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Vanguard FTSE Social Index FundProspectus
December 22, 2020
Institutional Shares
Vanguard FTSE Social Index Fund Institutional Shares (VFTNX)
See the inside front cover for important information about
access to yourfund’s annual and semiannual shareholder reports.
This prospectus contains financial data for the Fund through the
fiscal year ended August 31, 2020.
The Securities and Exchange Commission (SEC) has not approved or
disapproved thesesecurities or passed upon the adequacy of this
prospectus. Any representation to the contrary isa criminal
offense.
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Important information about access to shareholder reports
Beginning on January 1, 2021, as permitted by regulations
adopted by theSEC, paper copies of your fund’s annual and
semiannual shareholder reportswill no longer be sent to you by
mail, unless you specifically request them.Instead, you will be
notified by mail each time a report is posted on thewebsite and
will be provided with a link to access the report.
If you have already elected to receive shareholder reports
electronically, youwill not be affected by this change and do not
need to take any action. You mayelect to receive shareholder
reports and other communications from the fundelectronically by
contacting your financial intermediary (such as a broker-dealeror
bank) or, if you invest directly with the fund, by calling Vanguard
at one ofthe phone numbers on the back cover of this prospectus or
by logging on tovanguard.com.
You may elect to receive paper copies of all future shareholder
reports free ofcharge. If you invest through a financial
intermediary, you can contact theintermediary to request that you
continue to receive paper copies. If you investdirectly with the
fund, you can call Vanguard at one of the phone numbers onthe back
cover of this prospectus or log on to vanguard.com. Your election
toreceive paper copies will apply to all the funds you hold through
anintermediary or directly with Vanguard.
Contents
Fund Summary 1
Investing in Index Funds 7
More on the Fund 8
The Fund and Vanguard 14
Investment Advisor 15
Dividends, Capital Gains, and Taxes 16
Share Price 19
Financial Highlights 21
Investing With Vanguard 22
Purchasing Shares 22
Converting Shares 25
Redeeming Shares 26
Exchanging Shares 30
Frequent-Trading Limitations 31
Other Rules You Should Know 33
Fund and Account Updates 37
Employer-Sponsored Plans 38
Contacting Vanguard 39
Additional Information 39
Glossary of Investment Terms 41
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Fund Summary
Investment ObjectiveThe Fund seeks to track the performance of a
benchmark index that measuresthe investment return of large- and
mid-capitalization stocks.
Fees and ExpensesThe following table describes the fees and
expenses you may pay if you buy,hold, and sell Institutional Shares
of the Fund. You may pay other fees, such asbrokerage commissions
and other fees to financial intermediaries, which are notreflected
in the table and example below.
Shareholder Fees(Fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases NonePurchase Fee
NoneSales Charge (Load) Imposed on Reinvested Dividends
NoneRedemption Fee None
Annual Fund Operating Expenses(Expenses that you pay each year
as a percentage of the value of your investment)
Management Fees 0.11%12b-1 Distribution Fee NoneOther Expenses
0.01%Total Annual Fund Operating Expenses 0.12%
Example
The following example is intended to help you compare the cost
of investing inthe Fund’s Institutional Shares with the cost of
investing in other mutual funds. Itillustrates the hypothetical
expenses that you would incur over various periods ifyou were to
invest $10,000 in the Fund’s shares. This example assumes that
theshares provide a return of 5% each year and that total annual
fund operatingexpenses remain as stated in the preceding table. You
would incur thesehypothetical expenses whether or not you were to
redeem your investment atthe end of the given period. Although your
actual costs may be higher or lower,based on these assumptions your
costs would be:
1 Year 3 Years 5 Years 10 Years$12 $39 $68 $154
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it
buys and sellssecurities (or “turns over” its portfolio). A higher
portfolio turnover rate mayindicate higher transaction costs and
may result in more taxes when Fundshares are held in a taxable
account. These costs, which are not reflected inannual fund
operating expenses or in the previous expense example, reduce
theFund’s performance. During the most recent fiscal year, the
Fund’s portfolioturnover rate was 18% of the average value of its
portfolio.
