns from non-U.S. growth stocks and, to the extent that the Fund is invested in them, small- and mid-cap stocks, will trail returns from global stock markets. Historically, non-U.S. small- and mid-cap stocks have been more volatile in price than the large-cap stocks that dominate the global markets, and they often perform quite differently.
|
Plain Talk About Growth Funds and Value Funds
|
|
Growth investing and value investing are two styles employed by stock-fund
|
managers. Growth funds generally focus on stocks of companies believed to
|
have above-average potential for growth in revenue, earnings, cash flow, or other
|
similar criteria. These stocks typically have low dividend yields and above-average
|
prices in relation to measures such as earnings and book value. Value funds
|
typically emphasize stocks whose prices are below average in relation to those
|
measures; these stocks often have above-average dividend yields. Growth and
|
value stocks have historically produced similar long-term returns, though each
|
category has periods when it outperforms the other.
|
6
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition, investments in foreign stocks can be riskier than U.S. stock investments. The prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions.
To illustrate the volatility of international stock prices, the following table shows the best, worst, and average annual total returns for foreign stock markets over various periods as measured by the MSCI EAFE Index, a widely used barometer of international market activity. (Total returns consist of dividend income plus change in market price.) Note that the returns shown do not include the costs of buying and selling stocks or other expenses that a real-world investment portfolio would incur.
|
|
|
|
|
International Stock Market Returns
|
|
|
|
|
(1970–
2011
)
|
|
|
|
|
|
1 Year
|
5 Years
|
10 Years
|
20 Years
|
Best
|
69.4%
|
36.1%
|
22.0%
|
15.5%
|
Worst
|
–43.4
|
–4.7
|
0.8
|
3.1
|
Average
|
11.3
|
10.0
|
10.5
|
11.0
|
The table covers all of the 1-, 5-, 10-, and 20-year periods from 1970 through
2011
. These average
annual
returns reflect
past
performance of international stocks; you should not regard them as an indication of
future
performance of either foreign markets as a whole or the Fund in particular.
7
Note that the MSCI EAFE Index does not take into account returns for emerging markets, which can be substantially more volatile, and substantially less liquid, than the more developed markets included in the Index. In addition, because the MSCI EAFE Index tracks the European and Pacific developed markets collectively, the returns in the preceding table do not reflect the variability of returns for these markets individually. To illustrate this variability, the following table shows returns for different international markets—as well as for the U.S. market for comparison—from
2002
through
2011
, as measured by their respective indexes.
|
|
|
|
|
Returns for Various Stock Markets
1
|
|
|
|
|
European
|
Pacific
|
Emerging
|
U.S.
|
|
Market
2
|
Market
2
|
Markets
2
|
Market
|
2002
|
–18.38%
|
–9.29%
|
–6.17%
|
–22.10%
|
2003
|
38.54
|
38.48
|
55.82
|
28.68
|
2004
|
20.88
|
18.98
|
25.55
|
10.88
|
2005
|
9.42
|
22.64
|
34.00
|
4.91
|
2006
|
33.72
|
12.20
|
32.17
|
15.79
|
2007
|
13.86
|
5.30
|
39.39
|
5.49
|
2008
|
–46.42
|
–36.42
|
–53.33
|
–37.00
|
2009
|
35.83
|
24.18
|
78.51
|
26.46
|
2010
|
3.88
|
15.92
|
18.88
|
15.06
|
2011
|
–11.06
|
–13.74
|
–18.42
|
2.11
|
1 European market returns are measured by the MSCI Europe Index; Pacific market returns are measured by the MSCI Pacific Index; emerging markets returns are measured by the MSCI Emerging Markets Index; and U.S. market returns are measured by the Standard & Poor‘s 500 Index.
2
MSCI
Index returns are adjusted for withholding taxes
.
Keep in mind that these returns reflect
past
performance of the various indexes; you should not consider them as an indication of
future
performance of the indexes or of the Fund in particular.
8
The Fund is subject to country/regional risk and currency risk. Country/regional risk is the chance that world eventssuch as political upheaval, financial troubles, or natural disasterswill adversely affect the value of securities issued by companies in foreign countries or regions. Because the Fund may invest a large portion of its assets in securities of companies located in any one country or region, including emerging markets, the Funds performance may be hurt disproportionately by the poor performance of its investments in that area. Currency risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.
|
Plain Talk About International Investing
|
|
U.S. investors who invest abroad will encounter risks not typically associated
|
with U.S. companies because foreign stock and bond markets operate differently
|
from the U.S. markets. For instance, foreign companies are not subject to the
|
same accounting, auditing, and financial-reporting standards and practices as
|
U.S. companies, and their stocks may not be as liquid as those of similar U.S.
|
firms. In addition, foreign stock exchanges, brokers, and companies
may be
|
subject to
less government supervision and regulation than their counterparts in
|
the United States. These factors, among others, could negatively affect the
|
returns U.S. investors receive from foreign investments.
|
Security Selection
The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.
Each advisor employs active investment management methods, which means that securities are bought and sold according to the advisors evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general. Each advisor will sell a security when, in the view of the advisor, it is no longer as attractive as an alternative investment.
Baillie Gifford Overseas Ltd.
(Baillie Gifford), which manages approximately
49%
of the Funds assets, follows an investment approach based on making long-term investments in well-researched and well-managed businesses that the advisor believes enjoy sustainable competitive advantages in their marketplaces. Baillie Gifford uses a fundamental approach to identify quality growth companies. The firm considers sustainable earnings and free cash-flow growth to be critical factors in evaluating a companys prospects.
9
Companies are screened first for quality and then for value. Baillie Gifford looks for companies with attractive industry backgrounds, strong competitive positions within those industries, high-quality earnings, and a positive approach toward shareholders. The main fundamental factors considered in this bottom-up analysis are earnings growth, cash-flow growth, profitability, debt and interest coverage, and valuation.
To determine how to allocate its portion of the Funds assets geographically, Baillie Gifford constantly evaluates economic, market, and political trends worldwide. Among the factors considered are currency exchange rates, growth potential of economies and securities markets, technological developments, and political and social conditions.
Schroder Investment Management North America Inc.
(Schroders), which manages approximately
38%
of the Funds assets, seeks high-quality, reasonably priced, securities of international companies with strong growth prospects and a sustainable competitive advantage. Schroders believes that in-depth fundamental research, incorporating a comprehensive macroeconomic viewpoint, is the most reliable means of finding those companies and identifying where their growth is undervalued by the market. Schroders relies on a team-oriented matrix approach to drive research, security selection, and portfolio construction. Initial local research draws on the extensive knowledge of, and recommendations generated by,
approximately
70 regional analysts located
across the globe
. The strongest ideas of these local analysts are then overlaid with the global perspective of an international team of global sector specialists and regionally focused managers. In Schroders view, this knowledge matrix (global sector/regional expertise) provides an optimal framework for identifying strong investment candidates and building high-quality portfolios across multiple regions and sectors. While the input of the teams Global Sector Specialists is an important source of investment ideas and research, the investment decision making for the Fund rests with the Funds portfolio managers.
M&G Investment Management Limited
(M&G), which manages approximately
11
% of the Funds assets, uses a long-term, bottom-up approach to portfolio management that focuses on quality companies with scarce assets that deliver high returns and exhibit growth potential. Scarce assets can include traditional tangible assets (such as land or property), intangible assets (such as a strong brand or reputation), and organizational assets (such as a unique corporate culture). The team seeks to identify companies that fall into three categories: qualityhigh quality companies with scarce assets that support sustainable superior returns; growthcompanies that use scarce assets to grow faster than their competitors; and transformingcompanies that are emerging from a heavy investment cycle that may lead to a strong rebound in returns.
The Vanguard Group, Inc.
(Vanguard) manages a small portion (approximately
2%
) of the Funds assets to facilitate cash flows to and from the Funds advisors. Vanguard typically invests its portion of the Funds assets in stock index futures and/or shares of exchange-traded funds. For more details, see Other Investment Policies and Risks.
10
The Fund is subject to manager risk, which is the chance that poor security selection or focus on securities in a particular sector, category, or group of companies will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
Other Investment Policies and Risks
In addition to investing in stocks of foreign companies, the Fund may make other kinds of investments to achieve its objective.
The Fund may invest in foreign issuers through American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), or similar investment vehicles. The Fund may also invest in convertible securities.
The Fund may invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the S&P 500 Index). Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a countrys currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Funds securities from falling in value during foreign market
downswings.
|
Plain Talk About Derivatives
|
|
Derivatives can take many forms. Some forms of derivatives, such as
|
exchange-traded futures and options on securities, commodities, or indexes,
|
have been trading on regulated exchanges for decades. These types of
|
derivatives are standardized contracts that can easily be bought and sold, and
|
whose market values are determined and published daily. Nonstandardized
|
derivatives (such as swap agreements and forward foreign currency exchange
|
contracts), on the other hand, tend to be more specialized or complex, and may
|
be harder to value.
|
11
Vanguard typically invests a small portion of the Funds assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds.
These s
tock index futures and ETFs
typically
provide returns similar to those of common stocks. Vanguard may purchase futures or ETFs when doing so will reduce the Funds transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when an advisor believes that doing so is in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategiesfor instance, by allocating substantial assets to cash, commercial paper, or other less volatile instrumentsin response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.
12
Frequent Trading or Market-Timing
Background.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent tradin
g. The
board of trustees of each Vanguard fund
(other than money market funds and short-term bond funds)
has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it.
These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. A
lthough there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, a participant from exchanging into a fund account for 60 calendar days after the participant has exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
13
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. The average turnover rate for international stock funds was approximately
73%,
as reported by Morningstar, Inc., on
August 31, 2012
.
|
Plain Talk About Turnover Rate
|
|
Before investing in a mutual fund, you should review its turnover rate. This gives
|
an indication of how transaction costs, which are not included in the funds
|
expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that brokerage
|
commissions and other transaction costs will have on its return. Also, funds with
|
high turnover rates may be more likely to generate capital gains that must be
|
distributed to shareholders.
|
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family of
1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space,
and
equipmen
t.
Vanguard
Marketing Corporation
provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of
t
he Vanguard
funds
marketing costs.
14
|
Plain Talk About Vanguards Unique Corporate Structure
|
|
The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
|
the funds it oversees and thus indirectly by the shareholders in those funds.
|
Most other mutual funds are operated by management companies that may be
|
owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
Investment Advisors
The Fund uses a multimanager approach. Each advisor independently manages its assigned portion of the Funds assets, subject to the supervision and oversight of Vanguard and the Funds board of trustees. The board of trustees designates the proportion of the Fund assets to be managed by each advisor and may change these proportions at any time.
Baillie Gifford Overseas Ltd., Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, Scotland, is an investment advisory firm founded in 1983. Baillie Gifford Overseas Ltd. is wholly owned by a Scottish investment company, Baillie Gifford & Co. Founded in 1908, Baillie Gifford & Co., one of the largest independently owned investment management firms in the United Kingdom, manages money primarily for institutional clients. Baillie Gifford began managing a portion of the Fund in 2003. Baillie Gifford & Co. had assets under management that totaled approximately $130 billion as of
August 31, 2012
.
