February 27, 2026
Prospectus
Vanguard FTSE Europe ETF
Vanguard FTSE Pacific ETF
Vanguard FTSE Emerging Markets ETF
Exchange-traded
fund shares that are not individually redeemable and are listed on NYSE
Arca
Vanguard European
Stock Index Fund ETF Shares (VGK)
Vanguard Pacific Stock Index Fund ETF Shares (VPL)
Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO)
Vanguard Pacific Stock Index Fund ETF Shares (VPL)
Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO)
This Prospectus
contains financial data for the Funds through the fiscal year ended October 31,
2025.
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.
(Fees paid directly from your investment)
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| |
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Transaction
Fee on Purchases and Sales |
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Transaction
Fee on Reinvested Dividends |
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|
Transaction
Fee on Conversion to ETF Shares |
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*
(Expenses that you pay each year as a percentage of the value of your investment)
|
| |
|
Management
Fees |
% |
|
12b-1
Distribution Fee |
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|
Other
Expenses |
% |
|
Total Annual
Fund Operating Expenses |
% |
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1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
1
Principal
Risks
2
3
4
|
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Total
Return |
Quarter |
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% |
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|
-
% |
|
|
|
1
Year |
5
Years |
10
Years |
|
Vanguard
European Stock Index Fund ETF Shares |
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|
|
|
Based
on NAV |
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|
|
|
Return Before
Taxes |
% |
% |
% |
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of
Fund
Shares |
|
|
|
|
Based
on Market Price |
|
|
|
|
Return Before
Taxes |
|
|
|
|
FTSE
Developed Europe All Cap Index
(reflects no
deduction for fees or expenses) |
% |
% |
% |
|
FTSE
Global All Cap ex US Index
(reflects no
deduction for fees or expenses) |
|
|
|
5
Investment
Advisor
The Vanguard Group, Inc. (Vanguard)
through its wholly owned subsidiary, Vanguard Capital Management (VCM). VCM
exercises portfolio management responsibilities for the Fund.
Portfolio
Managers
Christine D. Franquin, Principal of
Vanguard and Portfolio Manager at VCM. She has co-managed the Fund since
2016.
Scott E. Geiger, CFA, Portfolio
Manager at VCM. He has co-managed the Fund since 2022.
John Kraynak, CFA, Portfolio
Manager at VCM. He has co-managed the Fund since 2025.
Purchase
and Sale of Fund Shares
ETF Shares may only be bought and
sold in the secondary market through a brokerage firm. The price you pay or
receive for ETF Shares will be the prevailing market price, which may be more
(premium) or less (discount) than the NAV of the shares. The brokerage firm may
charge you a commission to execute the transaction. Unless imposed by your
brokerage firm, there is no minimum dollar amount you must invest and no minimum
number of shares you must buy. ETF Shares of the Fund cannot be directly
purchased from or redeemed with the Fund, except by certain authorized
broker-dealers. These broker-dealers may purchase and redeem ETF Shares only in
large blocks (creation units), typically in exchange for baskets of securities.
An investor in ETF Shares may incur
costs attributable to the difference between the highest price a buyer is
willing to pay to purchase ETF Shares (bid) and the lowest price a seller is
willing to accept for ETF Shares (ask) when buying or selling shares in the
secondary market (bid-ask spread). Recent information about the Fund and its ETF
Shares, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads, is available online at vanguard.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. If you are
investing through a tax-advantaged account, such as an IRA or an
employer-sponsored retirement or savings plan, special tax rules apply. You
should consult your own tax advisor with respect to any particular U.S. or
non-U.S. tax consequences of your investment in the Fund.
Payments
to Financial Intermediaries
The Fund and its advisor do not pay
financial intermediaries for sales of Fund shares.
6
(Fees paid directly from your investment)
|
| |
|
Transaction
Fee on Purchases and Sales |
|
|
Transaction
Fee on Reinvested Dividends |
|
|
Transaction
Fee on Conversion to ETF Shares |
|
*
(Expenses that you pay each year as a percentage of the value of your investment)
|
| |
|
Management
Fees |
% |
|
12b-1
Distribution Fee |
|
|
Other
Expenses |
% |
|
Total Annual
Fund Operating Expenses |
% |
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
7
Principal
Risks
8
9
10
|
|
Total
Return |
Quarter |
|
|
% |
|
|
|
-
% |
|
|
|
1
Year |
5
Years |
10
Years |
|
Vanguard
Pacific Stock Index Fund ETF Shares |
|
|
|
|
Based
on NAV |
|
|
|
|
Return Before
Taxes |
% |
% |
% |
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of
Fund
Shares |
|
|
|
|
Based
on Market Price |
|
|
|
|
Return Before
Taxes |
|
|
|
|
FTSE
Developed Asia Pacific All Cap Index
(reflects no
deduction for fees or expenses) |
% |
% |
% |
|
FTSE
Global All Cap ex US Index
(reflects no
deduction for fees or expenses) |
|
|
|
11
Investment
Advisor
The Vanguard Group, Inc. (Vanguard)
through its wholly owned subsidiary, Vanguard Capital Management (VCM). VCM
exercises portfolio management responsibilities for the Fund.
Portfolio
Managers
Nicole Brubaker, Portfolio Manager
at VCM. She has co-managed the Fund since 2025.
Michael Perre, Principal of
Vanguard and Portfolio Manager at VCM. He has co-managed the Fund since
2016.
Jeffrey D. Miller, Portfolio
Manager at VCM. He has co-managed the Fund since 2016.
Purchase
and Sale of Fund Shares
ETF Shares may only be bought and
sold in the secondary market through a brokerage firm. The price you pay or
receive for ETF Shares will be the prevailing market price, which may be more
(premium) or less (discount) than the NAV of the shares. The brokerage firm may
charge you a commission to execute the transaction. Unless imposed by your
brokerage firm, there is no minimum dollar amount you must invest and no minimum
number of shares you must buy. ETF Shares of the Fund cannot be directly
purchased from or redeemed with the Fund, except by certain authorized
broker-dealers. These broker-dealers may purchase and redeem ETF Shares only in
large blocks (creation units), typically in exchange for baskets of securities.
An investor in ETF Shares may incur
costs attributable to the difference between the highest price a buyer is
willing to pay to purchase ETF Shares (bid) and the lowest price a seller is
willing to accept for ETF Shares (ask) when buying or selling shares in the
secondary market (bid-ask spread). Recent information about the Fund and its ETF
Shares, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads, is available online at vanguard.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. If you are
investing through a tax-advantaged account, such as an IRA or an
employer-sponsored retirement or savings plan, special tax rules apply. You
should consult your own tax advisor with respect to any particular U.S. or
non-U.S. tax consequences of your investment in the Fund.
Payments
to Financial Intermediaries
The Fund and its advisor do not pay
financial intermediaries for sales of Fund shares.
12
(Fees paid directly from your investment)
|
| |
|
Transaction
Fee on Purchases and Sales |
|
|
Transaction
Fee on Reinvested Dividends |
|
|
Transaction
Fee on Conversion to ETF Shares |
|
*
(Expenses that you pay each year as a percentage of the value of your investment)
|
| |
|
Management
Fees |
% |
|
12b-1
Distribution Fee |
|
|
Other
Expenses |
% |
|
Total Annual
Fund Operating Expenses1 |
% |
1
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
13
Principal
Risks
14
15
16
17
|
|
Total
Return |
Quarter |
|
|
% |
|
|
|
-
% |
|
|
|
1
Year |
5
Years |
10
Years |
|
Vanguard
Emerging Markets Stock Index Fund
ETF
Shares |
|
|
|
|
Based
on NAV |
|
|
|
|
Return Before
Taxes |
% |
% |
% |
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of
Fund
Shares |
|
|
|
|
Based
on Market Price |
|
|
|
|
Return Before
Taxes |
|
|
|
|
FTSE
Emerging Markets All Cap China A Inclusion
Index
(reflects no
deduction for fees or expenses) |
% |
% |
% |
|
Spliced
Emerging Markets Index
(reflects no
deduction for fees or expenses) |
|
|
|
|
FTSE
Global All Cap ex US Index
(reflects no
deduction for fees or expenses) |
|
|
|
18
Investment
Advisor
The Vanguard Group, Inc. (Vanguard)
through its wholly owned subsidiary, Vanguard Capital Management (VCM). VCM
exercises portfolio management responsibilities for the Fund.
Portfolio
Managers
John Kraynak, CFA, Portfolio
Manager at VCM. He has co-managed the Fund since 2025.
Michael Perre, Principal of
Vanguard and Portfolio Manager at VCM. He has managed the Fund since 2008
(co-managed since 2016).
Jeffrey D. Miller, Portfolio
Manager at VCM. He has co-managed the Fund since 2016.
Purchase
and Sale of Fund Shares
ETF Shares may only be bought and
sold in the secondary market through a brokerage firm. The price you pay or
receive for ETF Shares will be the prevailing market price, which may be more
(premium) or less (discount) than the NAV of the shares. The brokerage firm may
charge you a commission to execute the transaction. Unless imposed by your
brokerage firm, there is no minimum dollar amount you must invest and no minimum
number of shares you must buy. ETF Shares of the Fund cannot be directly
purchased from or redeemed with the Fund, except by certain authorized
broker-dealers. These broker-dealers may purchase and redeem ETF Shares only in
large blocks (creation units), typically in exchange for baskets of securities.
An investor in ETF Shares may incur
costs attributable to the difference between the highest price a buyer is
willing to pay to purchase ETF Shares (bid) and the lowest price a seller is
willing to accept for ETF Shares (ask) when buying or selling shares in the
secondary market (bid-ask spread). Recent information about the Fund and its ETF
Shares, including information on the Fund’s NAV, market price, premiums and
discounts, and bid-ask spreads, is available online at vanguard.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. If you are
investing through a tax-advantaged account, such as an IRA or an
employer-sponsored retirement or savings plan, special tax rules apply. You
should consult your own tax advisor with respect to any particular U.S. or
non-U.S. tax consequences of your investment in the Fund.
Payments
to Financial Intermediaries
The Fund and its advisor do not pay
financial intermediaries for sales of Fund shares.
19
More on
the
Funds
The following ETF Shares are
offered through this Prospectus:
|
Vanguard
Fund |
Vanguard
ETF Shares |
|
Vanguard
European Stock Index Fund |
Vanguard FTSE
Europe ETF |
|
Vanguard
Pacific Stock Index Fund |
Vanguard FTSE
Pacific ETF |
|
Vanguard
Emerging Markets Stock Index
Fund |
Vanguard FTSE
Emerging Markets ETF |
Each Fund is a series of Vanguard
International Equity Index Funds (the “Trust”). Unlike conventional
mutual fund shares, ETF Shares cannot be purchased directly from or redeemed
directly with the issuing fund by an individual investor. Instead, only certain
authorized broker-dealers (“Authorized Participants”) can purchase and redeem
ETF Shares directly from the issuing fund at net asset value. Authorized
Participants may purchase and redeem ETF Shares from the issuing fund only in
large blocks (creation units), usually in
exchange for baskets of securities. Funds may also issue and redeem creation
units in exchange for solely cash or a combination of cash and securities. These
trades may occur in-kind between Vanguard and the Authorized Participant.