Principal Investment StrategiesThe Fund employs an indexing
investment approach designed to track theperformance of the
FTSE4Good US Select Index. The Index, which ismarket-capitalization
weighted, is composed of large- and mid-cap stocks ofcompanies that
are screened for certain environmental, social, and
corporategovernance (ESG) criteria by the Index sponsor, which is
independent ofVanguard. The FTSE4Good US Select Index excludes
stocks of companies thatFTSE Group (FTSE) determines engage in the
following activities: (i) produceadult entertainment; (ii) produce
alcoholic beverages; (iii) produce tobaccoproducts; (iv) produce
(or produce specific and critical parts or services for)nuclear
weapon systems, chemical or biological weapons, cluster munitions,
andanti-personnel mines; (v) produce other weapons for military
use; (vi) producefirearms or ammunition for non-military use; (vii)
own proved or probablereserves in coal, oil, or gas, or any company
that FTSE determines has a primarybusiness activity in: (a) the
exploration and drilling for, as well as producing,refining, and
supplying, oil and gas products, (b) the supply of equipment
andservices to oil fields and offshore platforms, (c) the
operations of pipelinescarrying oil, gas, or other forms of fuel,
(d) integrated oil and gas companies thatprovide a combination of
services listed in (a)-(c) above, including the refiningand
marketing of oil and gas products, or (e) the exploration for or
mining of coal;(viii) provide gambling services; and (ix) generate
revenues from nuclear powerproduction. The Index methodology also
excludes the stocks of companies that,as FTSE determines, do not
meet the labor, human rights, environmental, andanti-corruption
standards as defined by the United Nations Global
CompactPrinciples, as well as companies that do not meet certain
diversity criteria. Thecomponents of the Index are likely to change
over time. The Fund attempts toreplicate the target index by
investing all, or substantially all, of its assets in thestocks
that make up the Index, holding each stock in approximately the
sameproportion as its weighting in the Index.
For additional details regarding the Index methodology, please
see theMethodology section of FTSE’s website for the FTSE4Good
Index Series.
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Principal RisksAn investment in the Fund could lose money over
short or long periods of time.You should expect the Fund’s share
price and total return to fluctuate within awide range. The Fund is
subject to the following risks, which could affect theFund’s
performance:
• Stock market risk, which is the chance that stock prices
overall will decline.Stock markets tend to move in cycles, with
periods of rising prices and periodsof falling prices. The Fund’s
target index tracks a subset of the U.S. stock market,which could
cause the Fund to perform differently from the overall stock
market.In addition, large-and mid-cap stocks, such as those held by
the Fund, each tendto go through cycles of doing better—or
worse—than other segments of thestock market or the stock market in
general. These periods have, in the past,lasted for as long as
several years. Historically, mid-cap stocks have been morevolatile
in price than large-cap stocks. The stock prices of mid-size
companiestend to experience greater volatility because, among other
things, thesecompanies tend to be more sensitive to changing
economic conditions.
• ESG investing risk, which is the chance that the stocks
screened by the indexsponsor for ESG criteria generally will
underperform the stock market as a wholeor that the particular
stocks selected for the FTSE4Good US Select Index will, inthe
aggregate, trail returns of other mutual funds screened for ESG
criteria.There are significant differences in interpretations of
what it means for acompany to meet ESG criteria. The index
provider’s assessment of a company,based on the company’s level of
involvement in a particular industry or the indexprovider’s own ESG
criteria, may differ from that of other funds or of theadvisor’s or
an investor’s assessment of such company. As a result, thecompanies
deemed eligible by the index provider may not reflect the beliefs
andvalues of any particular investor and may not exhibit positive
or favorable ESGcharacteristics. The index provider is dependent on
the availability of timely andaccurate ESG data being reported by
companies in the index to evaluate theirESG criteria. Additionally,
the FTSE4Good US Select Index may, at times,become focused in
stocks of a particular market sector, which would subject theFund
to proportionately higher exposure to the risks of that sector.
An investment in the Fund is not a deposit of a bank and is not
insured orguaranteed by the Federal Deposit Insurance Corporation
or any othergovernment agency.
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Annual Total ReturnsThe following bar chart and table are
intended to help you understand the risksof investing in the Fund.