M&G Investment Management Limited, Laurence Pountney Hill, London, EC4R
0HH, England, is an advisory firm and wholly owned subsidiary of the Prudential plc. M&G is a company incorporated in the United Kingdom, based in London, England, and is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States. M&G, a separate business unit within the Prudential group, launched Great Britains first unit trust (mutual fund) in 1931. M&G began managing a portion of the Fund in 2008. As of
August 31, 2012
, M&G managed approximately $351 billion in assets.
15
Schroder Investment Management North America Inc., 875 Third Avenue, 22nd Floor, New York, NY 10022-6225, is a registered investment advisor that is part of a worldwide group of financial services companies that are wholly owned by Schroders plc. Schroders currently serves as investment advisor to the Fund, other mutual funds, and a broad range of institutional investors. As of
August 31, 2012
, Schroders plc, through its affiliates, managed approximately $327 billion in assets. Schroder Investment Management North America Ltd. (Schroder Limited), 31 Gresham Street, London, EC2V 7QA, England, has served as the sub-advisor for the Schroders portion of the Fund.
The Fund pays each of its investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisors portion of the Fund relative to that of the MSCI ACWI ex USA Index over the preceding 36-month period. When the performance adjustment is positive, the Funds expenses increase; when it is negative, expenses decrease.
As of August 31, 2012,
Schroder Investment Management North America Inc. pays 50% of its advisory fee to Schroder Limited for providing sub-advisory services.
For the fiscal year ended
August 31, 2012
, the aggregate advisory fee represented an effective annual rate of
0.15%
of the Funds average net assets
before a performance-based increase of 0.04%
.
Under the terms of an SEC exemption, the Funds board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement or hire a new investment advisoreither as a replacement for an existing advisor or as an additional advisor. Any significant change in the Funds advisory arrangements will be communicated to shareholders in writing. In addition, as the Funds sponsor and overall manager, The Vanguard Group may provide investment advisory services to the Fund, on an at-cost basis, at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced, or that the terms of an existing advisory agreement be revised.
For a discussion of why the board of trustees approved the Funds investment advisory agreements, see the most recent semiannual report to shareholde
rs.
16
The managers primarily responsible for the day-to-day management of the Fund are:
James K. Anderson
, Partner of Baillie Gifford & Co. and Head of Global Equities. He has managed assets with Baillie Gifford since 1985 and has managed a portion of the Fund since 2003. Education: B.A., University College, Oxford; Diploma, Bologna Center of Johns Hopkins University; M.A., Carleton Ottawa University.
Greg Aldridge
, Portfolio Manager at M&G. He has worked in investment management with M&G since 2004; has managed investment portfolios since 2007; and has
m
anaged a portion of the Fund since 2008. Education: M.A., Cambridge University; M.B.A., INSE
AD.
Vi
rginie Maisonneuve
, CFA, Head of Schroders Global and International Equities. She has worked in investment management and has managed assets since 1987; has managed assets for Schroders since 2004; and has co-managed a portion of the Fund since 2005. Education: a degree from the Peoples University in Beijing, China, and a Diplôme de Grande Ecole de Commerce (equivalent to an M.B.A.) from the ESLSCA in Paris, France.
Simon Webber
, CFA, Fund Manager and Global Sector Specialist of Schroders Global and International Equities. He has worked in investment management for Schroders since 1999; has managed assets since 2001; and has co-managed a portion of the Fund since 2009. Education: B.Sc., University of Manchester.
The
Statement of Additional Information
provides information about each portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
17
Dividends, Capital Gains, and Taxes
Fund Distributions
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net capital gains realized from the sale of its holdings. Income and capital gains distributions, if any, generally occur annually in December.
Your distributions will be reinvested in additional Fund shares and accumulate on a tax-deferred basis if you are investing through an employer-sponsored retirement or savings plan. You will not owe taxes on these distributions until you begin withdrawals from the plan. You should consult your plan administrator, your plans Summary Plan Description, or your tax advisor about the tax consequences of plan withdrawals.
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
and dividends as well as capital gains from the funds sale of investments. Income
|
consists of both the dividends that the fund earns from any stock holdings and the
|
interest it receives from any money market and bond investments. Capital gains are
|
realized whenever the fund sells securities for higher prices than it paid for them.
|
These capital gains are either short-term or long-term, depending on whether the
|
fund held the securities for one year or less or for more than one year.
|
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests. However, on those days the value of the Funds assets may be affected to the extent that the Fund holds foreign securities that trade on foreign markets that are open.
Stocks held by a Vanguard fund are valued at their
market value
when reliable market quotations are readily available. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
18
When a fund determines that market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the funds pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the funds pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement), or country-specific or regional/global (e.g., natural disaster, economic or political news, act of terrorism, interest rate change). Intervening events include price movements in U.S. markets that are deemed to affect the value of foreign securities. Fair-value pricing may be used for domestic securitiesfor example, if (1) trading in a security is halted and does not resume before the funds pricing time or if a security does not trade in the course of a day, and (2) the fund holds enough of the security that its price could affect the NAV.
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
19
Financial Highlights
The following financial highlights table is intended to help you understand the Admiral Shares financial performance for the periods shown, and certain information reflects financial results for a single Admiral Share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Admiral Shares (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Table
|
|
The Admiral Shares began fiscal year
2012
with a net asset value (price) of $
58.17
|
per share. During the year, each Admiral Share earned $
1.229
from investment
|
income (interest and dividends). There was a decline of $
1.945
per share in the
|
value of investments held or sold by the Fund, resulting in a net decline of $0
.716
|
per share from investment operations.
|
|
Shareholders received $
1.144
per share in the form of dividend distributions. A
|
portion of each years distributions may come from the prior years income or
|
capital gains.
|
|
The share price at the end of the year was $
56.31
, reflecting losses of $0
.716
per
|
share and distributions of $
1.144
per share. This was a decrease of $
1.86
per
|
share (from $
58.17
at the beginning of the year to $
56.31
at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was
1.01
% for the year.
|
|
As of
August 31, 2012
, the Admiral Shares had approximately $
7.5
billion in net
|
assets. For the year, the expense ratio was
0.36
% ($
3.60
per $1,000 of net
|
assets), and the net investment income amounted to
2.17
% of average net
|
assets. The Fund sold and replaced securities valued at
30
% of its net assets.
|
20
|
|
|
|
|
|
International Growth Fund Admiral Shares
|
|
|
|
|
|
|
|
|
|
Year Ended August 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$58.17
|
$51.81
|
$50.08
|
$65.09
|
$83.26
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
1.229
|
1.192
|
1.009
|
1.340
1
|
1.649
|
Net Realized and Unrealized Gain (Loss)
|
|
|
|
|
|
on Investments
|
(1.945)
|
6.209
|
1.708
|
(11.571)
|
(10.929)
|
Total from Investment Operations
|
(.716)
|
7.401
|
2.717
|
(10.231)
|
(9.280)
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(1.144)
|
(1.041)
|
(.987)
|
(1.909)
|
(1.845)
|
Distributions from Realized Capital Gains
|
—
|
—
|
—
|
(2.870)
|
(7.045)
|
Total Distributions
|
(1.144)
|
(1.041)
|
(.987)
|
(4.779)
|
(8.890)
|
Net Asset Value, End of Period
|
$56.31
|
$58.17
|
$51.81
|
$50.08
|
$65.09
|
Total Return
|
–1.01%
|
14.21%
|
5.36%
|
–13.57% –12.67%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$7,523
|
$6,487
|
$4,353
|
$3,934
|
$4,845
|
Ratio of Total Expenses to Average
|
|
|
|
|
|
Net Assets
2
|
0.36%
|
0.34%
|
0.33%
|
0.34%
|
0.28%
|
Ratio of Net Investment Income to Average
|
|
|
|
|
|
Net Assets
|
2.17%
|
1.98%
|
1.90%
|
3.03%
1
|
2.26%
|
Portfolio Turnover Rate
|
30%
|
43%
|
44%
|
51%
|
55%
|
1 Net investment income per share and the ratio of net investment income to average net assets include $0.194 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.
2 Includes performance-based investment advisory fee increases (decreases) of 0.04%, 0.03%, 0.03%, 0.03%, and 0.02%.
21
Investing With Vanguard
The Fund is an investment option in your retirement or savings plan. Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.
If you have any questions about the Fund or Vanguard, including those about the Funds investment objective, strategies, or risks, contact Vanguard Participant Services, toll-free, at 800-523-1188.
If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.
Be sure to carefully read each topic that pertains to your transactions with Vanguard.
Vanguard reserves the right to change its policies without notice to shareholders.
Investment Options and Allocations
Your plans specific provisions may allow you to change your investment selections, the amount of your contributions, or how your contributions are allocated among the investment choices available to you. Contact your plan administrator or employee benefits office for more details.
Transactions
Transaction requests (e.g., a contribution, exchange, or redemption) must be in good order. Good order means that Vanguard has determined that (1) your transaction request includes complete information and (2) appropriate assets are already in your account or new assets have been received.
Processing times for your transaction requests may differ among recordkeepers or among transaction types. Your plans recordkeeper (which may also be Vanguard) will determine the necessary processing timeframes for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.
Your transaction will then be based on the next-determined NAV of the Funds Admiral Shares. If your transaction request was received in good order before the close of regular trading on the New York Stock Exchange (NYSE) (generally 4 p.m., Eastern time), you will receive that days NAV and trade date. NAVs are calculated only on days the NYSE is open for trading.
If Vanguard is serving as your plan recordkeeper, and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.
22
Frequent-Trading Limitations
The exchange privilege (your ability to purchase shares of a fund using the proceeds from the simultaneous redemption of shares of another fund) may be available to you through your plan. Although we make every effort to maintain the exchange privilege, Vanguard reserves the right to revise or terminate this privilege, limit the amount of an exchange, or reject any exchange, at any time, without notice. Because excessive exchanges can disrupt the management of the Vanguard funds and increase their transaction costs, Vanguard places certain limits on the exchange privilege.
If you are exchanging
out of
any Vanguard fund (other than money market funds and short-term bond funds), you must wait 60 days before exchanging
back into
the fund. This policy applies,
regardless of the dollar amount
. Please note that the 60-day clock restarts after every exchange out of the fund.
The frequent-trading limitations
do not
apply to the following: exchange requests submitted by mail to Vanguard (exchange requests submitted by fax, if otherwise permitted,
are
subject to the limitations); exchanges of shares purchased with participant payroll or employer contributions or loan repayments; exchanges of shares purchased with reinvested dividend or capital gains distributions; distributions, loans, and in-service withdrawals from a plan; redemptions of shares as part of a plan termination or at the direction of the plan; redemptions of shares to pay fund or account fees; share or asset transfers or rollovers; reregistrations of shares within the same fund; conversions of shares from one share class to another in the same fund; and automated transactions executed during the first six months of a participants enrollment in the Vanguard Managed Account Program.