Individual investors can purchase ETF Shares on the secondary market through a
broker. Reading this Prospectus will help you
decide whether a Fund’s ETF Shares are the right investment for you.
As you consider an investment in a
Fund’s ETF Shares, you should take into account your tolerance for fluctuations
in the securities markets. The costs
of investing are another important consideration. As a Fund shareholder, you
will pay a proportionate share of the costs of operating a Fund and any
transaction costs incurred when a Fund buys or sells securities, including
costs generated by shareholders of other
share classes to the extent a Fund offers more than one share class. These costs can erode a substantial portion of
the gross income or the capital appreciation a Fund achieves. Even seemingly
small differences can, over time, have a dramatic effect on a Fund’s performance.
Investment
Objective and More on Principal Investment Strategies
In this section, you will find more
information about each Fund’s investment objective and the principal investment
strategies and policies that each Fund uses in pursuit of its investment
objective. The Trust’s board of trustees (the “Board”) oversees each Fund’s
management. The Board may approve changes
20
to a Fund’s strategies or policies
in the interest of shareholders without shareholder approval unless the strategy
or policy is designated as fundamental.
Investment
Objective
The Funds’ investment objectives
are as follows:
• Vanguard
European Stock Index Fund seeks to track the performance of a
benchmark index that measures the investment return of stocks issued by
companies in the major markets of Europe.
• Vanguard Pacific Stock Index Fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies in the major markets of the Pacific region.
• Vanguard Emerging Markets Stock Index Fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in emerging market countries.
• Vanguard Pacific Stock Index Fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies in the major markets of the Pacific region.
• Vanguard Emerging Markets Stock Index Fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in emerging market countries.
Each Fund’s investment objective is
not fundamental and may be changed without shareholder
approval.
Implementation
of Investment Objective
To achieve its investment
objective, each Fund employs an indexing, or passive, investment approach
designed to track the performance of its Target Index (each, a “Target Index,”
and collectively, the “Target Indexes”).
|
Vanguard
Fund |
Target
Index |
|
Vanguard
European Stock Index Fund |
FTSE
Developed Europe All Cap Index |
|
Vanguard
Pacific Stock Index Fund |
FTSE
Developed Asia Pacific All Cap Index |
|
Vanguard
Emerging Markets Stock Index Fund |
FTSE Emerging
Markets All Cap China A
Inclusion
Index |
21
|
What are
Index Funds? |
|
Index
funds attempt to track—not outperform—the performance of a
specified
market index. An index is a group of securities whose overall
performance
is used as a standard to measure the investment
performance
of a particular market. Some indexes represent entire
markets,
such as the U.S. stock market, while others cover a segment of a
market,
such as short-term bonds. |
|
One cannot
invest directly in an index. Instead, an index fund’s advisor will
typically
seek to hold all, or substantially all, of the securities that make up
the fund’s
target index (often referred to as “replicating” an index or a “full
replication”
approach) or a representative sample of the securities that
make up a
fund’s target index (“sampling” an
index). |
Under normal circumstances, each
Fund invests at least 80% of its net assets, plus the amount of any borrowings
for investment purposes, in the stocks that make up its Target Index.
Investments in derivatives may be counted toward a Fund’s 80% policy to the
extent that they provide investment exposure to the securities included within
the policy or to one or more market risk factors associated with such
securities. Each Fund may change its 80% policy only upon 60 days’ notice to
shareholders.
Vanguard Emerging Markets Stock
Index Fund may become nondiversified, as defined under the Investment Company
Act of 1940, solely as a result of tracking an index. This could occur due to
events such as an index rebalance or market movement. A nondiversified fund may
invest a greater percentage of its assets in the securities of particular
issuers as compared with diversified funds. A fund becomes nondiversified if,
with respect to 75% of its total assets, the fund: (1) purchases more than 10%
of the outstanding voting securities of any one issuer, or (2) purchases
securities of any issuer when, as a result, more than 5% of the fund’s total
assets are invested in that issuer’s securities. The Fund may become
nondiversified without shareholder approval pursuant to SEC relief. In addition,
Vanguard Emerging Markets Stock Index Fund could become concentrated in an
industry or group of industries if its Target Index becomes concentrated due to
market conditions or the performance of a single or related group of
issuers.
Security
Selection
Vanguard European Stock Index Fund
and Vanguard Pacific Stock Index Fund use the replication method of indexing,
meaning that each Fund generally holds the same stocks as those in its Target
Index and in approximately the same
22
proportions. Vanguard Emerging
Markets Stock Index Fund invests by sampling its Target Index. The advisor buys
and sells securities for the Fund for the purpose of tracking the Target
Index.
Vanguard
European Stock Index Fund. The Fund’s Target Index, the FTSE
Developed Europe All Cap Index, is a market-capitalization weighted index and a
subset of the FTSE Global Equity Index Series which is designed to capture 98%
of the world’s investable market capitalization. The Fund’s Target Index is made
up of common stocks of large-, mid-, and small-cap companies located in
developed European markets. As of October 31, 2025, the number of stocks
(constituents) in the Target Index was 1,209. The constituents are reviewed and
rebalanced by the Index Provider on a semi-annual basis and are likely to change
over time.
Vanguard
Pacific Stock Index Fund. The Fund’s Target Index, the FTSE
Developed Asia Pacific All Cap Index, is a market-capitalization weighted index
and a subset of the FTSE Global Equity Index Series which is designed to capture
98% of the world’s investable market capitalization. The Fund’s Target Index is
made up of common stocks of large-, mid-, and small-cap companies located in
developed Asia/Pacific markets. As of October 31, 2025, the number of stocks
(constituents) in the Target Index was 2,326. The constituents are reviewed and
rebalanced by the Index Provider on a semi-annual basis and are likely to change
over time.
Vanguard
Emerging Markets Stock Index Fund. The Fund’s Target Index, the FTSE
Emerging Markets All Cap China A Inclusion Index, is part of the FTSE China A
Inclusion indexes which contain FTSE China A All Cap Index securities adjusted
for the aggregate approved QFII and RQFII quotas available to foreign investors.
The Fund’s Target Index is made up of common stocks of large-, mid-, and
small-cap companies located in emerging markets around the world. As of October
31, 2025, the number of stocks (constituents) in the Target Index was 4,836. The
constituents are reviewed and rebalanced by the Index Provider on a semi-annual
basis and are likely to change over time.
The Target Indexes are owned,
calculated, and controlled by the Index Provider in its sole discretion. Neither
the advisor nor any of their affiliates has discretion to select Target Index
components or change a Target Index’s methodology.
Stocks of publicly traded companies
are often classified according to market capitalization, which is the market
value of a company’s outstanding shares. These classifications typically include
small-cap, mid-cap, and large-cap. It is important to understand that there is
no “official” definition of each type of small-cap, mid-cap, or large-cap and
that market capitalization ranges can change over time.
23
A fund’s median market
capitalization, which is the midpoint of the market capitalization of the fund’s
stocks weighted by the proportion of the fund’s assets invested in each stock,
can be used as an indicator of the size of the companies in which it invests.
Stocks representing half of a fund’s assets will have market capitalizations
above the median, and the rest will fall below it. As of October 31, 2025, the
asset-weighted median market capitalization of each Fund’s stock holdings
was:
|
Vanguard
Fund |
Asset-Weighted
Median
Market
Capitalization |
|
Vanguard
Emerging Markets Stock Index
Fund |
$33
billion |
|
Vanguard
European Stock Index Fund |
$68
billion |
|
Vanguard
Pacific Stock Index Fund |
$31
billion |
Additional
Information Regarding the Funds’ Investments
The Funds’ investments are
described in more detail below.
• Large-Cap
Stocks represent the
largest publicly traded companies, which are often well-established and widely
recognized. These companies typically have significant market share, global
reach, and a history of financial stability. While they may not offer as much
growth potential as smaller companies, they are generally considered more
resilient during economic downturns but still not immune from a decrease in
price.
• Mid-Cap Stocks
represent medium-sized
companies, which can be companies that are more established than small-cap
companies but do not have the market share of large-cap companies. These
companies may be more agile than large-cap companies in responding to market
changes, while also benefiting from more resources and operational maturity than
small-cap companies. However, they can still face challenges during economic
downturns.
• Small-Cap
Stocks represent
smaller companies, which may be newer or operate in niche markets. These
companies can offer higher growth potential than larger companies and may be
more agile in adapting to market changes. However, they also face greater risks,
such as limited access to capital and vulnerability during economic
downturns.
More on Fund
Risks
Investing in the securities markets
can result in a loss of principal. Each Fund is subject to a variety of risks,
including the principal risks listed below, that can impact its net asset value
(NAV), performance, and ability to achieve its investment objective.
24
More
on Principal Risks
General Market
Risk. The markets in
which the Funds invest can be affected by a variety of factors. These factors,
which can be real or perceived, may include economic, market, political, and
regulatory conditions and developments as well as local, regional, or global
events such as wars, military conflicts, natural disasters, and public health
issues. In addition, investor sentiment and expectations regarding these factors
can also impact the markets. Different parts of the market, including different
industries and sectors as well as different types of securities, may react
differently to factors that affect the market. These factors can contribute to
market uncertainty, market volatility, and fluctuations in the value of the
Funds’ investments, thereby resulting in potential losses to the Funds over
short or long periods.
Investing in
Foreign Markets.
Foreign markets can perform differently than U.S. markets. World events could
adversely affect the value and/or liquidity of securities (including depositary
receipts) of foreign companies or foreign issuers, potentially in ways that
differ from impacts to U.S. companies or issuers. Further, global economies and
financial markets are becoming increasingly interconnected, which increases the
possibility that conditions in one country or region could adversely impact a
different country or region. In addition, the rights and remedies associated
with investments in a fund that invests in foreign securities may be different
than a fund that invests in domestic securities. The performance of a fund that
invests significantly in one or more countries or regions will be closely tied
to factors within that country or region. These factors may include currency,
economic, political, and/or regulatory conditions and developments. Therefore,
the Funds’ performance may be affected disproportionately compared to a fund
that does not invest significantly in such countries or
regions.