The bar chart shows how the performance of the Fund’sInstitutional
Shares has varied from one calendar year to another over theperiods
shown. The table shows how the average annual total returns of
theInstitutional Shares compare with those of the Fund‘s target
index and acomparative index, which have investment characteristics
similar to those of theFund. Keep in mind that the Fund’s past
performance (before and after taxes)does not indicate how the Fund
will perform in the future. Updated performanceinformation is
available on our website at vanguard.com/performance or bycalling
Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard FTSE Social Index Fund
Institutional Shares1
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0%10%20%30%40%50%
-10%-20%
14.58
–0.52
17.84
37.09
15.85
1.2710.34
24.19
–3.38
33.96
1 The year-to-date return as of the most recent calendar
quarter, which ended on September 30, 2020, was 9.20%.
During the periods shown in the bar chart, the highest and
lowest returns for acalendar quarter were:
Total Return QuarterHighest 13.76% March 31, 2019Lowest -13.16%
September 30, 2011
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Average Annual Total Returns for Periods Ended December 31,
2019
1 Year 5 Years 10 YearsVanguard FTSE Social Index Fund
Institutional Shares
Return Before Taxes 33.96% 12.42% 14.38%Return After Taxes on
Distributions 33.46 11.97 14.00Return After Taxes on Distributions
and Sale of Fund Shares 20.41 9.83 12.06Comparative Indexes(reflect
no deduction for fees, expenses, or taxes)FTSE4Good US Select Index
34.08% 12.53% 14.50%Dow Jones U.S. Total Stock Market Float
Adjusted Index 30.90 11.18 13.43
Actual after-tax returns depend on your tax situation and may
differ from thoseshown in the preceding table. When after-tax
returns are calculated, it isassumed that the shareholder was in
the highest individual federal marginalincome tax bracket at the
time of each distribution of income or capital gains orupon
redemption. State and local income taxes are not reflected in
thecalculations. Please note that after-tax returns are not
relevant for a shareholderwho holds fund shares in a tax-deferred
account, such as an individual retirementaccount or a 401(k) plan.
Also, figures captioned Return After Taxes onDistributions and Sale
of Fund Shares may be higher than other figures for thesame period
if a capital loss occurs upon redemption and results in an
assumedtax deduction for the shareholder.
Investment AdvisorThe Vanguard Group, Inc. (Vanguard)
Portfolio Managers
William A. Coleman, CFA, Portfolio Manager at Vanguard. He has
co-managedthe Fund since 2015.
Gerard C. O’Reilly, Principal of Vanguard. He has co-managed the
Fundsince 2015.
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Purchase and Sale of Fund SharesYou may purchase or redeem
shares online through our website (vanguard.com),by mail (The
Vanguard Group, P.O. Box 1110, Valley Forge, PA 19482-1110), or
bytelephone (800-662-2739). The minimum investment amount required
to openand maintain a Fund account for Institutional Shares is $5
million. The minimuminvestment amount required to add to an
existing Fund account is generally $1. Ifyou are investing through
an employer-sponsored retirement or savings plan,your plan
administrator or your benefits office can provide you with
detailedinformation on how you can invest through your plan.
Tax InformationThe Fund’s distributions may be taxable as
ordinary income or capital gain. If youare investing through a
tax-advantaged account, such as an IRA or anemployer-sponsored
retirement or savings plan, special tax rules apply.
Payments to Financial IntermediariesThe Fund and its investment
advisor do not pay financial intermediaries for salesof Fund
shares.
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Investing in Index Funds
What Is Indexing?Indexing is an investment strategy for tracking
the performance of a specifiedmarket benchmark, or “index.” An
index is a group of securities whose overallperformance is used as
a standard to measure the investment performance of aparticular
market. There are many types of indexes. Some represent
entiremarkets—such as the U.S. stock market or the U.S. bond
market. Other indexescover market segments—such as
small-capitalization stocks or short-termbonds. One cannot invest
directly in an index.
The index sponsor determines the securities to include in the
index and theweighting of each security in the index. Under normal
circumstances, the indexsponsor will rebalance an index on a
regular schedule. An index sponsor maycarry out additional ad hoc
index rebalances or delay or cancel a scheduledrebalance.