Before making an exchange to or from another fund available in your plan, consider the following:
Certain investment options, particularly funds made up of company stock or investment contracts, may be subject to unique restrictions.
Be sure to read the funds prospectus. Contact Vanguard Participant Services, toll-free, at 800-523-1188 for a copy.
Vanguard can accept exchanges only as permitted by your plan. Contact your plan administrator for details on other exchange policies that apply to your plan.
23
Plans for which Vanguard does not serve as recordkeeper:
If Vanguard does not serve as recordkeeper for your plan, your plans recordkeeper will establish accounts in Vanguard funds for the benefit of its clients. In such accounts, we cannot always monitor the trading activity of individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor participants trading activity with respect to Vanguard funds.
For those Vanguard funds that charge purchase
and/or
redemption fees, intermediaries that establish accounts in the Vanguard funds will be asked to assess
these
fees on participant accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If a firm other than Vanguard serves as recordkeeper for your plan, please read that firms materials carefully to learn of any other rules or fees that may apply.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, broker, or investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
No cancellations
Vanguard will not accept your request to cancel any transaction request once processing has begun. Please be careful when placing a transaction request.
Proof of a callers authority
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.
24
Uncashed Checks
Vanguard will not pay interest on uncashed checks.
Portfolio Holdings
We generally post on our website at
vanguard.com
, in the
Portfolio
section of the Funds Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. We also generally post the ten largest stock portfolio holdings of the Fund and the percentage of the Funds total assets that each of these holdings represents, as of the end of the most recent calendar quarter. This list is generally updated within 15 calendar days after the end of each calendar quarter. Please consult the Funds
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Funds portfolio holdings.
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
Newspaper
|
Vanguard
|
CUSIP
|
|
Inception Date
|
Abbreviation
|
Fund Number
|
Number
|
International Growth Fund
|
|
|
|
|
Admiral Shares
|
8/13/2001
|
IntlGrAdml
|
581
|
921910501
|
Accessing Fund Information Online
Vanguard Online at
Vanguard.com
Visit Vanguards education-oriented website for access to timely news and information about Vanguard funds and services and easy-to-use, interactive tools to help you create your own investment and retirement strategies.
CFA
®
is a trademark owned by CFA Institute.
Morningstar data ©
2012
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
25
Glossary of Investment Terms
Capital Gains Distribution.
Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Investments.
Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and bankers acceptances.
Common Stock.
A security representing ownership rights in a corporation. A stockholder is entitled to share in the companys profits, some of which may be paid out as dividends.
Dividend Distribution.
Payment to mutual fund shareholders of income from interest or dividends generated by a funds investments.
Expense Ratio.
A funds total annual operating expenses expressed as a percentage of the funds average net assets. The expense ratio includes management and administrative expenses, but does not include the transaction costs of buying and selling portfolio securities.
Inception Date.
The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the funds investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Median Market Capitalization.
An indicator of the size of companies in which a fund invests; the midpoint of market capitalization (market price x shares outstanding) of a funds stocks, weighted by the proportion of the funds assets invested in each stock. Stocks representing half of the funds assets have market capitalizations above the median, and the rest are below it.
MSCI ACWI ex USA Index.
An index that tracks stock markets in countries included in the MSCI EAFE Index plus Canada and a number of emerging markets, but excluding the U.
S
.
Mu
tual Fund.
An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
Securities.
Stocks, bonds, money market instruments, and other investments.
Spliced International Index.
An index that reflects performance of the MSCI EAFE Index through May 31, 2010, and performance of the MSCI ACWI ex USA
Index
thereafter.
26
Total Return.
A percentage change, over a specified time period, in a mutual funds net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility.
The fluctuations in value of a mutual fund or other security. The greater a funds volatility, the wider the fluctuations in its returns.
Yield.
Income (interest or dividends) earned by an investment, expressed as a percentage of the investments price.
27
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This page intentionally left blank.
|
|
Connect with Vanguard
®
> vanguard.com
|
|
|
|
|
For More Information
|
To receive a free copy of the latest annual or semiannual
|
If you would like more information about Vanguard
|
report or the SAI, or to request additional information
|
International Growth Fund, the following documents
|
about the Fund or other Vanguard funds, please visit
|
are available free upon request:
|
vanguard.com
or contact us as follows:
|
|
Annual/Semiannual Reports to Shareholders
|
The Vanguard Group
|
Additional information about the Funds investments is
|
Participant Services
|
available in the Funds annual and semiannual reports
|
P.O. Box 2900
|
to shareholders. In the annual report, you will find a
|
Valley Forge, PA 19482-2900
|
discussion of the market conditions and investment
|
Telephone: 800-523-1188
|
strategies that significantly affected the Funds
|
Text telephone for people with hearing impairment:
|
performance during its last fiscal year.
|
800-749-7273
|
|
Statement of Additional Information (SAI)
|
Information Provided by the Securities and
|
The SAI provides more detailed information about the
|
Exchange Commission (SEC)
|
Fund and is incorporated by reference into (and thus
|
You can review and copy information about the Fund
|
legally a part of) this prospectus.
|
(including the SAI) at the SECs Public Reference Room
|
|
in Washington, DC. To find out more about this public
|
|
service, call the SEC at 202-551-8090. Reports and
|
|
other information about the Fund are also available in
|
|
the EDGAR database on the SECs website at sec.gov,
|
|
or you can receive copies of this information, for a fee,
|
|
by electronic request at the following e-mail address:
|
|
publicinfo@sec.gov, or by writing the Public Reference
|
|
Section, Securities and Exchange Commission,
|
|
Washington, DC 20549-1520.
|
|
|
Funds Investment Company Act file number: 811-01027
|
|
|
|
|
|
© 2012 The Vanguard Group, Inc. All rights reserved.
|
|
Vanguard Marketing Corporation, Distributor.
|
|
|
I 581 122012
|
|
Vanguard Extended Duration Treasury Index Fund
|
Prospectus
|
|
December 27, 2012
|
|
Institutional Shares & Institutional Plus Shares
|
Vanguard Extended Duration Treasury Index Fund Institutional Shares (VEDTX)
|
Vanguard Extended Duration Treasury Index Fund Institutional Plus Shares (VEDIX)
|
|
|
|
|
This prospectus contains financial data for the Fund through the fiscal year ended
August 31, 2012
.
|
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or
|
passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
|
|
|
|
|
Contents
|
|
|
|
|
|
Fund Summary
|
1
|
Investing With Vanguard
|
22
|
Investing in Index Funds
|
6
|
Purchasing Shares
|
22
|
More on the Fund
|
7
|
Converting Shares
|
25
|
The Fund and Vanguard
|
15
|
Redeeming Shares
|
27
|
Investment Advisor
|
15
|
Exchanging Shares
|
30
|
Dividends, Capital Gains, and Taxes
|
17
|
Frequent-Trading Limitations
|
31
|
Share Price
|
19
|
Other Rules You Should Know
|
33
|
Financial Highlights
|
20
|
Fund and Account Updates
|
36
|
|
|
Contacting Vanguard
|
38
|
|
|
Additional Information
|
39
|
|
|
Glossary of Investment Terms
|
40
|
Fund Summary
Investment Objective
The Fund seeks to track the performance of an index of extended-duration zero-coupon U.S. Treasury securities.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy and hold Institutional Shares or Institutional Plus Shares of the Fund.
|
|
|
Shareholder Fees
|
|
|
(Fees paid directly from your investment)
|
|
|
|
Institutional
|
Institutional Plus
|
|
Shares
|
Shares
|
Sales Charge (Load) Imposed on Purchases
|
None
|
None
|
Purchase Fee (other than on reinvested dividends or capital gains)
|
0.50%
|
0.50%
|
Sales Charge (Load) Imposed on Reinvested Dividends
|
None
|
None
|
Redemption Fee
|
None
|
None
|
|
|
Annual Fund Operating Expenses
|
|
|
(Expenses that you pay each year as a percentage of the value of your investment)
|
|
|
Institutional
|
Institutional Plus
|
|
Shares
|
Shares
|
Management Expenses
|
0.07%
|
0.05%
|
12b-1 Distribution Fee
|
None
|
None
|
Other Expenses
|
0.03%
|
0.03%
|
Total Annual Fund Operating Expenses
|
0.10%
|
0.08%
|
1
Examples
The following examples are intended to help you compare the cost of investing in the Fund’s Institutional Shares or Institutional Plus Shares with the cost of investing in other mutual funds. They illustrate the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. These examples assume that the Shares provide a return of 5% a year and that total annual fund operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
Institutional Shares
|
$60
|
$82
|
$106
|
$178
|
Institutional Plus Shares
|
$58
|
$76
|
$95
|
$152
|
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense examples, reduce the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was
47
%.
Primary Investment Strategies
The Fund employs an indexing investment approach designed to track the performance of the Barclays U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. This Index includes zero-coupon U.S. Treasury securities (Treasury STRIPS) with maturities ranging from 20 to 30 years. A Treasury STRIP represents a single coupon payment, or a single principal payment, from a U.S. Treasury security that has been “stripped” into separately tradable components.
2
The Fund invests by
sampling
the Index, meaning that it holds a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors, including duration and other characteristics. All of the Funds investments will be selected through the sampling process, and at least 80% of the Funds assets will be invested in U.S. Treasury securities held in the Index. The Fund maintains a dollar-weighted average maturity consistent with that of the Index, which generally ranges between 20 and 30 years. The Fund is expected to have a duration that is greater than 20 years.
Primary Risks
An investment in the Fund could lose money over short or even long periods. You should expect the Funds share price and total return to fluctuate within a wide range, like the fluctuations of the overall bond market. The Fund
is subject to the following risks, which could affect the Funds performance
:
Interest rate risk,
which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk is expected to be extremely high for the Fund because it invests primarily in zero-coupon long-term bonds, which have prices that are even more sensitive to interest rate changes than are coupon-bearing bonds of similar maturity. Because the Fund invests primarily in Treasury STRIPS with maturities ranging from 20 to 30 years, rising interest rates may cause the value of the Funds investments to decline significantly.
Index sampling risk,
which is the chance that the securities selected for the Fund, in the aggregate, will not provide investment performance matching that of the Funds target index. Index sampling risk for the Fund should be low.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Funds Institutional Shares (including operating expenses but excluding shareholder fees) has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Institutional Shares (including operating expenses and any applicable shareholder fees) compare with those of the Funds target index, which has investment characteristics similar to those of the Fund. Keep in mind that the Funds past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at
vanguard.com/performance
or by calling Vanguard toll-free at 800-662-7447.
3
Annual Total Returns — Vanguard Extended Duration Treasury Index Fund Institutional Shares
1
1 If applicable shareholder fees were reflected, returns would be less than those shown. The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2012, was 5.33%.