Investing in
Emerging Markets (Applies to
Vanguard Emerging Markets Stock Index Fund). Investing in emerging markets
presents additional risks and volatility compared to investing in developed
markets. These risks include less developed tax, financial reporting,
accounting, and recordkeeping systems. Governments in emerging market countries
may intervene in the economy by imposing capital controls, nationalizing
industries, or placing restrictions on foreign ownership. The legal structure in
these markets may also be less developed, making it difficult for investors to
pursue legal remedies or enforce judgments. Regulatory frameworks may be less
stringent, leading to greater risks with respect to the custody of securities
and compliance with local laws. Additionally, these markets may face
hyperinflation, currency devaluation, and trade disputes.
Exchanges in emerging market
countries are often less efficient, with lower overall liquidity, potentially
leading to increased volatility and difficulties in valuing investments. These
challenges can also occur due to limited, incomplete, or inaccurate information
regarding issuers, who may not be
25
subject to the same standards as
those in developed markets. Currency exchange rates are typically more volatile
which magnifies the risks associated with investments in emerging markets.
Additionally, these markets may encounter restrictions (such as sanctions,
embargoes, or tariffs), manipulation, or other unfavorable actions. Each of
these risks can cause losses to the Fund’s investments and/or impact the Fund’s
performance.
Currency
Risk. Each Fund is
subject to the risk that foreign currency will perform differently than U.S.
dollars and increase the potential loss to each Fund. Currency exchange rates
may be volatile, move rapidly, and change as a result of changes in interest
rates, inflation rates, government surpluses or deficits, and monetary policy or
currency controls imposed by local governments or supranational entities such as
the International Monetary Fund. Changes in currency exchange rates can affect
the value of each Funds’ holdings.
Investments
Economically Tied to China (Applies to
Vanguard Emerging Markets Stock Index Fund). The Fund’s investments in
companies economically tied to China subject the Fund to risks not typically
associated with investments in more established markets. Investments in
companies or issuers economically tied to China are subject to all of the
foreign market risks described in this Prospectus, as well as to the unique
risks and considerations discussed below. Foreign market risks (Investing in
Foreign Markets, Investing in
Emerging Markets, Currency
Risk, and Geopolitical and
Sanctions Risk) may be
more pronounced with respect to the Fund’s investments economically tied to
China or for the Fund as a whole. Each of these factors could increase the
Fund’s volatility, cause the Fund to incur losses, or otherwise impact the
Fund’s performance.
Investments in companies or issuers
economically tied to China are associated with considerable degrees of social
and humanitarian, legal, regulatory, political, and economic uncertainty. For
example, the Chinese government has historically exercised authority over
publicly traded Chinese companies and may continue to do so. This authority can
include, but is not limited to, dictating what types of products Chinese
companies should produce and to whom such products can be sold, nationalizing or
seizing assets, and pursuing regulatory enforcement in an unpredictable manner.
The Chinese government’s monetary policy, which may include restricting currency
access or devaluing Chinese currency, could have a negative impact on the Fund’s
ability to effectively trade in the Chinese markets. China has ongoing disputes
with Hong Kong, Taiwan, the Xinjiang region and the Uyghur population, and other
neighboring areas. These disputes continue to escalate due to ongoing Chinese
military exercises (such as land reclamation efforts in the South China Sea),
policymaking within China, assertions of human rights violations by the UN and
other developed nations, and statements from high-ranking Chinese government
officials. In addition, the Chinese government has been accused of participating
in
26
state-sponsored cyberattacks
against other foreign countries and foreign companies. Concerns have also been
raised regarding Chinese companies that engage in activities that potentially
pose a national security threat to the United States and other countries. Actual
or threatened responses to these activities, including sanctions or other
restrictions (such as tariffs or embargoes) imposed by the United States or
other countries, can significantly impact the Chinese economy and companies or
issuers economically tied to China. The Chinese government may also itself
impose trade restrictions on Chinese companies. Compliance with sanctions could
lead to a large market selloff, which could result in significant losses to the
Fund if the Fund holds securities that are sanctioned. All of these factors
could cause the Fund’s investments in companies or issuers economically tied to
China to decline in value or become less liquid.
The Fund may be subject to
additional risks depending on the types of Chinese securities in which it
invests and how it gains exposure to those securities. Companies incorporated in
China can issue different types of shares depending on the exchange on which the
shares will trade and the types of investors to whom the shares will be
available. For example, A-shares are traded on the Shanghai and
Shenzhen Stock Exchanges and are available to the Fund through the China Stock
Connect program (“Stock Connect”) or with a license granted under the qualified
foreign investor (“QFI”) framework. To the extent that the Fund invests in
A-shares, the Fund is subject to the risk that it will not be able to access its
desired amount of A-shares through Stock Connect or a QFI license. There is no
guarantee that the Chinese government will continue to allow investment through
Stock Connect and/or the QFI framework. Investing through these channels is also
subject to trading restrictions and suspensions and operational, clearing, and
settlement risks. H-shares are traded on the Hong Kong Stock
Exchange and are generally available to all investors, but their use is subject
to risk because the Hong Kong stock market may have little to no correlation to
the performance of the mainland Chinese stock market.
The Fund may also gain exposure to
Chinese companies through legal structures known as variable interest entities
(“VIEs”), which provide exposure to a Chinese company through contractual
arrangements instead of equity ownership. Investing through a VIE does not offer
the same level of investor protection as direct ownership and is subject to
risks including breach of the contractual arrangements, difficulty in enforcing
the contractual arrangements outside of the United States, and intervention by
the Chinese government. These risks could significantly affect a VIE’s market
value, which in turn could impact the Fund’s performance.
Investing in
Equity Markets. Each
Fund invests in the equity markets. Equity markets have historically been
cyclical, having periods of time when stock values rise and fall. These periods
of rising and falling values can occur for
27
unpredictable timeframes over the
short and long term. Market volatility also is unpredictable and can lead to
significant fluctuations in stock values, resulting in potential losses to the
Funds.
Market
Capitalization (Market Cap). Companies are generally classified
into three types of market cap depending on their size: small-, mid-, and
large-cap. Companies can be further classified into micro- or mega-cap.
Different factors can affect each market cap uniquely, and historically small-
and mid-cap stocks have typically been more volatile due to the effects of
changing economic conditions. Large companies may not reach the same levels of
growth or performance as smaller companies, and they may be slower to react to
competitive challenges. The performance of funds that invest in a subset of
market caps could diverge from the performance of funds that are focused on a
broader representation of the stock market.
Index
Investing. Each Fund
is subject to the following risks associated with index investing:
Passive
Management. Each Fund
seeks to track the performance of its Target index regardless of how a Target
Index is performing. The advisor’s use of an indexing, or passive, approach to
select and maintain investments for each Fund means that the advisor will select
investments for the purpose of tracking the Target index and generally will not
use strategies to reduce negative impacts to the Fund during periods of market
volatility. As a result, a Fund’s performance may be lower than it would be if
it were actively managed.
Index
Replication Strategy (Applies to Vanguard European Stock Index Fund and Vanguard
Pacific Stock Index Fund). Although the Fund seeks to hold
substantially all of the securities included in its Target Index, it may be
unable to do so. In addition, the Fund could be prevented from holding one or
more of the securities in the same proportion as in the Target Index.
Index Sampling Strategy (Applies to Vanguard Emerging Markets Stock Index Fund). Because each Fund does not hold all securities included in its Target Index, each Fund is subject to the risk that the representative sample of securities selected by the advisor will, in the aggregate, vary from the investment of the full Target Index.
Index Sampling Strategy (Applies to Vanguard Emerging Markets Stock Index Fund). Because each Fund does not hold all securities included in its Target Index, each Fund is subject to the risk that the representative sample of securities selected by the advisor will, in the aggregate, vary from the investment of the full Target Index.
Tracking
Error. The performance
of a Fund’s investments, in the aggregate, may not match the investment
performance of its Target index. It is important to understand that an index
fund will never perform exactly the same as its target index because, among
other things, an index fund has operating expenses and transaction costs and its
target index does not. Beyond these inherent
28
differences in the operation of an
index fund versus the operation of its target index, there are a variety of
other factors that can cause or result in tracking error.These may include, but
are not limited to:
○
Price differences between the
securities held by the index fund and those included in its target
index
○
Cash flows into or out of the index
fund
○
The size of the index
fund
○
Compliance with new or existing
regulatory requirements
○
Portfolio transactions carried out
by the index fund’s advisor to minimize the distribution of capital
gains
○
Changes to the underlying
securities that make up the target index
○
Errors made by the provider of the
target index
Tracking error risk may be
heightened during times of increased market volatility or under other unusual
market conditions. An index fund using a sampling strategy may be more likely to
experience tracking error than an index fund using a replicating
strategy.
Index
Provider. Each Fund is
subject to risks associated with its Index Provider. The securities that make up
a Target Index and their weighting in the Target Index are determined by the
Index Provider. The Index Provider does not provide any warranty or accept any
liability with respect to the quality, accuracy, or completeness of the Target
Index or any data used to compile the Target Index. Under normal circumstances,
the Index Provider rebalances (updates) the Target Index on a regular schedule.
However, the Index Provider may also rebalance the Target Index outside of the
regular schedule or delay or cancel a scheduled rebalance, which could result in
added costs for a Fund or cause a Fund to experience tracking error. The Index
Provider may make errors, and it is possible that such errors may not be
identified by the Index Provider for a period of time or at all. Any gains,
losses, or costs associated with or resulting from an error made by the Index
Provider will generally be borne by a Fund and, as a result, a Fund’s
shareholders. A Fund’s advisor does not provide any warranty or guarantee
against any errors made by the Index Provider.
Nondiversification (Applies to
Vanguard Emerging Markets Stock Index Fund). By tracking its broad-based Target
Index, the Fund could become nondiversified, as defined under the Investment
Company Act of 1940. Nondiversified funds invest a greater percentage of their
assets in a small number of issuers than diversified funds, their performance
may be negatively impacted by relatively few securities or even a single
security, and their shares may experience significant fluctuations in
value.
29
Concentration
Risk. Except as may be
necessary to approximate the composition of its Target Index, each Fund will not
concentrate its investments in the securities of issuers whose principal
business activities are in the same industry or group of industries. However, it
is possible that a Target Index could become concentrated due to market
conditions or the performance of a single or related group of issuers. If a
Target Index becomes concentrated and a Fund needs to concentrate in the same
industry or group of industries, its performance could be negatively impacted by
the industry or industries in which it is concentrated.