Generally, the index sponsor does not provide any warranty, or
acceptany liability, with respect to the quality, accuracy, or
completeness of either thetarget index or its related data. Errors
made by the index sponsor may occurfrom time to time and may not be
identified by the index sponsor for a period oftime or at all.
Vanguard does not provide any warranty or guarantee against
sucherrors. Therefore, the gains, losses, or costs associated with
the index sponsor’serrors will generally be borne by the index fund
and its shareholders.
An index fund seeks to hold all, or a representative sample, of
the securities thatmake up its target index. Index funds attempt to
mirror the performance of thetarget index, for better or worse.
However, an index fund generally does notperform exactly like its
target index. For example, index funds have operatingexpenses and
transaction costs. Market indexes do not, and therefore they
willusually have a slight performance advantage over funds that
track them. Theability of an index fund to match its performance to
that of its target index canalso be impacted by, among other
things, the timing and size of cash flows andthe size of the fund.
Market disruptions and regulatory restrictions could alsohave an
adverse effect on a fund’s ability to adjust its exposure to the
requiredlevels in order to track the index.
Index funds typically have the following characteristics:
• Variety of investments. Index funds generally invest in the
securities of avariety of companies, industries, and/or government
entities.
• Relative performance consistency. Because they seek to track
marketbenchmarks, index funds usually do not perform dramatically
better or worsethan their benchmarks.
• Low cost. Index funds are generally inexpensive to run
compared with activelymanaged funds. They have low or no research
costs and typically keep tradingactivity—and thus brokerage
commissions and other transaction costs—to aminimum compared with
actively managed funds.
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More on the Fund
This prospectus describes the principal risks you would face as
a Fundshareholder. It is important to keep in mind one of the main
principles ofinvesting: generally, the higher the risk of losing
money, the higher the potentialreward. The reverse, also, is
generally true: the lower the risk, the lower thepotential reward.
As you consider an investment in any mutual fund, you shouldtake
into account your personal tolerance for fluctuations in the
securitiesmarkets. Look for this symbol throughout the prospectus.
It is used tomark detailed information about the more significant
risks that you wouldconfront as a Fund shareholder. To highlight
terms and concepts important tomutual fund investors, we have
provided Plain Talk® explanations along the way.Reading the
prospectus will help you decide whether the Fund is the
rightinvestment for you. We suggest that you keep this prospectus
forfuture reference.
Share Class OverviewThis prospectus offers the Fund’s
Institutional Shares, which are generally forinvestors who invest a
minimum of $5 million. A separate prospectus offers theFunds’
Admiral™ Shares, which generally have an investment minimumof
$3,000.
Both share classes offered by the Fund have the same investment
objective,strategies, and policies. However, different share
classes have differentexpenses; as a result, their investment
returns will differ.
Plain Talk About Fund Expenses
All mutual funds have operating expenses. These expenses, which
arededucted from a fund’s gross income, are expressed as a
percentage of thenet assets of the fund. Assuming that operating
expenses remain as statedin the Fees and Expenses section, Vanguard
FTSE Social Index FundInstitutional Shares’ expense ratio would be
0.12%, or $1.20 per $1,000 ofaverage net assets. The average
expense ratio for large-cap growth funds in2019 was 1.02%, or
$10.20 per $1,000 of average net assets (derived fromdata provided
by Lipper, a Thomson Reuters Company, which reports on themutual
fund industry).
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Plain Talk About Costs of Investing
Costs are an important consideration in choosing a mutual fund.
That isbecause you, as a shareholder, pay a proportionate share of
the costs ofoperating a fund and any transaction costs incurred
when the fund buys orsells securities. These costs can erode a
substantial portion of the grossincome or the capital appreciation
a fund achieves. Even seemingly smalldifferences in expenses can,
over time, have a dramatic effect on afund’s performance.
The following sections explain the principal investment
strategies and policiesthat the Fund uses in pursuit of its
objective. The Fund’s board of trustees, whichoversees the Fund’s
management, may change investment strategies or policiesin the
interest of shareholders without a shareholder vote, unless
thosestrategies or policies are designated as fundamental. Under
normalcircumstances, the Fund will invest at least 80% of its
assets in the stocks thatmake up its target index. The Fund may
change its 80% policy only upon 60days’ notice to shareholders.