During the periods shown in the bar chart, the highest return for a calendar quarter was 52.05% (quarter ended September 30, 2011), and the lowest return for a quarter was –20.01% (quarter ended March 31, 2009).
|
|
|
Average Annual Total Returns for Periods Ended December 31,
2011
|
|
|
|
|
Since
|
|
|
Inception
|
|
|
(Nov. 28,
|
|
1 Year
|
2007)
|
Vanguard Extended Duration Treasury Index Fund Institutional Shares
|
|
|
Return Before Taxes
|
55.40%
|
13.30%
|
Return After Taxes on Distributions
|
52.64
|
10.43
|
Return After Taxes on Distributions and Sale of Fund Shares
|
36.07
|
9.62
|
Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index
|
|
|
(reflects no deduction for fees, expenses, or taxes)
|
56.24%
|
13.83%
|
Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned
Return After Taxes on Distributions and Sale of Fund Shares
will be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.
4
Investment Advisor
The Vanguard Group, Inc.
Portfolio Manager
Gregory Davis, CFA, Principal of Vanguard and head of Vanguards Bond Index Group.
He has managed the Fund since its inception in 2007.
Purchase and Sale of Fund Shares
You may purchase or redeem shares online through our website (
vanguard.com)
, by mail (The Vanguard Group, P.O. Box 1110, Valley Forge, PA 19482-1110), or by telephone (800-662-2739). The following table provides the Funds minimum initial and subsequent investment requirements.
|
|
|
Account Minimums
|
Institutional Shares
|
Institutional Plus Shares
|
To open and maintain an account
|
$5 million
|
$100 million
|
To add to an existing account
|
Generally $100 (other than
|
Generally $100 (other than
|
|
by Automatic Investment
|
by Automatic Investment
|
|
Plan, which has no
|
Plan, which has no
|
|
established minimum)
|
established minimum)
|
Tax Information
The Funds distributions may be taxable as ordinary income or capital gain.
Payments to Financial Intermediaries
The Fund and its investment advisor do not pay financial intermediaries for sales of Fund shares.
5
Investing in Index Funds
What Is Indexing?
Indexing is an investment strategy for tracking the performance of a specified market benchmark, or “index.” An index is an unmanaged group of securities whose overall performance is used as a standard to measure the investment performance of a particular market. There are many types of indexes. Some represent entire markets—such as the U.S. stock market or the U.S. bond market. Other indexes cover market segments—such as small-capitalization stocks or short-term bonds.
An index fund holds all, or a representative sample, of the securities that make up its target index. Index funds attempt to mirror the performance of the target index, for better or worse. However, an index fund generally does not perform
exactly
like its target index. For example, like all mutual funds, index funds have operating expenses and transaction costs. Market indexes do not, and therefore will usually have a slight performance advantage over funds that track them.
Index funds typically have the following characteristics:
•
Variety of investments.
Most Vanguard index funds generally invest in the securities of a variety of companies and industries.
•
Relative performance consistency
. Because they seek to track market benchmarks, index funds usually do not perform dramatically better or worse than their benchmarks.
•
Low cost
. Index funds are inexpensive to run compared with actively managed funds. They have low or no research costs and typically keep trading activity—and thus dealer markups and other transaction costs—to a minimum.
6
More on the Fund
This prospectus describes the primary risks you would face as a Fund shareholder. It is important to keep in mind one of the main axioms of investing:
Generally, t
he higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: The lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance for fluctuations in the securities markets. Look for this symbol throughout the prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk
®
explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
Share Class Overview
This prospectus offers the Fund’s Institutional Shares and Institutional Plus Shares, which are generally for investors who invest a minimum of $5 million or $100 million, respectively. In addition, the Fund issues an exchange-traded class of shares (ETF Shares), which are offered through a separate prospectus.
All share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment performances will differ.
A Note to Investors
The Fund is primarily intended for pension plans and other institutional investors that desire to closely match long-term liabilities with a portfolio of U.S. Treasury securities of similar long-term duration. Interest rate risk is expected to be extremely high for the Fund because it invests primarily in zero-coupon long-term bonds, which have prices that are even more sensitive to interest rate changes than are coupon-bearing bonds of similar maturity. Because the Fund invests primarily in Treasury STRIPS with maturities ranging from 20 to 30 years, rising interest rates may cause the value of the Fund’s investments to decline significantly. Prospective investors are urged to consult with their own advisors to determine the suitability of investment in the Fund and the relationship of this investment to their overall investment programs and financial and tax positions.
7
|
Plain Talk About Fund Expenses
|
|
All mutual funds have operating expenses. These expenses, which are deducted
|
from a fund’s gross income, are expressed as a percentage of the net assets of
|
the fund. Assuming that operating expenses remain as stated in the Fees and
|
Expenses section, Vanguard Extended Duration Treasury Index Fund’s expense
|
ratios would be as follows: for Institutional Shares,
0.10%
, or
$1.00
per $1,000 of
|
average net assets; for Institutional Plus Shares,
0.08%
, or
$0.80
per $1,000 of
|
average net assets. The average expense ratio for general U.S. Treasury funds in
|
2011
was
0.35%
, or
$3.50
per $1,000 of average net assets (derived from data
|
provided by Lipper Inc., which reports on the mutual fund industry).
|
|
Plain Talk About Costs of Investing
|
|
Costs are an important consideration in choosing a mutual fund. That’s because
|
you, as a shareholder, pay a proportionate share of the costs of operating a fund,
|
plus any transaction costs incurred when the fund buys or sells securities. These
|
costs can erode a substantial portion of the gross income or the capital
|
appreciation a fund achieves. Even seemingly small differences in expenses can,
|
over time, have a dramatic effect on a fund’s performance.
|
The following sections explain the primary investment strategies and policies that the Fund uses in pursuit of its objective. The Fund’s board of trustees, which oversees the Fund’s management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental. Note that the Fund’s investment objective is not fundamental and may be changed without a shareholder vote. The Fund‘s policy of investing at least 80% of its assets in U.S. Treasury securities that are part of the target index may be changed only upon 60 days‘ notice to shareholders.
8
Market Exposure
|
Plain Talk About Treasury STRIPS
|
|
A Treasury STRIP represents a single coupon payment, or a single principal
|
payment, on a U.S. Treasury security that has been “stripped” into separately
|
tradable components. For example, a newly issued 10-year U.S. Treasury note
|
can be divided into 20 semiannual coupon payments (coupon STRIPS) and a
|
single principal payment (principal STRIP). Treasury STRIPS are obligations of the
|
U.S. Treasury and are backed by the full faith and credit of the United States.
|
|
Treasury STRIPS are sometimes called zero-coupon securities because the only
|
time an investor receives payment is at maturity.
Consequently, these securities
|
are more sensitive to changes in interest rates than coupon-bearing
|
securities with the same maturity date.
Treasury STRIPS are popular with
|
pension funds and insurance companies because these securities have known
|
cash values at maturity, which enables investors to closely match their liabilities
|
with guaranteed payments from the U.S. Treasury. Because Treasury STRIPS do
|
not pay interest, they are issued and sold at a discount to face value.
|
|
Because Treasury STRIPS do not pay interest and are purchased at an “original
|
issue discount,” the Fund may be required to distribute to shareholders income
|
dividends that exceed the cash the Fund receives on its portfolio holdings. As a
|
result, the Fund may need to liquidate assets, at potentially inopportune times, to
|
satisfy its income-dividend distribution requirements.
|
The Fund is subject to interest rate risk, which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk is expected to be extremely high for the Fund because it invests primarily in zero-coupon long-term bonds, which have prices that are even more sensitive to interest rate changes than are coupon-bearing bonds of similar maturity. Because the Fund invests primarily in Treasury STRIPS with maturities ranging from 20 to 30 years, rising interest rates may cause the value of the Fund’s investments to decline significantly.
Although bonds are often thought to be less risky than stocks, there have been periods when bond prices have fallen significantly because of rising interest rates. For instance, prices of long-term bonds fell by almost 48% between December 1976 and September 1981.
To illustrate the relationship between bond prices and interest rates, the following table shows the effect of a 1% and a 2% change (both up and down) in interest rates on the values of four noncallable bonds of different maturities, each with a market value of $1,000.
9
|
|
|
|
|
How Interest Rate Changes Affect the Value of a $1,000 Bond
|
|
|
|
After a 1%
|
After a 1%
|
After a 2%
|
After a 2%
|
Type of Bond (Maturity)
|
Increase
|
Decrease
|
Increase
|
Decrease
|
Short-Term (2.5 years)
1
|
$977
|
$1,024
|
$954
|
$1,049
|
Intermediate-Term (10 years)
1
|
922
|
1,086
|
851
|
1,180
|
Long-Term (20 years)
1
|
874
|
1,150
|
769
|
1,328
|
Long-Term Zero-Coupon (20 years)
|
800
|
1,200
|
600
|
1,400
|
1 Assuming a 4% coupon.
|
|
|
|
|
These figures are for illustration only; you should not regard them as an indication of future performance of the bond market as a whole or the Fund in particular.
|
Plain Talk About Bonds and Interest Rates
|
|
As a rule, when interest rates rise, bond prices fall. The opposite is also true:
|
Bond prices go up when interest rates fall. Why do bond prices and interest rates
|
move in opposite directions? Let’s assume that you hold a bond offering a 4%
|
yield. A year later, interest rates are on the rise and bonds of comparable quality
|
and maturity are offered with a 5% yield. With higher-yielding bonds available,
|
you would have trouble selling your 4% bond for the price you paid—you would
|
probably have to lower your asking price. On the other hand, if interest rates were
|
falling and 3% bonds were being offered, you should be able to sell your 4% bond
|
for more than you paid.
|
Changes in interest rates can affect bond
income
as well as bond
prices
.
|
Plain Talk About Bond Maturities
|
|
A bond is issued with a specific maturity date—the date when the issuer must pay
|
back the bond’s principal (face value). Bond maturities range from less than 1 year
|
to more than 30 years. Typically, the longer a bond’s maturity, the more price risk
|
you, as a bond investor, face as interest rates rise—but also the higher yield you
|
could receive. Longer-term bonds are more suitable for investors willing to take a
|
greater risk of price fluctuations to get higher and more stable interest income.
|
Shorter-term bond investors should be willing to accept lower yields and greater
|
income variability in return for less fluctuation in the value of their investment.
|
10
Security Selection
Index sampling strategy.
Because it would be very expensive and inefficient to buy and sell
all
securities held in its target indexwhich is an indexing strategy called replicationthe Fund uses index sampling techniques to select securities. Using computer programs, the Funds advisor generally selects a representative sample of securities that approximates the full target index in terms of key risk factors and other characteristics. These factors include duration, cash flow, and quality of the underlying bonds. Because the Fund does
not
hold all securities in its target index, some of the securities that are held will likely be overweighted (or underweighted) compared with the target index.
The Fund is subject to index sampling risk, which is the chance that the securities selected for the Fund, in the aggregate, will not provide investment performance matching that of the Funds target index. Index sampling risk for the Fund should be low.
Types of bonds.