ETF Share
Trading. Because ETF
Shares trade on the secondary markets, they are subject to the following
risks:
ETF Shares
Trading at Prices Other Than NAV. ETF Shares may trade on a
national securities exchange at prices above, below, or at their most recent
NAV.The NAV of a Fund’s ETF Shares, which typically is calculated at the end of
each business day, will generally fluctuate with changes in the market value of
the Fund’s holdings. The market prices of ETF Shares will also fluctuate, in
some cases materially, in accordance with changes in NAV and the intraday value
of a Fund’s holdings, as well as the relative supply of and demand for the ETF
Shares on an exchange. Differences between secondary market prices of ETF Shares
and the intraday value of a Fund’s holdings may be due largely to supply and
demand forces in the secondary market, which may not be the same forces as those
influencing prices for securities held by the Fund at a particular
time.
Although it is expected that the
market price of an ETF Share typically will trade close to the value of a Fund’s
holdings, market prices are not expected to correlate exactly to a Fund’s NAV
due to timing reasons, supply and demand imbalances, and other factors. In
addition, disruptions to creations and redemptions; adverse developments
impacting market makers, authorized participants, or other market participants;
or high market volatility may result in the market price of ETF Shares differing
significantly from a Fund’s NAV or the intraday value of a Fund’s holdings. As a
result of these factors, among others, you may pay more (premium) or less
(discount) than NAV when you buy ETF Shares on the secondary market, and you may
receive more or less than NAV when you sell those shares. These discounts and
premiums are likely to be greatest during times of market disruption or extreme
market volatility.
Cost of Buying
or Selling Shares.
Individual investors who buy or sell ETF Shares through a broker may incur a
brokerage commission or other charges imposed by brokers. In addition, the
market price of ETF Shares, like the price of any security on an exchange,
includes a “bid-ask spread” charged by the market makers or other participants
that trade the particular security. The bid-ask spread is the difference between
the highest price a buyer is willing to pay to purchase ETF Shares (bid) and the
lowest price a seller is willing to accept for ETF Shares (ask) when buying or
selling shares in the secondary
30
market. The bid-ask spread of a
Fund’s ETF Shares can vary over time based on the Fund’s trading volume and
market liquidity and may increase if the Fund’s trading volume, the bid-ask
spread of the Fund’s underlying securities, or market liquidity decrease. In
times of severe market disruption, including when trading of a Fund’s holdings
may be halted, the bid-ask spread may increase significantly. This means that
ETF Shares may trade at a discount to a Fund’s NAV, and the discount is likely
to be greatest during significant market volatility.
Short
Selling. ETF Shares,
similar to shares of other issuers listed on an exchange, may be sold short. In
a short sale, an investor “borrows” securities from a lender for a fee and then
sells the borrowed securities on the open market with the hope that the borrowed
securities decline in price before the investor has to repurchase the securities
to return them to the lender. Short sales of ETF Shares can increase their
volatility and lead to price decreases.
Lack of Active
Trading Market.
Although ETF Shares are listed on a national securities exchange, it is possible
that an active trading market may not be maintained. Although this could happen
at any time, it is more likely to occur during times of severe market
disruption. If you attempt to sell your ETF Shares when an active trading market
is not functioning, you may have to sell at a significant discount to NAV. In
extreme cases, you may not be able to sell your shares at all.
Trading
Halt. Trading of ETF
Shares on an exchange may be halted by the activation of individual or
market-wide trading halts (which halt trading for a specific period of time when
the price of a particular security or overall market prices decline by a
specified percentage). Trading of ETF Shares may also be halted if (1) the
shares are delisted from the listing exchange without first being listed on
another exchange or (2) exchange officials determine that such action is
appropriate in the interest of a fair and orderly market or for the protection
of investors. If a trading halt or unanticipated early closing of an exchange
occurs, a shareholder may be unable to purchase or sell ETF
Shares.
Authorized
Participants. Only
Authorized Participants may engage in creation or redemption transactions
directly with each Fund. The Fund has a limited number of financial institutions
that may act as Authorized Participants. A Fund’s Authorized Participants are
not obligated to engage in creation or redemption transactions. To the extent
that a Fund’s Authorized Participants are unable to or choose not to proceed
with creation and/or redemption transactions with respect to the Fund and no
other Authorized Participants step forward to engage in creation or redemption
transactions with the Fund, the Fund’s ETF Shares may trade at a discount to NAV
and possibly face trading halts and/or delisting.
31
Additional
Risks
Geopolitical and
Sanctions Risk. Due to
growing dependencies between global economies, geopolitical events can
negatively affect all securities, markets, and economies. It is possible that
events which only impact one geographic area could have negative short- or
long-term effects on markets, issuers, and/or exchanges in the United States and
other countries.
At times, the United States, other
governments, or other supranational bodies (e.g., the United Nations) may impose
sanctions on countries and/or entities in response to geopolitical events or
other priorities. Compliance with sanctions could impact the Funds, including
the Funds’ abilities to transact in or obtain exposure to certain foreign
securities and assets. Sanctions also could cause significant losses to the
Funds’ investments and their performance could be negatively impacted. In lieu
of sanctions, companies or specific goods that the company produces could be
subjected to trade embargoes or tariffs, which can also affect securities
markets and create volatility. So long as sanctions do not prohibit investment
in the company or issuer, the Funds typically also would not be prohibited from
investing in the affected company or issuer.
ETF Share Class
Risks. By investing in
the ETF Shares of a fund that also offers conventional mutual fund shares, you
could be subject to costs and/or tax impacts that you would not be subject to if
you invested in exchange-traded shares offered by a fund without a conventional
mutual fund share class. These costs include brokerage and other transaction
costs associated with a Fund buying and selling portfolio securities in response
to conventional mutual fund share class inflows and outflows, cash drag as a
result of a Fund holding the cash necessary to satisfy conventional mutual fund
share class transactions, and taxable capital gains distributions if a Fund has
to sell portfolio holdings at a gain in order to satisfy mutual fund share class
redemptions.
Potential
Redemption Activity Impacts. The Vanguard funds can be
negatively impacted by certain large redemptions. These redemptions could occur
due to a single shareholder or multiple shareholders deciding to sell a large
quantity of shares of a fund or a share class of the fund. Large redemptions can
occur for many reasons, either as a result of actions taken by the Vanguard
funds or their advisors, or as a result of events unrelated to actions taken by
the Vanguard funds or their advisors. Actions taken by the Vanguard funds or
their advisors could include, but are not limited to, changes to a fund’s
advisor(s), changes to a fund’s portfolio manager(s), changes to the composition
of a fund’s portfolio, and/or other product changes or launches that, for
example, result in shareholders redeeming shares of one fund to purchase shares
of another fund or investment vehicle. For a fund of funds, actions taken by the
Vanguard funds or their advisors could include a withdrawal from an underlying
fund or a change in the allocation to underlying funds. Events
32
unrelated to actions taken by the
Vanguard funds or their advisors could include shareholders selling out of a
fund in response to market movements or regulatory changes.
A large redemption could adversely
affect a fund’s liquidity and NAV. For example, a large redemption could require
a fund’s manager to sell portfolio holdings at unplanned or inopportune times.
The manager’s sale of these holdings, which is a taxable event, could require
the fund to distribute any corresponding capital gains or other taxable income
to the fund’s remaining shareholders; see Dividends,
Distributions, and Taxes in the Investing in
Vanguard ETF® Shares
section for additional
information. The increased trading activity could also increase underlying costs
for the fund due to commissions paid by the fund.
Investing in
Derivatives. Investing
in derivatives may present risks different from, and/or greater than, those
associated with investing directly in stocks, bonds, or other types of
investments. Derivatives could expose the Fund to increased volatility and/or
significant loss. Certain derivatives have an inherent leverage component,
providing the Fund exposure to a sizable position in an underlying asset with a
relatively small upfront investment at the time the Fund enters into the
derivatives position. For these derivatives, an adverse change in the value or
price of the underlying asset could result in a loss substantially greater than
the amount invested in the derivative itself. Some derivatives require the Fund
to enter into a contract with a counterparty. If the counterparty is unable or
unwilling to fulfill its contractual obligation, the Fund may experience a loss.
A liquid market may not always exist for the Fund’s derivatives positions. The
Fund may be unable to sell or otherwise exit its derivatives position at desired
times or prices, which could also result in a loss to the Fund. Some
derivatives, particularly OTC derivatives, can be complex and often are valued
subjectively. Valuation may be more difficult in times of market turmoil since
many investors and market makers may be reluctant to purchase complex
instruments or quote prices for them. Improper valuations can result in
increased cash payment requirements to counterparties or a loss of value to the
Fund.
Derivatives may not perform as
intended, which may result in losses to the Fund. For example, derivatives used
for hedging or as a substitute for a portfolio instrument may not provide the
expected benefits, particularly during adverse market conditions. The use of
derivatives is also subject to legal risk, which includes the risk of loss
resulting from insufficient or unenforceable contractual documentation,
insufficient capacity or authority of the Fund’s counterparty, and operational
risk, which includes documentation or settlement issues, system failures,
inadequate controls, and human error.
Ownership
Limitations Risk. As
the Vanguard funds continue to grow, they may be increasingly impacted by
ownership limitations that apply to certain securities held by the Vanguard
funds (“limited securities”). An ownership
33
limitation restricts the amount of
a security that funds within the same fund complex or funds advised by the same
investment advisor can own. These limitations may apply even where an external
manager or different affiliate of Vanguard provides investment advisory services
to a fund. Ownership limitations restrict the amount that funds can invest in
certain securities, due to either regulatory limits that apply to certain
industries (for example, banking and utilities) or mechanisms that some issuers
have in place to deter takeover attempts (for example, poison pills). These
restrictions can have negative impacts on funds, including the inability of an
index fund to track its index, the inability of a fund to meet its investment
objectives, negative performance impacts, and unanticipated tax consequences.
The impact of a particular ownership limitation on a Vanguard fund will vary
based on several factors, including, but not limited to, a fund’s investment
strategy and its current and desired exposure to limited securities, the
industry to which the limitation applies, the country or region of a particular
issuer, and the regulatory body imposing the limitation. In addition to the
impacts of specific ownership limitations, the Vanguard funds are also subject
to the risk of multiple ownership limitations applying at one time, which could
increase the likelihood of a fund experiencing the negative impacts listed
above. The Vanguard funds attempt to mitigate the impacts of ownership
limitations through the various methods discussed below in “Methods to address
ownership limitations.” However, it is possible that these methods will be
unsuccessful and could also expose the Vanguard funds to other potential risks
and negative consequences.
Impacts of
Ownership Limitations.
When an ownership limitation applies, the Vanguard funds may need to allocate
ownership of impacted securities across impacted Vanguard funds, and a Vanguard
fund may not be able to buy additional securities or continue to hold existing
securities above its allocated amounts. For index funds, this can result in
tracking error if a fund cannot buy or hold the securities it needs in order to
replicate or sample its target index. For active funds, this can result in a
fund not being able to take advantage of favorable opportunities to invest in
securities that are subject to limitations. For both index and active funds, the
inability to buy or hold securities could prevent a fund from being able to meet
its investment objective or invest in accordance with its investment strategy,
and/or could negatively impact the fund’s performance. In addition, the steps
taken to address ownership limitations could result in additional costs and/or
unanticipated tax consequences to a fund that affect the amount, timing, and
character of distributions to the fund’s shareholders. The more assets the
Vanguard funds hold, the more likely it is that ownership limitations will
negatively impact Vanguard funds because they will not be able to purchase
additional shares of limited securities above their allocated amounts in order
to fully invest their assets in accordance with their investment
strategies.
34
Methods to
Address Ownership Limitations. The Vanguard funds try to manage
the negative impacts of these ownership limitations on the Vanguard funds by
seeking permission (relief) from regulators and/or issuers to purchase or hold
more securities than the amount allowed by ownership limitations. However, it is
not always possible to secure relief and such relief could be revoked if the
Vanguard funds are unable to satisfy the applicable conditions, or if the
regulator or issuer changes its position or policy or if the applicable legal
requirements become more restrictive. There is an increasing amount of
uncertainty around how much ownership limitations relief regulators will grant
to asset managers like Vanguard. Given this uncertainty, there is no guarantee
that Vanguard or the Vanguard funds will be able to maintain their existing
relief or obtain additional relief from ownership limitations in the future. A
regulator may impose certain conditions on the Vanguard funds in connection with
granting relief from an ownership limitation, including, for example, that the
funds vote in a certain way with respect to shares of the limited security that
the Vanguard funds hold in excess of the ownership limitation. Regulatory relief
may also depend on the operational independence of certain Vanguard subsidiaries
and/or business divisions.
In addition, the relief upon which
Vanguard and the Vanguard funds currently rely, which has allowed Vanguard to
exceed certain ownership limitations, could be reduced or revoked, forcing the
Vanguard funds to sell down one or more securities to comply with the ownership
limitations. If a fund has to sell securities, there could be negative impacts
to fund performance as well as unanticipated tax consequences that could impact
the amount, timing, and character of distributions to the fund’s
shareholders.
When a Vanguard fund cannot buy or
hold securities directly due to ownership limitations, the fund will typically
try to get indirect exposure to impacted securities. The fund does this so that
it can replicate as closely as possible the returns the fund would get if it
directly owned the impacted securities. Indirect exposure can be accomplished
through the use of derivatives, such as total return swaps, or by investing in
wholly owned subsidiaries that hold the impacted securities. Both of these
methods of obtaining indirect exposure increase fund costs, and, depending on
the extent to which these alternatives are used by a fund to avoid exceeding
ownership limits, the added costs could have a negative impact on the fund’s
performance. With respect to an index fund, these added costs could also result
in tracking error relative to the fund’s target index. The risks associated with
derivatives use are discussed in more detail elsewhere in this
Prospectus.
There is no guarantee that laws and
regulations always will allow that indirect exposure to limited securities may
be omitted for purposes of determining the Vanguard funds’ exposure to limited
securities and compliance with the
35
applicable ownership limitations.
In such circumstances, the Vanguard funds could not use these techniques and
would be required to sell down the indirect and/or direct holdings in the
applicable limited securities.
Other Investment
Policies
In addition to employing its
principal investment strategies, each Fund may use the following other
investment strategies and types of investments in order to achieve its
investment objective.
Substitute
Index
Each Fund reserves the right to
substitute a different index for the index it currently tracks if a current
index is discontinued, if the Fund’s agreement with the provider of its Target
index is terminated, or for any other reason determined in good faith by the
Board. In any such instance, a substitute index would represent the same market
segment as the Target index.
Other
Types of Investments
Each Fund may invest in derivatives
such as total return swaps, equity futures, foreign currency exchange forward
contracts, or other derivatives. In general, a derivative is a financial
contract whose value is based on the value of a financial asset (such as a
stock, a bond, or a currency), a physical asset (such as gold, oil, or wheat), a
market index, or a reference rate. Each Fund attempts to remain fully invested
in stocks in order to track its Target Index as closely as possible; however, to
help stay fully invested and to reduce transaction costs, each Fund may invest
in derivatives. Each Fund may use derivatives to obtain exposure to a stock, a
basket of stocks, or an index. Derivatives may also be used as an alternate
means to obtain economic exposure if a Fund is required to limit its investment
in a particular issuer or industry. Vanguard Emerging Markets Stock Index Fund
may use derivatives as an alternative method of economic exposure to China
A-Shares. The Funds will not use derivatives for speculation or for the purpose
of leveraging (magnifying) investment returns.
Each Fund may enter into foreign currency exchange forward contracts in order to maintain the same currency exposure as its Target Index. A foreign currency exchange forward contract is an agreement to buy or sell a 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. These contracts, however, would not prevent a Fund’s securities from falling in value as a result of risks other than unfavorable currency exchange movements. The Funds may use these contracts to manage currency exposure and to settle trades in a foreign currency.
Each Fund may also invest in convertible securities and warrants. Convertible securities are securities that may be converted at either a stated price or a
Each Fund may enter into foreign currency exchange forward contracts in order to maintain the same currency exposure as its Target Index. A foreign currency exchange forward contract is an agreement to buy or sell a 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. These contracts, however, would not prevent a Fund’s securities from falling in value as a result of risks other than unfavorable currency exchange movements. The Funds may use these contracts to manage currency exposure and to settle trades in a foreign currency.
Each Fund may also invest in convertible securities and warrants. Convertible securities are securities that may be converted at either a stated price or a
36
stated rate into underlying shares
of common stock. Warrants are securities that permit their owners to purchase a
specific number of stock shares at a predetermined price in the future.
In most cases, each Fund invests directly in the components of its Target Index. However, a Fund also reserves the right to obtain indirect economic exposure to an index component by purchasing a depositary receipt representing an interest in that component. Depositary Receipts, also sold as participatory notes, are securities that are listed on exchanges or quoted in over-the-counter markets in one country, but represent shares of issuers domiciled in another country. Generally, a Fund will purchase depositary receipts only when the advisor believes that the Fund would benefit from holding the depositary receipt rather than the underlying index component. For example, the Fund might opt to hold a depositary receipt if the foreign market in which an index component trades does not provide adequate protection to the rights of foreign investors, or if a foreign regulator places restrictions on the free flow of capital or currency. For purposes of any investment policy or other requirement related to the percentage of index components held by a Fund, depositary receipts that represent an interest in an index component are treated by the Fund as index components.
In most cases, each Fund invests directly in the components of its Target Index. However, a Fund also reserves the right to obtain indirect economic exposure to an index component by purchasing a depositary receipt representing an interest in that component. Depositary Receipts, also sold as participatory notes, are securities that are listed on exchanges or quoted in over-the-counter markets in one country, but represent shares of issuers domiciled in another country. Generally, a Fund will purchase depositary receipts only when the advisor believes that the Fund would benefit from holding the depositary receipt rather than the underlying index component. For example, the Fund might opt to hold a depositary receipt if the foreign market in which an index component trades does not provide adequate protection to the rights of foreign investors, or if a foreign regulator places restrictions on the free flow of capital or currency. For purposes of any investment policy or other requirement related to the percentage of index components held by a Fund, depositary receipts that represent an interest in an index component are treated by the Fund as index components.
Cash
Management
Each Fund’s daily cash balance may
be invested in one or more Vanguard CMT Funds, which are used as cash management
vehicles for the Vanguard funds. When investing in a CMT Fund, each Fund bears
its proportionate share of the expenses of the CMT Fund in which it invests.
Vanguard receives no additional revenue from Fund assets invested in a CMT
Fund.
Temporary
Defensive Measures
Each Fund may temporarily depart
from its normal investment policies and strategies when the advisor believes
that doing so is in the Fund’s best interest, so long as the strategy or policy
employed is consistent with the Fund’s investment objective. For instance, a
Fund may invest beyond its normal limits in derivatives or exchange-traded funds
that are consistent with the Fund’s investment objective when those instruments
are favorably priced or provide needed liquidity, as might be the case when the
Fund receives large cash flows that it cannot prudently invest immediately. A
Fund may also invest beyond its normal limits in derivatives as an alternate
means to obtain economic exposure if the Fund is required to limit its
investment in a particular issuer or industry.
Portfolio
Holdings
Please consult the Funds'
Statement of
Additional Information
or Vanguard’s website for a description of the policies and procedures that
govern disclosure of each Fund’s portfolio holdings.
37
Management and
Distribution of the Funds
Each Fund is a member of The
Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All of the funds
that are members of Vanguard (other than funds of funds) share in the expenses
associated with administrative services and business operations, such as
personnel, office space, and equipment.
Vanguard Marketing Corporation
provides marketing services to the funds. Although fund 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.
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How is
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Vanguard
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 are owned by third parties—either public or
private
stockholders—and not by the funds they
serve. |
Investment
Advisor
The Vanguard Group, Inc., P.O. Box
2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor
to the Funds through Vanguard Capital Management (VCM). VCM exercises portfolio
management responsibilities for the Funds. As of October 31, 2025, Vanguard
served as advisor for approximately $9.8 trillion in assets.
Vanguard, through VCM, provides investment advisory
services to the Funds pursuant to the Funds’ Service Agreement and subject to
the supervision and oversight of the trustees and officers of the
Funds.
VCM, P.O. Box 2600, Valley Forge,
PA 19482, is a wholly owned subsidiary of Vanguard and was established in
2025.
For the fiscal year ended October
31, 2025, the advisory expenses represented an effective annual rate of each
Fund’s average net assets as follows: for Vanguard European Stock Index Fund,
0.01%; for Vanguard Pacific Stock Index Fund, 0.01%; for Vanguard Emerging
Markets Stock Index Fund, 0.01%.
Each Fund reserves the right to
utilize a multimanager approach in the future. Under the terms of an SEC
exemption, the Board may, without prior approval from
shareholders, change the terms of an advisory agreement with a third-party
investment advisor or hire a new third-party investment advisor—either as a
replacement for an existing advisor or as an additional advisor. Any significant
change in a Fund’s advisory arrangement will be communicated to shareholders in
writing. As Vanguard is the Funds’ sponsor and overall manager,
Vanguard, through VCM, may provide investment
advisory services to a Fund under certain circumstances. Vanguard may also
recommend to the Board that an advisor be hired, terminated, or replaced or that
the terms of an existing advisory agreement be revised. The Funds have
38
filed an application seeking an SEC
exemption with respect to investment advisors that are wholly owned subsidiaries
of Vanguard. If the exemption is granted, the Funds may rely on the new SEC
relief.
A discussion regarding the basis
for the Board’s approval of each Fund’s investment advisory
arrangement is available in each Fund’s Form
N-CSR filed with the SEC for the fiscal year ended October 31 and in the
applicable Financial Statements and Other Information document available on each
Fund’s website.