The Funds target index is the
Barclays
U.S. Treasury STRIPS 2030 Year Equal Par Bond Index. This index includes Treasury STRIPS with maturities ranging from 20 to 30 years. The number of bonds held by the Fund and the number of bonds in the Funds target index were 59 and 59, respectively, as of
August 31, 2012
.
Other Investment Policies and Risks
The Fund reserves the right to substitute a different index for the index it currently tracks if the current index is discontinued, if the Funds agreement with the sponsor of its target index is terminated, or for any other reason determined in good faith by the Funds board of trustees. In any such instance, the substitute index would measure the same market segment as the current index.
The Fund may invest in derivatives. In general, derivatives may involve risks different from, and possibly greater than, those of the underlying securities, assets, or market indexes.
Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, bond, or currency), a physical asset (such as gold, oil, or wheat), or a market index (such as the Barclays U.S. Aggregate Bond Index). The Fund may invest in derivatives only if the expected risks and rewards of the derivatives are consistent with the investment objective, policies, strategies, and risks of the Fund as disclosed in this prospectu
s.
In particular, derivatives will be used only when they may help the advisor:
Invest in eligible asset classes with greater efficiency and lower cost than is possible through direct investment;
11
The Funds derivative investments may include fixed income futures contracts, fixed income options, total return swaps, or other derivatives. Losses (or gains) involving futures contracts can sometimes be substantialin part because a relatively small price movement in a futures contract may result in an immediate and substantial loss (or gain) for a fund. Similar risks exist for other types of derivatives.
|
Plain Talk About Derivatives
|
|
Derivatives can take many forms. Some forms of derivatives, such as
|
exchange-traded futures and options on securities, commodities, or indexes,
|
have been trading on regulated exchanges for decades. These types of
|
derivatives are standardized contracts that can easily be bought and sold, and
|
whose market values are determined and published daily. Nonstandardized
|
derivatives (such as swap agreements), on the other hand, tend to be more
|
specialized or complex, and may be harder to value.
|
Vanguard may invest a small portion of the Funds assets in
U.S. Treasury futures, which are a type of derivative, and/or s
hares o
f e
xchange-traded funds (ETFs). These
Treasury futures and E
TFs provide returns similar to those of the bonds listed in the index
, or in a subset of the index, tracked by the ETFs
. Vanguard may purchase ETFs when doing so will reduce the Funds transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue fro
m F
und assets
invested
in ETF Shares of other Vanguard funds. Fund assets invested in ETF Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.
Cash Management
The Funds daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds. When investing in a Vanguard CMT Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in which it invests.
12
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when the advisor believes that doing so is in the Funds best interest, so long as the alternative is consistent with the Funds investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Funds objective when those instruments are more favorably priced or provide needed liquidity, as might be the case when the Fund receives large cash flows that it cannot prudently invest immediately.
Purchase Fee
The Fund charges a
0.50%
fee on all purchases of its shares, including shares that you purchase by exchange from another Vanguard fund. Purchases that result from reinvested dividend or capital gains distributions are not subject to the purchase fee.
Unlike a sales charge or a load paid to a broker or a fund management company, the purchase fee is paid directly to the Fund to offset the costs of buying securities.
See
Investing With Vanguard
for more information about fees.
Frequent Trading or Market-Timing
Background.
Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the funds shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by
all
fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisors ability to efficiently manage the fund.
Policies to Address Frequent Trading.
The Vanguard funds (other than money market funds and short-term bond funds) do not knowingly accommodate frequent trading. The board of trustees of each Vanguard fund (other than money market funds and short-term bond funds) has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it. These policies and procedures do not apply to Vanguard ETF
®
Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. Although there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
13
Each Vanguard fund reserves the right to reject any purchase requestincluding exchanges from other Vanguard fundswithout notice and regardless of size. For example, a purchase request could be rejected because of a history of frequent trading by the investor or if Vanguard determines that such purchase may negatively affect a funds operation or performance.
Each Vanguard fund (other than money market funds and short-term bond funds) generally prohibits, except as otherwise noted in the
Investing With Vanguard
section, an investors purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account.
Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the
Investing With Vanguard
section of this prospectus for further details on Vanguards transaction policies.
Each fund (other than money market funds), in determining its net asset value, will, when appropriate, use fair-value pricing, as described in the
Share Price
section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover Rate
Although the Fund
generally
seeks to invest for the long term, it may sell securities regardless of how long they have been held.
Generally, an index fund sells securities in response to redemption requests or to changes in the composition of its target index
,
or to manage the funds duration
. The
Financial Highlights
section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period.
Cash flows and index rebalancing during the Funds fiscal year ended August 31, 2012, resulted in higher turnover than previous years.
The average turnover rate for long-term bond funds was approximately
83%
, as reported by Morningstar, Inc., on
August 31, 2012
.
|
Plain Talk About Turnover Rate
|
|
Before investing in a mutual fund, you should review its turnover rate. This gives
|
an indication of how transaction costs, which are not included in the funds
|
expense ratio, could affect the funds future returns. In general, the greater the
|
volume of buying and selling by the fund, the greater the impact that dealer
|
markups and other transaction costs will have on its return. Also, funds with high
|
turnover rates may be more likely to generate capital gains that must be
|
distributed to shareholders as taxable income.
|
14
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family
of 1
80 mutual funds holding assets of approximately
$1.8
trillion. All of the funds that are members of The Vanguard Group (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space, and equipmen
t.
Vanguard Marketing Corporation provides marketing services to the funds. Although shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of the Vanguard funds marketing costs.
|
Plain Talk About Vanguards Unique Corporate Structure
|
|
The Vanguard Group is truly a
mutual
mutual fund company. It is owned jointly by
|
the funds it oversees and thus indirectly by the shareholders in those funds.
|
Most other mutual funds are operated by management companies that may be
|
owned by one person, by a private group of individuals, or by public investors
|
who own the management companys stock. The management fees charged by
|
these companies include a profit component over and above the companies cost
|
of providing services. By contrast, Vanguard provides services to its member
|
funds on an at-cost basis, with no profit component, which helps to keep the
|
funds expenses low.
|
Investment Advisor
The Vanguard Group, Inc. (Vanguard), P.O. Box 2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor to the Fund through its Fixed Income Group. As of
August 31, 2012
, Vanguard served as advisor for approximately
$1.6
trillion in assets. Vanguard
provides investment advisory services to
the Fund on an at-cost basis, subject to the supervision and oversight of the trustees and officers of the Fund.
For the fiscal year ended
August 31, 2012
, the advisory expenses represented an effective annual rate of
0.01%
of the Funds average net assets.
For a discussion of why the board of trustees approved the Funds investment advisory arrangement, see the most recent annual report to shareholders covering the fiscal year ended August 31.
15
Vanguards Fixed Income Group is overseen by:
George U. Sauter
, Chief Investment Officer and Managing Director of Vanguard. As Chief Investment Officer, he is responsible for the oversight of Vanguards Equity Investment and Fixed Income Groups. The investments managed by these two groups include active quantitative equity funds, equity index funds, active bond funds, index bond funds, stable value portfolios, and money market funds. Since joining Vanguard in 1987, Mr. Sauter has been a key contributor to the development of Vanguards stock indexing and active quantitative equity investment strategies. He received his A.B. in Economics from Dartmouth College and an M.B.A. in Finance from the University of Chicago.
Robert F. Auwaerter
, Principal of Vanguard and head of Vanguards Fixed Income Group. He has direct oversight responsibility for all money market funds, bond funds, and stable value portfolios managed by the Fixed Income Group. He has managed investment portfolios since 1978 and has been with Vanguard since 1981. He received his B.S. in Finance from The Wharton School of the University of Pennsylvania and an M.B.A. from Northwestern University.
Kenneth E. Volpert
, CFA, Principal of Vanguard and head of Vanguards Taxable Bond Group. He has direct oversight responsibility for all taxable bond funds managed by the Fixed Income Group. He has managed investment portfolios since 1982 and has been with Vanguard since 1992. He received his B.S. from the University of Illinois and an M.B.A. from the University of Chicago.
The manager primarily responsible for the day-to-day management of the Fund is:
Gregory Davis
, CFA, Principal of Vanguard and head of Vanguards Bond Index Group. He has worked in investment management for Vanguard since 1999; has managed investment portfolios since 2000; and has managed the Fund since its inception in 2007. Education: B.S., The Pennsylvania State University; M.B.A., The Wharton School of the University of Pennsylvania.
The
Statement of Additional Information
provides information about the portfolio managers compensation, other accounts under management, and ownership of shares of the Fund.
16
Dividends, Capital Gains, and Taxes
Fund Distributions
The Fund distributes to shareholders virtually all of its net income (interest less expenses) as well as any net capital gains realized from the sale of its holdings. The Funds income dividends are declared and distributed quarterly; capital gains distributions, if any, generally occur annually in December. Because of the original issue discount on zero-coupon securities, the Fund may be required to distribute income dividends to shareholders that exceed the cash received by the Fund. You can receive distributions of income or capital gains in cash, or you can have them automatically reinvested in more shares of the Fund.
|
Plain Talk About Distributions
|
|
As a shareholder, you are entitled to your portion of a funds income from interest
|
as well as capital gains from the funds sale of investments. Income consists of
|
interest the fund earns from its money market and bond investments. Capital
|
gains are realized whenever the fund sells securities for higher prices than it paid
|
for them. These capital gains are either short-term or long-term, depending on
|
whether the fund held the securities for one year or less or for more than one year.
|
Basic Tax Points
Vanguard will send you a statement each year showing the tax status of all your distributions. In addition, investors in taxable accounts should be aware of the following basic federal income tax points:
Distributions are taxable to you whether or not you reinvest these amounts in additional Fund shares.
Original issue discount on a Treasury STRIP is generally treated as interest, whether or not cash is actually received by the Fund.
Distributions declared in Decemberif paid to you by the end of Januaryare taxable as if received in December.
Any dividend and short-term capital gain distributions that you receive are taxable to you as ordinary income.
Any distributions of net long-term capital gains are taxable to you as long-term capital gains, no matter how long youve owned shares in the Fund.
Capital gains distributions may vary considerably from year to year as a result of the Funds normal investment activities and cash flows.
17
-
A sale or exchange of Fund shares is a taxable event. This means that you may have
-
capital gain to report as income, or a capital loss to report as a deduction, when you
complete your tax return.
Any conversion between classes of shares of the
same
fund is a
nontaxable
event. By contrast, an exchange between classes of shares of
different
funds is a
taxable
event.
Dividend and capital gains distributions that you receive, as well as your gains or losses from any sale or exchange of Fund shares, may be subject to state and local income taxes. Depending on your states rules, however, any dividends attributable to interest earned on
direct
obligations of the U.S. government may be exempt from state and local taxes. Vanguard will notify you each year how much, if any, of your dividends may qualify for this exemption.
This prospectus provides general tax information only. If you are investing through a tax-deferred retirement account, such as an IRA, special tax rules apply. Please consult your tax advisor for detailed information about any tax consequences for you.