The managers
primarily responsible for the day-to-day management of the Funds
are:
Nicole
Brubaker, Portfolio
Manager at VCM. She has been with Vanguard since 2014, has worked in investment
management since 2018, and has co-managed Vanguard Pacific Stock Index Fund
since 2025. Education: B.S., Millersville University.
Christine D.
Franquin, Principal of
Vanguard and Portfolio Manager at VCM. She has managed investment portfolios
since joining Vanguard in 2000 and has co-managed Vanguard European Stock Index
Fund since 2016. Education: B.A., Universitaire Faculteiten Sint-Ignatius
Antwerpen, Belgium; J.D., University of Liege, Belgium; M.S., Clark
University.
Scott E.
Geiger, CFA, Portfolio
Manager at VCM. He has been with Vanguard since 2006, has worked in investment
management since 2008, has managed investment portfolios since 2013, and has
co-managed Vanguard European Stock Index Fund since 2022. Education: B.S.,
Millersville University.
John
Kraynak, CFA,
Portfolio Manager at VCM. He has been with Vanguard since 2010, has worked in
investment management since 2018, and has co-managed Vanguard European Stock
Index Fund and Vanguard Emerging Markets Stock Index Fund since 2025. Education:
B.S., Millersville University; M.B.A., Drexel University.
Jeffrey D.
Miller, Portfolio
Manager at VCM. He has been with Vanguard since 1999, has managed investment
portfolios since 2010, and has co-managed Vanguard Pacific Stock Index Fund and
Vanguard Emerging Markets Stock Index Fund since 2016. Education: B.A., The
Pennsylvania State University; M.B.A., Drexel University.
Michael
Perre, Principal of
Vanguard and Portfolio Manager at VCM. He has been with Vanguard since 1990, has
managed investment portfolios since 1999, has managed Vanguard Emerging Markets
Stock Index Fund since 2008 (co-managed since 2016), and has co-managed Vanguard
Pacific Stock Index Fund since 2016. Education: B.A., Saint Joseph’s University;
M.B.A., Villanova University.
The Funds'
Statement
of Additional Information provides
information about each portfolio manager’s compensation, other accounts under
management, and ownership of shares of the Funds.
39
Investing in
Vanguard ETF®
Shares
Each Vanguard fund may offer one or
more share classes. If a Vanguard fund offers multiple share classes, each share
class has the same investment objective, strategies, and policies. However,
because different share classes can have different expenses, their investment
returns may differ. Vanguard and the Funds have received an exemptive order from
the SEC that permits the Funds to offer conventional mutual fund shares and ETF
shares. This Prospectus offers the Funds’ ETF Shares
The Funds’ ETF Shares are listed
for trading on NYSE Arca. You can buy and sell ETF Shares on the secondary
market in the same way you buy and sell any other exchange-traded
security—through a broker. Your broker may charge a commission to execute a
transaction. Unless imposed by your broker, there is no minimum dollar amount
you must invest and no minimum number of ETF Shares you must buy.
Your ownership of ETF Shares will
be shown on the records of the broker through which you hold the shares.
Vanguard will not have any record of your ownership. Your account information
will be maintained by your broker, which will provide you with account
statements, confirmations of your purchases and sales of ETF Shares, and tax
information. Your broker also will be responsible for ensuring that you receive
income and capital gains distributions, as well as shareholder reports and other
communications from the fund whose ETF Shares you own. You will receive other
services (e.g., dividend reinvestment and average cost information) only if your
broker offers these services.
Redemption of ETF
Shares by Authorized Participants
Unlike conventional (i.e., not
exchange-traded) mutual fund shares, ETF Shares cannot be purchased directly
from or redeemed directly with the issuing fund by an individual investor.
Instead, only Authorized Participants can purchase and redeem ETF Shares
directly from the issuing fund. Authorized Participants may purchase and redeem
ETF Shares from the issuing fund only in large blocks (creation units), usually
in exchange for baskets of securities. Funds may also issue and redeem creation
units in exchange for solely cash or a combination of cash and securities. These
trades may occur in-kind between Vanguard and the Authorized Participant. If
cash is used to meet redemptions, a Fund typically obtains such cash through
positive cash flows or the sale of Fund holdings consistent with the Fund’s
investment objective and strategy.
Under certain circumstances,
including under stressed market conditions, a Fund may borrow money (subject to
certain regulatory conditions and if available under board-approved procedures)
through an interfund lending facility; through a bank line-of-credit, including
a joint committed credit facility; or through an uncommitted line-of-credit from
Vanguard in order to meet redemption requests.
40
Conversion
Privilege
Owners of conventional shares
issued by a 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 by a
shareholder. 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® or with any other brokerage firm.
To initiate a conversion of conventional shares to ETF Shares, please contact
your broker.
Vanguard Brokerage Services does
not impose a fee on conversions from Vanguard 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, temporarily suspend, or terminate the conversion
privilege.
Converting conventional shares to
ETF Shares is generally accomplished as follows. First, after your broker
notifies Vanguard of your request to convert, Vanguard will transfer your
conventional shares from your account to the broker’s omnibus account with
Vanguard (an account maintained by the broker on behalf of all its customers who
hold conventional Vanguard fund shares through the broker). After the transfer,
Vanguard’s records will reflect your broker, not you, as the owner of the
shares. Next, your broker will instruct Vanguard to convert the appropriate
number or dollar amount of conventional shares in its omnibus account to ETF
Shares of equivalent value, based on the respective NAVs of the two share
classes.
Your Fund’s transfer agent will
reflect ownership of all ETF Shares in the name of the Depository Trust Company
(DTC). The DTC will keep track of which ETF Shares belong to your broker, and
your broker, in turn, will keep track of which ETF Shares belong to
you.
Because the DTC is unable to handle
fractional shares, only whole shares can be converted. For example, if you owned
300.25 conventional shares, and this was equivalent in value to 90.75 ETF
Shares, the DTC account would receive 90 ETF Shares. Conventional shares with a
value equal to 0.75 ETF Shares (in this example, that would be 2.481
conventional shares) would remain in the broker’s omnibus account with Vanguard.
Your broker then could either (1) credit your account with 0.75 ETF Shares or
(2) redeem the 2.481 conventional shares for cash at NAV and deliver that cash
to your account. If your broker chose to redeem your conventional shares, you
would realize a gain or loss on the redemption that must be reported on your tax
return (unless you hold the
41
shares in an IRA or other
tax-deferred account). Please consult your broker for information on how it will
handle the conversion process, including whether it will impose a fee to process
a conversion.
If you convert your conventional
shares to ETF Shares through Vanguard Brokerage Services, all conventional
shares for which you request conversion will be converted to ETF Shares of
equivalent value. Because no fractional shares will have to be sold, the
transaction will not be taxable.
Here are some important points to
keep in mind when converting conventional shares of a Vanguard fund to ETF
Shares:
• The conversion process can take
anywhere from several days to several weeks, depending on your broker. Vanguard
generally will process conversion requests either on the day they are received
or on the next business day. Vanguard imposes conversion blackout windows around
the dates when a fund with ETF Shares declares dividends. This is necessary to
prevent a shareholder from collecting a dividend from both the conventional
share class currently held and also from the ETF share class to which the shares
will be converted.
• Until the conversion process is
complete, you will remain fully invested in a fund’s conventional shares, and
your investment will increase or decrease in value in tandem with the NAV of
those shares.
• The conversion transaction is
nontaxable except, if applicable, to the very limited extent previously
described.
Pricing of Fund
Shares
ETF Shares may only be bought and
sold in the secondary market. The price you pay or receive for the ETF Shares
will be the prevailing market price, which may be more or less than the Fund’s
NAV. Your transaction will be priced at the NAV only if you purchase or redeem
your ETF Shares in creation unit blocks (an option available only to certain
authorized broker-dealers) or if you convert your conventional fund shares to
ETF Shares. NAV is typically calculated as of the close of regular trading on
the New York Stock Exchange (“NYSE”), generally 4 p.m., Eastern time, on each
day that the NYSE is open for business (a business day). In the rare event the
NYSE experiences unanticipated disruptions and is unavailable at the close of
the trading day, NAVs will be calculated as of the close of regular trading on
the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as
determined at Vanguard’s discretion), generally 4 p.m., Eastern time. The time
selected for NAV calculation in this rare event generally shall also serve as
the conclusion of the trading day. On U.S. holidays or other days when the NYSE
is closed, the NAV is not calculated, and the Vanguard funds do not sell or
redeem shares. However, on those days the value of a fund’s assets may be
affected to the extent that the fund holds securities that change in value on
those days (such as foreign securities that trade on foreign markets that are
open).
42
If a fund only has one share class,
the NAV per share is computed by dividing the total assets, minus liabilities,
of a fund by the number of fund shares outstanding. If a fund has more than one
share class, each share class has its own NAV, which is computed by dividing the
total assets, minus liabilities, allocated to the share class by the number of
fund shares outstanding for that class. The value of securities and other
investments held by the Vanguard funds is determined pursuant to the valuation
policies and procedures adopted by the Vanguard funds’ boards of trustees.
Vanguard has been designated as the valuation designee for the Vanguard funds
pursuant to Rule 2a-5 under the Investment Company Act of 1940, subject to
oversight by the Vanguard funds’ boards of trustees.
Securities for which market
quotations are readily available are valued at their market value, based on
quotations provided by independent third-party pricing sources. Such securities
are generally valued at their official closing price, the last reported sales
price, or if there were no sales that day, the mean between the closing bid and
asking prices, from the principal exchange or market on which they are traded. A
fund’s investments in any mutual fund shares, including institutional money
market fund shares, are valued at the NAVs of the mutual fund shares. A fund’s
investments in any ETF shares or closed-end fund shares are valued at the market
value of those shares.
When the market quotations are not
readily available or do not accurately reflect the value of a security or other
investment, such security or other investment is priced at fair value, generally
based on information provided by independent third-party pricing services, in
accordance with the valuation policies and procedures adopted by the Vanguard
funds’ boards of trustees. Fair value represents a good faith determination of
the value of a fund’s investments. The fair value of a security or other
investment is the amount that the owner might reasonably expect to receive upon
the current sale of the security or other investment. Fair-value pricing may
require subjective determinations. It is possible that the price determined
through fair-value pricing may differ from the price quoted or published by
other sources and may not be the price at which those investments could have
been sold during the period in which the fair value was used.