General Information
Backup withholding.
By law, Vanguard must withhold 28% of any taxable distributions or redemptions from your account if you do not:
-
Provide us with your correct taxpayer identification number;
-
Certify that the taxpayer identification number is correct; and
-
Confirm that you are not subject to backup withholding.
Similarly, Vanguard must withhold taxes from your account if the IRS instructs us to do so.
Foreign investors.
Vanguard funds offered for sale in the United States (Vanguard U.S. funds), including the Fund offered in this prospectus, generally are not sold outside the United States, except to certain qualified investors. Non-U.S. investors should be aware that U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments in Vanguard U.S. funds. Foreign investors should visit the Non-U.S. Investors page on our website at
vanguard.com
for information on Vanguards non-U.S. products.
Invalid addresses.
If a dividend or capital gains distribution check mailed to your address of record is returned as undeliverable, Vanguard will automatically reinvest the distribution and all future distributions until you provide us with a valid mailing address. Reinvestments will receive the net asset value calculated on the date of the reinvestment.
18
|
Plain Talk About Buying a Dividend
|
|
Unless you are investing through a tax-deferred retirement account (such as an
|
IRA), you should consider avoiding a purchase of fund shares shortly before the
|
fund makes a distribution, because doing so can cost you money in taxes. This is
|
known as buying a dividend. For example: On December 15, you invest $5,000,
|
buying 250 shares for $20 each. If the fund pays a distribution of $1 per share on
|
December 16, its share price will drop to $19 (not counting market change). You
|
still have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250 shares
|
x $1 = $250 in distributions), but you
owe tax
on the $250 distribution you
|
receivedeven if you reinvest it in more shares. To avoid buying a dividend,
|
check a funds distribution schedule before you invest.
|
Share Price
Share price, also known as
net asset value
(NAV), is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not transact purchase or redemption requests.
Debt securities held by a Vanguard fund are valued based on information furnished by an independent pricing service or market quotations. Certain short-term debt instruments used to manage a funds cash are valued on the basis of amortized cost. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.
When a fund determines that pricing-service information or market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its
fair value
(the amount that the owner might reasonably expect to receive upon the current sale of the security). A fund also may use fair-value pricing on bond market holidays when the fund is open for business (such as Columbus Day and Veterans Day).
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
Vanguard fund share prices are published daily on our website at
vanguard.com/prices.
19
Financial Highlights
The following financial highlights table is intended to help you understand the Funds financial performance for the periods shown, and certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Fund (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose reportalong with the Funds financial statementsis included in the Funds most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report online at
vanguard.com,
or by contacting Vanguard by telephone or mail.
|
Plain Talk About How to Read the Financial Highlights Table
|
|
This explanation uses the Funds Institutional Shares as an example. The
|
Institutional Shares began fiscal year
2012
with a net asset value (price) of $30.19
|
per share. During the year, each Institutional Share earned $1.084 from
|
investment income (interest). There was a gain of $10.162 per share in the value
|
of investments held or sold by the Fund, resulting in a net gain of $11.246 per
|
share from investment operations.
|
|
Shareholders received $1.886 per share in the form of dividend and capital gains
|
distributions. A portion of each years distributions may come from the prior
|
years income or capital gains.
|
|
The share price at the end of the year was $39.55, reflecting earnings of $11.246
|
per share and distributions of $1.886 per share. This was an increase of $9.36 per
|
share (from $30.19 at the beginning of the year to $39.55 at the end of the year).
|
For a shareholder who reinvested the distributions in the purchase of more
|
shares, the total return was 37.92% for the year.
|
|
As of
August 31, 2012
, the Institutional Shares had approximately $586 million in
|
net assets. For the year, the expense ratio was 0.10% ($1.00 per $1,000 of net
|
assets), and the net investment income amounted to 3.08% of average net
|
assets. The Fund sold and replaced securities valued at 47% of its net assets.
|
20
|
|
|
|
|
|
Extended Duration Treasury Index Fund Institutional Shares
|
|
|
|
|
|
|
|
|
Nov. 28,
|
|
|
|
|
|
2007
1
to
|
|
|
Year Ended August 31,
|
|
|
|
|
|
|
Aug. 31,
|
For a Share Outstanding Throughout Each Period
|
2012
|
2011
|
2010
|
2009
|
2008
|
Net Asset Value, Beginning of Period
|
$30.19
|
$31.18
|
$30.69
|
$29.52
|
$30.00
|
Investment Operations
|
|
|
|
|
|
Net Investment Income
|
1.084
|
1.127
2
|
1.173
2
|
1.273
2
|
1.023
2
|
Net Realized and Unrealized Gain
|
|
|
|
|
|
(Loss) on Investments
3
|
10.162
|
(.948)
|
3.796
|
1.221
|
(.928)
|
Total from Investment Operations
|
11.246
|
.179
|
4.969
|
2.494
|
.095
|
Distributions
|
|
|
|
|
|
Dividends from Net Investment Income
|
(1.101)
|
(1.101)
|
(1.134)
|
(1.324)
|
(.575)
|
Distributions from Realized Capital Gains
|
(.785)
|
(.068)
|
(3.345)
|
—
|
—
|
Total Distributions
|
(1.886)
|
(1.169)
|
(4.479)
|
(1.324)
|
(.575)
|
Net Asset Value, End of Period
|
$39.55
|
$30.19
|
$31.18
|
$30.69
|
$29.52
|
Total Return
4
|
37.92%
|
1.33%
|
20.84%
|
8.05%
|
0.39%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net Assets, End of Period (Millions)
|
$586
|
$409
|
$286
|
$151
|
$258
|
Ratio of Total Expenses to Average Net Assets
|
0.10%
|
0.11%
|
0.11%
|
0.11%
|
0.11%
5
|
Ratio of Net Investment Income to
|
|
|
|
|
|
Average Net Assets
|
3.08%
|
4.42%
|
4.41%
|
3.93%
|
4.55%
5
|
Portfolio Turnover Rate
6
|
47%
|
22%
|
24%
|
39%
|
36%
|
1
|
Inception.
|
2
|
Calculated based on average shares outstanding.
|
3
|
Includes increases from purchase fees of $0.05, $0.02, $0.00, $0.01, and $0.03.
|
4
|
Total returns do not include transaction fees that may have applied in the periods shown.
|
5
|
Annualized.
|
6
|
Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the Fund’s capital shares, including ETF Creation Units.
|
21
Investing With Vanguard
This section of the prospectus explains the basics of doing business with Vanguard.
Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as Vanguard Marketing Corporation or another broker-dealer. If you hold Vanguard fund shares directly with Vanguard, you should
carefully read each topic
within this section
that pertains to your relationship with Vanguard.
If you hold Vanguard fund shares indirectly through an intermediary, please see
Investing With Vanguard Through Other Firms
, and also refer to your account agreement with the intermediary for information about transacting in that account.
Vanguard reserves the right to change the following policies without notice
.
Please call or check online for current information.
See
Contacting Vanguard.
For Vanguard fund shares held directly with Vanguard
, each fund you hold in an account is a separate fund account. For example, if you hold three funds in a nonretirement account titled in your own name, two funds in a nonretirement account titled jointly with your spouse, and one fund in an individual retirement account, you have six fund accountsand this is true even if you hold the same fund in multiple accounts. Note that each reference to you in this prospectus applies to any one or more registered account owners or persons authorized to transact on your account.
Purchasing Shares
Vanguard reserves the right, without notice, to increase or decrease the minimum amount required to open, convert shares to, or maintain a fund account, or to add to an existing fund account.
Investment minimums may differ for certain categories of investors.
Account Minimums
To open and maintain an account.
Institutional Shares$5 million; Institutional Plus Shares$100 million.
Certain Vanguard institutional clients may meet the minimum investment amount by aggregating up to three separate accounts within the same Fund. This aggregation policy does not apply to clients receiving special administrative services from Vanguard or to omnibus accounts maintained by financial intermediaries.
Vanguard may charge additional recordkeeping fees for institutional clients whose accounts are recordkept by Vanguard. Please contact your Vanguard representative to determine whether additional recordkeeping fees apply to your account.
Add to an existing account.
Generally $100 (other than by Automatic Investment Plan, which has no established minimum).
22
How to Initiate a Purchase Request
Be sure to check
Exchanging Shares, Frequent-Trading Limitations,
and
Other Rules You Should Know
before placing your purchase request.
Online.
You may open certain types of accounts, request a purchase of shares, and request an exchange through our website
or our mobile application i
f you are registered
for online access
.
By telephone.
You may call Vanguard to begin the account registration process or request that the account-opening forms be sent to you. You may also call Vanguard to request a purchase of shares in your account
or to request an exchange
. See
Contacting Vanguard
.
By mail.
You may send Vanguard your account registration form and check to open a new fund account. To add to an existing fund account, you may send your check with an Invest-by-Mail form (from a transaction confirmation or your account statement), with a deposit slip (available online), or with a written request. You may also send a written request to Vanguard to make an exchange. For a list of Vanguard addresses, see
Contacting Vanguard
.
How to Pay for a Purchase
By electronic bank transfer.
You may purchase shares of a Vanguard fund through an electronic transfer of money from a bank account. To establish the electronic bank transfer option on an account, you must designate the bank account online, complete a special form, or fill out the appropriate section of your account registration form. After the option is set up on your account, you can purchase shares by electronic bank transfer on a regular schedule (Automatic Investment Plan) or from time to time. Your purchase request can be initiated online (if you are
r
egistered
for online access
), by telephone, or by mail.
By wire.
Wiring instructions vary for different types of purchases. Please call Vanguard for instructions and policies on purchasing shares by wire. See
Contacting Vanguard.
By check.
You ma
y m
ake initial or additional purchases to your fund account
by sending a check or through our mobile application.
Also see
How to Initiate a Purchase Request
.
M
ake your check payable to Vanguard and include the appropriate fund number (e.g., Vanguardxx). For a list of Fund numbers (for share classes in this prospectus), see
Additional Information
.
By exchange.
You may purchase shares of a Vanguard fund using the proceeds from the simultaneous redemption of shares of another Vanguard fund. You may initiate an exchange online (if you are
r
egistered
for online access
), by telephone, or by written request. See
Exchanging Shares
.
23
Trade Date
The trade date for any purchase request received in good order will depend on the day and time Vanguard receives your request, the manner in which you are paying, and the type of fund you are purchasing. Your purchase will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the New York Stock Exchange (NYSE) is open for trading (a business day).
For purchases by
check
into all funds other than money market funds, and for purchases by
exchange
,
wire
, or
electronic bank transfer
(not using an Automatic Investment Plan) into all funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the same day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the next business day.
For purchases by
check
into money market funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the next business day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the second business day following the day Vanguard receives the purchase request. Because money market instruments must be purchased with federal funds and it takes a money market mutual fund one business day to convert check proceeds into federal funds, the trade date for the purchase will be one business day later than for other funds.
For purchases by electronic bank transfer using an
Automatic Investment Plan
: Your trade date generally will be one business day before the date you designated for withdrawal from your bank account.