Fair-value pricing may be used in a
variety of circumstances. For example, it may be used if the value of a security
or other investment has been materially affected by events occurring after the
close of the principal exchange or market on which the security is traded but
before the funds’ NAV is calculated. These events might be company-specific
(e.g., earnings report, merger announcement), country-specific (e.g.,
significant price movements in U.S. or a foreign market), or regional/global
events (e.g., natural disaster, economic or political news, interest rate
change, act of terrorism). These events could affect a single security or a
large number of securities in a particular market, and it most commonly occurs
with foreign portfolio holdings because many foreign markets operate at times
that do not coincide with those of the major U.S. markets. Events that could
affect the value of the foreign portfolio holdings may occur between the close
of the foreign market and the time a fund’s NAV is
43
calculated. 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 as of the close of
regular trading on the NYSE.
In addition, fair-value pricing may
be used if trading in a security is halted and does not resume before a fund’s
pricing time, a security does not trade in the course of a day and a fund holds
enough of the security that its price could affect the NAV, or if the trading
market on which a security is listed is suspended or closed and no appropriate
alternative trading market is available.
Fixed income securities are
generally valued based on information furnished by independent pricing services
and are priced at fair value. Pricing services may use matrix pricing or
valuation models that utilize certain inputs and assumptions to derive values.
Pricing services generally value fixed income securities assuming orderly
transactions of an institutional round lot size, but a fund may hold or transact
in such securities in smaller odd lot sizes. Odd lots may trade at lower prices
than institutional round lots.
Failures by third-party pricing
services to carry out their obligations to the Vanguard funds (e.g., any errors
in the data provided by third-party pricing services) could result in delays in
the calculation of the funds’ NAVs and/or the inability to calculate the NAVs
over extended time periods. The funds may be unable to recover any losses
associated with such failures.
The Vanguard funds have authorized
certain financial intermediaries and their designees, and may, from time to
time, authorize certain funds of funds for which Vanguard serves as the
investment advisor (Vanguard Funds of Funds), to accept orders to purchase or
redeem fund shares on behalf of the Vanguard funds. In these circumstances, the
Vanguard fund will be deemed to receive an order when accepted by the authorized
financial intermediary, its designee, or one of the Vanguard Funds of Funds, and
the order will be executed using the NAV next calculated after such
acceptance.
Vanguard’s website will show the
previous day’s closing NAV and closing market price for a fund’s ETF Shares. The
website also discloses, in the Premium/Discount analysis section of a fund’s
Price & Performance page, how frequently the fund traded at a premium or
discount to NAV (based on closing NAVs and market prices) and the magnitudes of
such premiums and discounts.
Dividends,
Distributions, and Taxes
Fund
Distributions
Each Fund generally distributes to
shareholders virtually all of its net income (interest and dividends, less
expenses) as well as any net short-term or long-term capital gains realized from
the sale of its holdings. Each Fund may also make distributions that are treated
as a return of capital. Income dividends generally are distributed quarterly in
March, June, September, and December;
44
capital gains distributions, if
any, generally occur annually in December. In addition, each Fund may make a
supplemental distribution at some other time during the year.
From time to time, Vanguard and/or
a fund’s board of trustees may adjust a fund’s fees and expenses and/or reduce,
refund, reimburse, waive, or otherwise return to the funds and their
shareholders a portion of prior fees and expenses (collectively, “expense
adjustments”). Fund performance and potentially shareholder distributions, will
reflect such expense adjustments. If you sell all or part of your investment in
a fund before an expense adjustment occurs, then you will not receive the
economic benefit, if any, of such expense adjustment. An expense adjustment at
any given time does not imply or guarantee that similar or additional expense
adjustments will be made in the future.
From time to time,
a Fund may pay out higher-than-expected distributions. As an index fund, the
Fund must adjust its holdings to reflect changes in its target index. In some
cases, such changes may force an index fund to sell securities that have
appreciated in value, thereby realizing a capital gain that must be distributed
to shareholders. A security may move out of an index for a number of reasons,
including a merger or acquisition, a substantial change in the market
capitalization of the issuer, or the movement of a country from emerging market
to developed market status.
Reinvestment
of Distributions
In order to reinvest dividend and
capital gains distributions, investors in a Fund’s ETF Shares must hold their
shares at a broker that offers a reinvestment service. This can be the broker’s
own service or a service made available by a third party, such as the broker’s
outside clearing firm or the DTC. If a reinvestment service is available,
distributions of income and capital gains can automatically be reinvested in
additional whole and fractional ETF Shares of a Fund. If a reinvestment service is
not available, investors will receive their distributions in cash. To determine
whether a reinvestment service is available and whether there is a commission or
other charge for using this service, consult your broker.
Mutual fund share class holders
will receive dividend payments before holders of ETF Shares. As with all
exchange-traded funds, reinvestment of dividend and capital gains distributions
in additional ETF Shares will occur two business days or more after the
ex-dividend date (the date when a distribution of dividends or capital gains is
deducted from the price of a Fund’s shares). The exact number of days depends on
your broker. During that time, the amount of your distribution will not be
invested in a Fund and therefore will not share in the Fund’s income, gains, and
losses.
Basic
Tax Points
Investors in
taxable accounts should be aware of the following basic federal income tax
points:
45
• Distributions are taxable to you
whether or not you reinvest these amounts in additional Fund shares.
• Distributions declared and recorded
in December—if paid to you by the end of January—are generally taxable as if
received in December.
• Any dividend distribution or
short-term capital gains that you receive is 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, or a special tax deduction on “qualified
REIT dividends,” if any, distributed by the Fund.
• Any distribution of net long-term
capital gains is taxable to you as long-term capital gains, no matter how long
you have owned shares in the Fund.
• Capital gains
distributions can occur when a Fund sells assets at a gain. Capital gains
distributions vary from year to year as a result of the Fund’s investment
activities and cash flows, including those due to redemption activity by Fund
shareholders.
• Capital gains distributions may
occur if Vanguard, a Fund, or its advisor makes
changes that would impact the Fund directly or indirectly, including changes to
the Fund’s portfolio or advisors or changes to any other Vanguard fund or
product that would involve the redemption of shares of the Fund and the related
sale of the Fund’s investments. Such changes could, depending on the timing,
result in capital gains distributions in the current fiscal year, subsequent
fiscal year, or both.
• Your cost basis in the Fund will be
decreased by the amount of any return of capital that you receive. This, in
turn, will affect the amount of any capital gain or loss that you realize when
selling your Fund shares.
• Return of capital
distributions generally are not taxable to you until your cost basis has been
reduced to zero. If your cost basis is at zero, return of capital distributions
will be treated as capital gains.
• A sale 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.
• If you purchase shares before an
ex-dividend date when a fund has realized but not yet distributed income or
capital gains, the purchase price may include the amount of the upcoming
distribution, and you may pay the full price for the shares and later receive a
portion of the purchase price back as a taxable distribution. In such case, you
generally will be taxed upon receipt of such distribution, even though the
distribution effectively represents a return of a portion of your purchase
price. This is known as “buying a dividend.”
Individuals, trusts, and estates
whose income exceeds certain threshold amounts are subject to a 3.8% Medicare
contribution tax on “net investment income.” Net investment income takes into
account distributions paid by the Fund and capital gains from any sale of
Fund shares.
46
Dividend distributions and capital
gains distributions that you receive, as well as your gains or losses from any
sale of Fund shares, may be subject to state and local income
taxes.
Each Fund may be subject to foreign
taxes or foreign tax withholding on dividends, interest, and capital gains from
foreign securities. If, at the end of the taxable year, more than 50% of the
value of a Fund’s assets consists of securities of foreign corporations, and the
Fund makes a special election, you will generally be required to include in your
income, for U.S. federal income tax purposes, your share of the qualifying
foreign income taxes paid by the Fund in respect of its foreign portfolio
securities. There is no assurance that a Fund will make this election for a
taxable year, even if it is eligible to do so. You may qualify for an offsetting
credit or deduction under U.S. tax laws for any amount designated as your
portion of a Fund’s foreign tax obligations, provided that you meet certain
requirements. See your tax advisor or IRS publications for more
information.
This Prospectus provides general
tax information only. If you are investing through a tax-advantaged account,
such as an IRA or an employer-sponsored retirement or savings plan, special tax
rules apply. Please consult your own tax advisor for detailed information about
any tax consequences for you.
Frequent Trading
Limitations
Unlike frequent trading of a
Vanguard fund’s conventional share classes, frequent trading of ETF Shares
generally does not disrupt portfolio management or otherwise harm fund
shareholders. The vast majority of trading in ETF Shares occurs on the secondary
market. Because these trades do not involve the issuing fund, they do not pose
potential harm to the fund or its shareholders. Certain broker-dealers are
authorized to purchase and redeem ETF Shares directly with the issuing fund.
Because these trades typically are effected in kind (i.e., for securities and
not for cash), or are assessed a transaction fee when effected in cash, they do
not cause any of the harmful effects to the issuing fund (as previously noted)
that may result from frequent trading. For these reasons, the boards of trustees
of Vanguard funds that issue ETF Shares have determined that it is not necessary
to adopt policies and procedures to detect and deter frequent trading and
market-timing of ETF Shares.
47
Financial
Highlights
Financial
highlights information is intended to help you understand a fund’s performance
for the past five years (or, if shorter, its period of operations). Certain
information reflects financial results for a single fund share. Total return
represents the rate that an investor would have earned or lost each period on an
investment in a fund or share class (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 report, along with fund financial statements, is included
in a fund’s most recent annual Financial Statements and Other Information. You
may obtain a free copy of a fund’s latest disclosure documents upon
request.
Vanguard
European Stock Index Fund FTSE Europe ETF Shares
|
For a
Share Outstanding
Throughout
Each Period |
Year Ended October
31, | ||||
|
2025 |
2024 |
2023 |
2022 |
2021 | |
|
Net
Asset Value, Beginning of Period |
$67.16 |
$56.17 |
$49.95 |
$68.65 |
$49.57 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
2.314 |
1.988 |
1.985 |
1.977 |
1.922 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
13.074 |
11.032 |
6.205 |
(18.595) |
18.939 |
|
Total from
Investment Operations |
15.388 |
13.020 |
8.190 |
(16.618) |
20.861 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(2.328) |
(2.030) |
(1.970) |
(2.082) |
(1.781) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
|
Total
Distributions |
(2.328) |
(2.030) |
(1.970) |
(2.082) |
(1.781) |
|
Net
Asset Value, End of Period |
$80.22 |
$67.16 |
$56.17 |
$49.95 |
$68.65 |
|
Total
Return |
23.42% |
23.26% |
16.23% |
-24.54% |
42.34% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$27,772 |
$18,717 |
$16,494 |
$13,073 |
$21,547 |
|
Ratio of
Total Expenses to Average Net Assets |
0.07% |
0.09%2 |
0.09%2 |
0.11%2 |
0.08% |
|
Ratio of
Net Investment Income to Average Net Assets |
3.15% |
3.00% |
3.33% |
3.33% |
2.95% |
|
Portfolio
Turnover Rate3 |
5% |
3% |
4% |
5% |
3% |
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee
offset
arrangements was 0.09%, 0.09%, and 0.11%,
respectively. |
|
3 |
Excludes
the value of portfolio securities received or delivered as a result of
in-kind
purchases
or redemptions of the fund’s capital shares, including ETF Creation
Units. |
48
Vanguard
Pacific Stock Index Fund FTSE Pacific ETF Shares
|
For a
Share Outstanding
Throughout
Each Period |
Year Ended October
31, | ||||
|
2025 |
2024 |
2023 |
2022 |
2021 | |
|
Net
Asset Value, Beginning of Period |
$73.95 |
$64.49 |
$58.78 |
$80.80 |
$67.11 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
2.153 |
1.917 |
1.944 |
2.158 |
1.993 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
18.073 |
9.840 |
5.738 |
(21.961) |
13.594 |
|
Total from
Investment Operations |
20.226 |
11.757 |
7.682 |
(19.803) |
15.587 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(2.446) |
(2.297) |
(1.972) |
(2.217) |
(1.897) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
|
Total
Distributions |
(2.446) |
(2.297) |
(1.972) |
(2.217) |
(1.897) |
|
Net
Asset Value, End of Period |
$91.73 |
$73.95 |
$64.49 |
$58.78 |
$80.80 |
|
Total
Return |
28.09% |
18.36% |
13.00% |
-24.99% |
23.27% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$8,397 |
$7,032 |
$6,162 |
$5,276 |
$5,463 |
|
Ratio of
Total Expenses to Average Net Assets |
0.07% |
0.08%2 |
0.08%2 |
0.08%2 |
0.08% |
|
Ratio of
Net Investment Income to Average Net Assets |
2.75% |
2.60% |
2.88% |
3.11% |
2.45% |
|
Portfolio
Turnover Rate3 |
7% |
5% |
3% |
6% |
5% |
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee
offset
arrangements was 0.08%. |
|
3 |
Excludes
the value of portfolio securities received or delivered as a result of
in-kind
purchases
or redemptions of the fund’s capital shares, including ETF Creation
Units. |
49
Vanguard
Emerging Markets Stock Index Fund FTSE Emerging Markets ETF Shares
|
For a
Share Outstanding
Throughout
Each Period |
Year Ended October
31, | ||||
|
2025 |
2024 |
2023 |
2022 |
2021 | |
|
Net
Asset Value, Beginning of Period |
$46.36 |
$38.04 |
$35.35 |
$50.55 |
$43.98 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
1.279 |
1.189 |
1.230 |
1.410 |
1.186 |
|
Net
Realized and Unrealized Gain (Loss) on
Investments |
8.601 |
8.339 |
2.677 |
(15.163) |
6.506 |
|
Total from
Investment Operations |
9.880 |
9.528 |
3.907 |
(13.753) |
7.692 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(1.530) |
(1.208) |
(1.217) |
(1.447) |
(1.122) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
— |
|
Total
Distributions |
(1.530) |
(1.208) |
(1.217) |
(1.447) |
(1.122) |
|
Net
Asset Value, End of Period |
$54.71 |
$46.36 |
$38.04 |
$35.35 |
$50.55 |
|
Total
Return |
21.95% |
25.46% |
10.95% |
-27.68% |
17.51% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$104,721 |
$82,565 |
$68,051 |
$60,832 |
$80,116 |
|
Ratio of
Total Expenses to Average Net Assets |
0.07% |
0.08%2 |
0.08%2 |
0.08%2 |
0.08% |
|
Ratio of
Net Investment Income to Average Net Assets |
2.67% |
2.77% |
3.06% |
3.19% |
2.29% |
|
Portfolio
Turnover Rate3 |
6% |
8% |
5% |
7% |
9% |
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee
offset
arrangements was 0.08%. |
|
3 |
Excludes
the value of portfolio securities received or delivered as a result of
in-kind
purchases
or redemptions of the fund’s capital shares, including ETF Creation
Units. |
50
Additional
Information
A Precautionary
Note to Investment Companies. Each Fund’s ETF Shares are issued
by registered investment companies, and therefore the acquisition of such shares
by other investment companies and private funds is subject to the restrictions
of Section 12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC
Rule 12d1-4 under the 1940 Act permits registered investment companies to invest
in other registered investment companies beyond the limits in Section 12(d)(1),
subject to certain conditions, including that funds with different investment
advisors must enter into a fund of funds investment
agreement.
Forum
Selection. The Trust’s
Bylaws designate Delaware courts as the exclusive forum for certain claims
against or related to the Trust, a trustee, an officer, or other employee of the
Trust, except that, unless the Trust otherwise consents in writing, the U.S.
Federal District Courts are the exclusive forum for the resolution of complaints
under the Securities Act of 1933 or the 1940 Act. These provisions may limit a
shareholder’s ability to bring a claim in a different forum and may result in
increased shareholder costs in pursuing such a claim.
Shareholder
Rights. Each Fund’s
Agreement and Declaration of Trust, as amended, requires a shareholder bringing
a derivative action on behalf of the Trust that is subject to a pre-suit demand
to collectively hold at least 10% of the outstanding shares of the Trust or at
least 10% of the outstanding shares of the series or class to which the demand
relates and to undertake to reimburse the Trust for the expense of any counsel
or advisors used when considering the merits of the demand in the event that the
board of trustees determines not to bring such action. In each case, these
requirements do not apply to claims arising under the federal securities laws to
the extent that any such federal securities laws, rules, or regulations do not
permit such application. The Trust’s Bylaws also provide that shareholders waive
the right to trial by jury to the fullest extent permitted by
law.
Joint Committed
Credit Facility. Each
Fund participates, along with other funds managed by Vanguard, in a committed
credit facility provided by a syndicate of lenders pursuant to a credit
agreement that may be renewed annually; each Vanguard fund is individually
liable for its borrowings, if any, under the credit facility. The amount and
terms of the committed credit facility are subject to approval by the Board and
renegotiation with the lender syndicate on an annual basis.
Securities
Market Indexes
Listed below is the broad-based securities market index, as referenced in the Funds’ Average Annual Total Returns tables:
Listed below is the broad-based securities market index, as referenced in the Funds’ Average Annual Total Returns tables:
FTSE Global All
Cap ex US Index. An
index consisting of large-, mid-, and small-cap stocks globally, excluding the
U.S. The index is derived from the FTSE Global Equity Index Series (GEIS), which
covers approximately 98% of the world’s investable market
capitalization.
Certain affiliates of the Funds and
the advisor may purchase and resell ETF Shares pursuant to this
Prospectus.
51
|
Vanguard
Fund |
Inception
Date |
Vanguard
Fund
Number |
CUSIP
Number |
|
Vanguard
European Stock Index Fund |
|
|
|
|
ETF
Shares |
3/4/2005
(Investor Shares
6/18/1990) |
963 |
922042874 |
|
Vanguard
Pacific Stock Index Fund |
|
|
|
|
ETF
Shares |
3/4/2005
(Investor Shares
6/18/1990) |
962 |
922042866 |
|
Vanguard
Emerging Markets Stock Index
Fund |
|
|
|
|
ETF
Shares |
3/4/2005
(Investor Shares
5/4/1994) |
964 |
922042858 |
Inception Date means the date on
which the assets of a fund (or one of its share classes) are first invested in
accordance with the fund’s investment objective. For funds with a subscription
period, the inception date is the day after that period ends. Investment
performance is generally measured from the inception date.
CGS identifiers have been provided by
CUSIP Global Services, managed on behalf of the American Bankers Association by
FactSet Research Systems Inc., and are not for use or dissemination in a manner
that would serve as a substitute for any CUSIP service. The CUSIP Database, ©
2026 American Bankers Association. “CUSIP” is a registered trademark of the
American Bankers Association.
CFA® is a registered trademark owned by
CFA Institute.
London Stock Exchange Group companies
include FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”),
MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc. (“FTSE
TMX”). All rights reserved. “FTSE®”, “Russell®”, “MTS®“, “FTSE TMX®” and “FTSE Russell” and other
service marks and trademarks related to the FTSE or Russell indexes are
trademarks of the London Stock Exchange Group companies and are used by FTSE,
MTS, FTSE TMX and Russell under license. All information is provided for
information purposes only. Every effort is made to ensure that all information
given in this publication is accurate, but no responsibility or liability can be
accepted by the London Stock Exchange Group companies nor its licensors for any
errors or for any loss from use of this publication. Neither the London Stock
Exchange Group companies nor any of their licensors make any claim, prediction,
warranty or representation whatsoever, expressly or impliedly, either as to the
results to be obtained from the use of the Indices or the fitness or suitability
of the Indices for any particular purpose to which they might be put. The London
Stock Exchange Group companies do not provide investment advice and nothing in
this document should be taken as constituting financial or investment advice.
The London Stock Exchange Group companies make no representation regarding the
advisability of investing in any asset. A decision to invest in any such asset
should not be made in reliance on any information herein. Indexes cannot be
invested in directly. Inclusion of an asset in an index is not a recommendation
to buy, sell or hold that asset. The general information contained in this
publication should not be acted upon without obtaining specific legal, tax, and
investment advice from a licensed professional. No part of this information may
be reproduced, stored in a retrieval system or transmitted in any form or by any
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Distribution of the London Stock Exchange Group companies’ index values and the
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FTSE TMX, MTS and/or Russell and/or its licensors.
52
Connect with
Vanguard® ˃ vanguard.com
For
More Information
If you would like
more information about Vanguard FTSE Europe ETF, FTSE Pacific ETF, and FTSE
Emerging Markets ETF, the following documents are available free upon
request:
Annual/Semiannual
Reports to Shareholders and Form N-CSR
Additional
information about the Funds’ investments is available in the Funds’ annual and
semiannual reports to shareholders and in Form N-CSR. In the annual reports ,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Funds’ performance during their last fiscal
year. In Form N-CSR, you will find the Funds’ annual and semiannual financial
statements.
Statement
of Additional Information (SAI)
The SAI provides more detailed
information about the Funds’ ETF Shares and is incorporated by reference into
(and thus legally a part of) this Prospectus.
To obtain a free copy
of the latest annual or semiannual reports , financial statements, or the SAI,
or to request additional information about Vanguard ETF Shares, please visit
https://vgi.vg/fund-literature or contact us as
follows:
Telephone:
866-499-8473; Text telephone for people with hearing impairment:
800-749-7273
Information
Provided by the SEC
Reports and other
information about the Funds are available in the EDGAR database on the SEC’s
website at sec.gov, or you can receive copies of this information, for a fee, by
electronic request at the following email address:
[email protected].
Funds’ Investment
Company Act file number: 811-05972
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