If your purchase request is not accurate and complete, it may be rejected. See
Other Rules You Should KnowGood Order
.
For further information about purchase transactions, consult our website at
vanguard.com
or see
Contacting Vanguard
.
Earning Dividends
You generally begin earning dividends on the business day following your trade date. When buying money market fund shares through a federal funds wire, however, you can begin earning dividends immediately by making a purchase request by telephone to Vanguard before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Prime Money Market Fund).
24
Purchase Fee
The Fund charges a purchase fee of
0.50%
on all share purchases, including shares purchased by exchange from another Vanguard fund. The purchase fee does not apply to shares purchased through reinvested dividends or capital gains.
Other Purchase Rules You Should Know
Check purchases.
All purchase checks must be written in U.S. dollars and must be drawn on a U.S. bank. Vanguard does not accept cash, travelers checks, or money orders. In addition, Vanguard may refuse starter checks and checks that are not made payable to Vanguard.
New accounts.
We are required by law to obtain from you certain personal information that we will use to verify your identity. If you do not provide the information, we may not be able to open your account. If we are unable to verify your identity, Vanguard reserves the right, without notice, to close your account or take such other steps as we deem reasonable.
Refused or rejected purchase requests.
Vanguard reserves the right to stop selling fund shares or to reject any purchase request at any time and without notice, including, but not limited to, purchases requested by exchange from another Vanguard fund. This also includes the right to reject any purchase request because of a history of frequent trading by the investor or because the purchase may negatively affect a funds operation or performance.
Large purchases.
Please call Vanguard before attempting to invest a large dollar amount.
No cancellations.
Vanguard will not accept your request to cancel any purchase request once processing has begun. Please be careful when placing a purchase request.
Converting Shares
When a conversion occurs, you receive shares of one class in place of shares of another class of the same fund. At the time of conversion, the dollar value of the new shares you receive equals the dollar value of the old shares that were converted. In other words, the conversion has no effect on the value of your investment in the fund at the time of the conversion. However, the number of shares you own after the conversion may be greater than or less than the number of shares you owned before the conversion, depending on the net asset values of the two share classes.
A conversion between share classes of the same fund is a
nontaxable
event.
25
Trade Date
The trade date for any conversion request received in good order will depend on the day and time Vanguard receives your request. Your conversion will be executed using the NAVs of the different share classes on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day).
For a conversion request received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. For a conversion request received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day. See
Other Rules You Should Know.
Conversions From Institutional Shares to Institutional Plus Shares
You may convert Institutional Shares to Institutional Plus Shares of the Fund, provided that your account balance is at least $100 million.
Conversions to ETF Shares
Owners of conventional shares (i.e., not exchange-traded shares) issued by the Fund may convert those shares to ETF Shares of equivalent value of the same fund. Please note that investors who own conventional shares through a 401(k) plan or other employer-sponsored retirement or benefit plan generally may not convert those shares to ETF Shares and should check with their plan sponsor or recordkeeper. ETF Shares, whether acquired through a conversion or purchased on the secondary market, cannot be converted to conventional shares.
Also
, ETF Shares of one fund cannot be exchanged for ETF Shares of another fund.
ETF Shares must be held in a brokerage account. Thus, before converting conventional shares to ETF Shares, you must have an existing, or open a new, brokerage account. This account may be with Vanguard Brokerage Services
®
(Vanguard Brokerage) or with any other brokerage firm.
Vanguard Brokerage does not impose a fee on conversions from conventional shares to Vanguard ETF Shares. However, other brokerage firms may charge a fee to process a conversion. Vanguard reserves the right, in the future, to impose a transaction fee on conversions or to limit or terminate the conversion privilege. For additional information on converting conventional shares to ETF Shares, please contact Vanguard to obtain a prospectus for ETF Shares. See
Contacting Vanguard
.
26
Mandatory Conversions to Institutional Shares
If an account no longer meets the balance requirements for Institutional Plus Shares, Vanguard may automatically convert the shares in the account to Institutional Shares. A decline in the account balance because of market movement may result in such a conversion. Vanguard will notify the investor in writing before any mandatory conversion occurs. Please note that mandatory conversions do not apply to ETF Shares.
Redeeming Shares
How to Initiate a Redemption Request
Be sure to check
Exchanging Shares, Frequent-Trading Limitations
, and
Other Rules You Should Know
before placing your redemption request.
Online.
You may request a redemption of shares or request an exchange through our website
or our mobile application
if you are registered
for online access.
By telephone.
You may call Vanguard to request a redemption of shares or an exchange. See
Contacting Vanguard
.
By mail.
You may send a written request to Vanguard to redeem from a fund account or to make an exchange. See
Contacting Vanguard
.
How to Receive Redemption Proceeds
By electronic bank transfer.
You may have the proceeds of a fund redemption sent directly to a designated bank account. To establish the electronic bank transfer option on an account, you must designate a bank account online, complete a special form, or fill out the appropriate section of your account registration form. After the option is set up on your account, you can redeem shares by electronic bank transfer on a regular schedule (Automatic Withdrawal Plan) or from time to time. Your redemption request can be initiated online
(if you are registered for online access)
, by telephone, or by mail.
By wire.
To receive your proceeds by wire, you may instruct Vanguard to wire your redemption proceeds ($100 minimum) to a previously designated bank account. To establish the wire redemption option, you generally must designate a bank account online, complete a special form, or fill out the appropriate section of your account registration form.
By exchange.
You may have the proceeds of a Vanguard fund redemption invested directly in shares of another Vanguard fund. You may initiate an exchange online (if you are
r
egistered
for online access
), by telephone, or by written request. See
Exchanging Shares
.
By check.
If you have not chosen another redemption method, Vanguard will mail you a redemption check, generally payable to all registered account owners, normally within two business days of your trade date, generally to the address of record.
27
Trade Date
The trade date for any redemption request received in good order will depend on the day and time Vanguard receives your request and the manner in which you are redeeming. Your redemption will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day).
For redemptions by
check
,
exchange
, or
wire
: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
Note on timing of wire redemptions from money market funds: For telephone requests received by Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Prime Money Market Fund), the redemption proceeds generally will leave Vanguard by the close of business the same day. For telephone requests received by Vanguard on a business day after those cut-off times, or on a nonbusiness day, and for all requests other than by telephone, the redemption proceeds generally will leave Vanguard by the close of business on the next business day.
Note on timing of wire redemptions from all other funds: For requests received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the redemption proceeds generally will leave Vanguard by the close of business on the next business day. For requests received by Vanguard on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the redemption proceeds generally will leave Vanguard by the close of business on the second business day after Vanguard receives the request.
For redemptions by electronic bank transfer using an
Automatic Withdrawal Plan
: Your trade date generally will be the date you designated for withdrawal of funds (redemption of shares) from your Vanguard account. Proceeds of redeemed shares generally will be credited to your designated bank account two business days after your trade date. If the date you designated for withdrawal of funds from your Vanguard account falls on a weekend, holiday, or other nonbusiness day, your trade date generally will be the previous business day.
For redemptions by
electronic bank transfer
not using an Automatic Withdrawal Plan: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
28
If your redemption request is not accurate and complete, it may be rejected. If we are unable to send your redemption proceeds by wire or electronic bank transfer because the receiving institution rejects the transfer, Vanguard will make additional efforts to complete your transaction. If Vanguard is still unable to complete the transaction, we may send the proceeds of the redemption to you by check, generally payable to all registered account owners, or use your proceeds to purchase new shares of the fund from which you sold shares for the purpose of the wire or electronic bank transfer transaction. See
Other Rules You Should KnowGood Order
.
For further information about redemption transactions, consult our website at
vanguard.com
or see
Contacting Vanguard
.
Earning Dividends
You generally will continue earning dividends until the first business day following your trade date.
Other Redemption Rules You Should Know
Documentation for certain accounts.
Special documentation may be required to redeem from certain types of accounts, such as trust, corporate, nonprofit, or retirement accounts. Please call us
before
attempting to redeem from these types of accounts.
Potentially disruptive redemptions.
Vanguard reserves the right to pay all or part of a redemption in kindthat is, in the form of securitiesif we reasonably believe that a cash redemption would negatively affect the funds operation or performance or that the shareholder may be engaged in market-timing or frequent trading. Under these circumstances, Vanguard also reserves the right to delay payment of the redemption proceeds for up to seven calendar days. By calling us
before
you attempt to redeem a large dollar amount, you may avoid in-kind or delayed payment of your redemption. Please see
Frequent-Trading Limitations
for information about Vanguards policies to limit frequent trading.
Recently purchased shares.
Although you can redeem shares at any time, proceeds may not be made available to you until the fund collects payment for your purchase. This may take up to
seven
calendar days for shares purchased by check or by electronic bank transfer. If you have written a check on a fund with checkwriting privileges, that check may be rejected if your fund account does not have a sufficient available balance.
Address change.
If you change your address online or by telephone, there may be up to a 14-day restriction on your ability to request check redemptions online and by telephone. You can request a redemption in writing at any time. Confirmations of address changes are sent to both the old and new addresses.
29
Payment to a different person or address.
At your request, we can make your redemption check payable, or wire your redemption proceeds, to a different person or send it to a different address. However, this generally requires the written consent of all registered account owners and may require a signature guarantee or a notarized signature. You may obtain a signature guarantee from some commercial or savings banks, credit unions, trust companies, or member firms of a U.S. stock exchange.
No cancellations.
Vanguard will not accept your request to cancel any redemption request once processing has begun. Please be careful when placing a redemption request.
Emergency circumstances.
Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days. In addition, Vanguard funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.
Exchanging Shares
An exchange occurs when you use the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund. You can make exchange requests online (if you
are re
gistered
for online access
), by telephone, or by written request. See
Purchasing Shares
and
Redeeming Shares
.
If the NYSE is open for regular trading (generally until 4 p.m., Eastern time, on a business day) at the time an exchange request is received in good order, the trade date generally will be the same day. See
Other Rules You Should KnowGood Order
for additional information on all transaction requests.
Vanguard will not accept your request to cancel any exchange request once processing has begun. Please be careful when placing an exchange request.
Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. See
Frequent-Trading Limitations
for additional restrictions on exchanges.
30
Frequent-Trading Limitations
Because excessive transactions can disrupt management of a fund and increase the funds costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other than money market funds and short-term bond funds) limits an investors purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent-trading limits.
For Vanguard Retirement Investment Program pooled plans, the limitations apply to exchanges made online or by phone.
These frequent-trading limitations
do not
apply to the following:
-
Purchases of shares with reinvested dividend or capital gains distributions.
-
Transactions through Vanguards Automatic Investment Plan, Automatic Exchange
Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online
®
.
their accounts directly with Vanguard. (Transaction requests submitted by fax, if otherwise permitted,
are
subject to the limitations.)
-
Transfers and reregistrations of shares within the same fund.
-
Purchases of shares by asset transfer or direct rollover.
-
Conversions of shares from one share class to another in the same fund.
-
Checkwriting redemptions.
-
Section 529 college savings plans.
-
Certain approved institutional portfolios and asset allocation programs, as well as
trades made by Vanguard funds that invest in other Vanguard funds. (Please note that
shareholders
of Vanguards funds of funds
are
subject to the limitations.)
For participants in employer-sponsored defined contribution plans,* the frequent-trading limitations
do not
apply to:
Purchases of shares with participant payroll or employer contributions or loan repayments.
-
Purchases of shares with reinvested dividend or capital gains distributions.
-
Distributions, loans, and in-service withdrawals from a plan.
-
Redemptions of shares as part of a plan termination or at the direction of the plan.
-
Automated transactions executed during the first six months of a participants
enrollment in the Vanguard Managed Account Program.
31
-
Redemptions of shares to pay fund or account fees.
-
Share or asset transfers or rollovers.
-
Reregistrations of shares.
-
Conversions of shares from one share class to another in the same fund.
-
Exchange requests submitted by written request to Vanguard. (Exchange requests
submitted by fax, if otherwise permitted,
are
subject to the limitations.)
* The following Vanguard fund accounts are subject to the frequent-trading limitations: SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and Vanguard Individual 401(k) Plans.
Accounts Held by Institutions (Other Than Defined Contribution Plans)
Vanguard will systematically monitor for frequent trading in institutional clients accounts. If we detect suspicious trading activity, we will investigate and take appropriate action, which may include applying to a clients accounts the 60-day policy previously described, prohibiting a clients purchases of fund shares, and/or revoking the clients exchange privilege.
Accounts Held by Intermediaries
When intermediaries establish accounts in Vanguard funds for the benefit of their clients, we cannot always monitor the trading activity of the individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediarys clients. Intermediaries also may monitor their clients trading activities with respect to Vanguard funds.
For those Vanguard funds that charge purchase and/or redemption fees, intermediaries will be asked to assess these fees on client accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If you invest with Vanguard through an intermediary, please read that firms materials carefully to learn of any other rules or fees that may apply.
32
Other Rules You Should Know
Prospectus and Shareholder Report Mailings
Vanguard attempts to eliminate the unnecessary expense of duplicate mailings by sending just one summary prospectus (or prospectus) and/or shareholder report when two or more shareholders have the same last name and address. You may request individual prospectuses and reports by contacting our Client Services Department in writing, by telephone, or online.
Vanguard.com
Registration.
If you are a registered user of
vanguard.com,
you can review your account holdings; buy, sell, or exchange shares of most Vanguard funds; and perform most other transactions
through our website
. You must register for this service online.
Electronic delivery.
Vanguard can deliver your account statements, transaction confirmations, prospectuses, and shareholder reports electronically. If you are a registered user of
vanguard.com
, you can consent to the electronic delivery of these documents by logging on and changing your mailing
preferences
under Account
Maintenance
. You can revoke your electronic consent at any time
through our website
, and we will begin to send paper copies of these documents within 30 days of receiving your revocation.
Telephone Transactions
Automatic.
When we set up your account, well automatically enable you to do business with us by telephone,
unless you instruct us otherwise in writing.
Tele-Account
®
.
To obtain fund and account information through Vanguards automated telephone service, you must first establish a Personal Identification Number (PIN) by calling Tele-Account at 800-662-6273.
Proof of a callers authority.
We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
Authorization to act on the account (as the account owner or by legal documentation or other means).
-
Account registration and address.
-
Fund name and account number, if applicable.
-
Other information relating to the caller, the account owner, or the account.
33
Good Order
We reserve the right to reject any transaction instructions that are not in good order. Good order generally means that your instructions:
Are provided by the person(s) authorized in accordance with Vanguards policies and procedures to access the account and request transactions.
-
Include the fund name and account number.
-
Include the amount of the transaction (stated in dollars, shares, or percentage).
Written instructions also must include:
Signature guarantees or notarized signatures, if required for the type of transaction.
(Call Vanguard for specific requirements.)
Any supporting documentation that may be required.
The requirements vary among types of accounts and transactions. For more information, consult our website at
vanguard.com
or see
Contacting Vanguard.
Vanguard reserves the right, without notice, to revise the requirements for good order.
Future Trade-Date Requests
Vanguard does not accept requests to hold a purchase, conversion, redemption, or exchange transaction for a future date. All such requests will receive trade dates as previously described in
Purchasing Shares
,
Converting Shares
,
Redeeming Shares,
and
Exchanging Shares
. Vanguard reserves the right to return future-dated purchase checks.
Accounts With More Than One Owner
If an account has more than one owner or authorized person, Vanguard generally will accept instructions from any one owner or authorized person.
Responsibility for Fraud
Vanguard will not be responsible for any account losses because of fraud if we reasonably believe that the person transacting business on an account is authorized to do so. Please take precautions to protect yourself from fraud. Keep your account information private, and immediately review any account statements or other information that we provide to you. It is important that you contact Vanguard immediately about any transactions or changes to your account that you believe to be unauthorized.
Uncashed Checks
Please cash your distribution or redemption checks promptly. Vanguard will not pay interest on uncashed checks.
34
Dormant Accounts
If your account has no activity in it for a period of time, Vanguard may be required to transfer it to a state under the states abandoned property law.
Unusual Circumstances
If you experience difficulty contacting Vanguard online or by telephone, you can send us your transaction request by regular or express mail. See
Contacting Vanguard
for addresses.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as
Vanguard Marketing Corporation
, a bank,
a
broker, or
an
investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply.
Please see
Frequent
-
Trading Limitations
Accounts Held by Intermediaries
for information about the assessment of any purchase or redemption fees and the monitoring of frequent trading for accounts held by intermediaries.
Low-Balance Accounts
The Fund reserves the right to convert an investors Institutional Shares or Institutional Plus Shares to another share class, as appropriate, if the investors fund account balance falls below the minimum initial investment for any reason, including market fluctuation. Any such conversion will be preceded by written notice to the investor.
Right to Change Policies
In addition to the rights expressly stated elsewhere in this prospectus, Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time; (2) accept initial purchases by telephone; (3) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners, or if Vanguard reasonably believes a fraudulent transaction may occur or has occurred; (4) temporarily freeze any account and/or suspend account services upon initial notification to Vanguard of the death of the shareholder until Vanguard receives required documentation in good order; (5) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fees charged to a group of shareholders; and (6) redeem an account or suspend account privileges, without the owners permission to do so, in cases of threatening conduct or activity Vanguard believes to be suspicious, fraudulent, or illegal. Changes may affect any or all investors. These actions will be taken when, at
35
the sole discretion of Vanguard management, Vanguard reasonably believes they are deemed to be in the best interest of a fund.
Share Classes
Vanguard reserves the right, without notice, to change the eligibility requirements of its share classes, including the types of clients who are eligible to purchase each share class.
Fund and Account Updates
Confirmation Statements
We will send (or provide
through our website,
whichever you prefer) a confirmation of your trade date and the amount of your transaction when you buy, sell, exchange, or convert shares. However, we will not send confirmations reflecting only checkwriting redemptions or the reinvestment of dividend or capital gains distributions. For any month in which you had a checkwriting redemption, a Checkwriting Activity Statement will be sent to you itemizing the checkwriting redemptions for that month. Promptly review each confirmation statement that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on a confirmation statement, or Vanguard will consider the transaction properly processed.
Portfolio Summaries
We will send (or provide
through our website,
whichever you prefer) quarterly portfolio summaries to help you keep track of your accounts throughout the year. Each summary shows the market value of your account at the close of the statement period, as well as all distributions, purchases, redemptions, exchanges, transfers, and conversions for the current calendar quarter. Promptly review each summary that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on the summary, or Vanguard will consider the transaction properly processed.
Tax Information Statements
For most accounts, we are required to provide annual tax forms to assist you in preparing your income tax returns. These forms, which are generally mailed in January, will report the previous years dividends, capital gains distributions, proceeds from the sale of shares from taxable accounts, and distributions from IRAs and other retirement plans. Registered users of
vanguard.com
can also view these forms
through our website
. Vanguard may also provide you with additional tax-related documentation. For more information, consult our website at
vanguard.com
or see
Contacting Vanguard
.
36
Annual and Semiannual Reports
We will send (or provide
through our website,
whichever you prefer) reports about Vanguard Extended Duration Treasury Index Fund twice a year, in April and October. These reports include overviews of the financial markets and provide the following specific Fund information:
Portfolio Holdings
We generally post on our website at
vanguard.com
, in the
Portfolio
section of the Funds Portfolio & Management page, a detailed list of the securities held by the Fund as of the end of the most recent calendar quarter. This list is generally updated within 30 days after the end of each calendar quarter. Vanguard may exclude any portion of these portfolio holdings from publication when deemed in the best interest of the Fund. Please consult the Funds
Statement of Additional Information
or our website for a description of the policies and procedures that govern disclosure of the Funds portfolio holdings.
37
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|
Contacting Vanguard
|
|
|
|
Web
|
|
Vanguard.com
|
For the most complete source of Vanguard news
|
|
For fund, account, and service information
|
|
For most account transactions
|
|
For literature requests
|
|
24 hours a day, 7 days a week
|
|
Phone
|
|
Vanguard Tele-Account
®
800-662-6273
|
For automated fund and account information
|
(ON-BOARD)
|
Toll-free, 24 hours a day, 7 days a week
|
Investor Information 800-662-7447 (SHIP) For fund and service information
|
(Text telephone for people with hearing
|
For literature requests
|
impairment at 800-749-7273)
|
Hours of operation: MondayFriday, 8 a.m. to 10 p.m.,
|
|
Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
|
Client Services 800-662-2739 (CREW)
|
For account information
|
(Text telephone for people with hearing
|
For most account transactions
|
impairment at 800-749-7273)
|
Hours of operation: MondayFriday, 8 a.m. to 10 p.m.,
|
|
Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
|
Institutional Division
|
For information and services for large institutional investors
|
888-809-8102
|
Hours of operation: MondayFriday, 8:30 a.m. to 9 p.m.,
|
|
Eastern time
|
Financial Advisor and
Intermediary Sales
|
For information and services for financial intermediaries
|
Support 800-997-2798
|
including
financial advisors,
broker-dealers, trust institutions,
|
|
and
insurance companies
|
|
Hours of operation: MondayFriday, 8:30 a.m. to 7 p.m.,
|
|
Eastern time
|
|
|
Vanguard Addresses
|
|
Please be sure to use the correct address. Use of an incorrect address could delay the
|
processing of your transaction.
|
|
|
|
Regular Mail (Individuals)
|
The Vanguard Group
|
|
P.O. Box 1110
|
|
Valley Forge, PA 19482-1110
|
Regular Mail (Institutions)
|
The Vanguard Group
|
P.O. Box 2900
|
|
Valley Forge, PA 19482-2900
|
Registered, Express, or Overnight
|
The Vanguard Group
|
|
455 Devon Park Drive
|
|
Wayne, PA 19087-1815
|
|
|
38
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