Market Exposure
The Fund is subject to stock market risk, which is the chance
that stockprices overall will decline. Stock markets tend to move
in cycles, withperiods of rising prices and periods of falling
prices. The Fund‘s targetindex tracks a subset of the U.S. stock
market, which could cause theFund to perform differently from the
overall stock market. In addition,large- and mid-cap stocks, such
as those held by the Fund, each tend togo through cycles of doing
better—or worse—than other segments of thestock market or the stock
market in general. These periods have, in thepast, lasted for as
long as several years. Historically, mid-cap stocks havebeen more
volatile in price than large-cap stocks. The stock prices
ofmid-size companies tend to experience greater volatility because,
amongother things, these companies tend to be more sensitive to
changingeconomic conditions.
Stocks of publicly traded companies are often classified
according to marketcapitalization, which is the market value of a
company’s outstanding shares.These classifications typically
include small-cap, mid-cap, and large-cap. It isimportant to
understand that there are no “official” definitions of small-,
mid-,and large-cap, even among Vanguard fund advisors, and that
marketcapitalization ranges can change over time. As of August 31,
2020, the market
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capitalization range of the FTSE4Good US Select Index was $2.15
billion to$2.21 trillion, and the asset-weighted median market
capitalization of the Fund’sstock holdings was $175 billion.
The Fund is subject to ESG investing risk, which is the chance
that stocksscreened by the index sponsor for ESG criteria generally
willunderperform the stock market as a whole or that the particular
stocksselected for the FTSE4Good US Select Index will, in the
aggregate, trailreturns of other mutual funds screened for ESG
criteria. There aresignificant differences in interpretations of
what it means for a companyto meet ESG criteria. The index
provider’s assessment of a company,based on the company’s level of
involvement in a particular industry orthe index provider’s own ESG
criteria, may differ from that of other fundsor of the advisor’s or
an investor’s assessment of such company. As aresult, the companies
deemed eligible by the index provider may notreflect the beliefs
and values of any particular investor and may notexhibit positive
or favorable ESG characteristics. The index provider isdependent on
the availability of timely and accurate ESG data beingreported by
companies in the index to evaluate their ESG criteria.Additionally,
the FTSE4Good US Select Index may, at times, becomefocused in
stocks of a particular market sector, which would subject theFund
to proportionately higher exposure to the risks of that sector.
Market disruptions can adversely affect local and global markets
as well asnormal market conditions and operations. Any such
disruptions could have anadverse impact on the value of the Fund’s
investments and Fund performance.
Security SelectionIndex replication strategy. The Fund uses the
replication method of indexing.This means that the Fund generally
holds each security found in the FTSE4GoodUS Select Index in
approximately the same proportion as represented in theIndex
itself. For example, if 5% of the Index were made up of the stock
of aspecific company, the Fund would invest about 5% of its assets
in that company.Keep in mind that the screening policies employed
by the Index may result ineconomic sector weightings that are
significantly different from those of theoverall market.
The FTSE4Good US Select Index. The FTSE4Good US Select Index
ismaintained by FTSE, a widely known global index provider. The
FTSE4Good USSelect Index excludes stocks of companies that FTSE
determines engage in thefollowing activities: (i) produce adult
entertainment; (ii) produce alcoholicbeverages; (iii) produce
tobacco products; (iv) produce (or produce specific andcritical
parts or services for) nuclear weapon systems, chemical or
biologicalweapons, cluster munitions, and anti-personnel mines; (v)
produce other
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weapons for military use; (vi) produce firearms or ammunition
for non-militaryuse; (vii) own proved or probable reserves in coal,
oil, or gas, or any companythat FTSE determines has a primary
business activity in: (a) the exploration anddrilling for, as well
as producing, refining, and supplying, oil and gas products, (b)the
supply of equipment and services to oil fields and offshore
platforms, (c) theoperations of pipelines carrying oil, gas, or
other forms of fuel, (d) integrated oiland gas companies, that
provide a combination of services listed in (a)-(c) above,including
the refining and marketing of oil and gas products, or (e)
theexploration for or mining of coal; (viii) provide gambling
services; and (ix)generate revenues from nuclear power production.
The Index methodology alsoexcludes the stocks of companies that, as
FTSE determines, do not meet thelabor, human rights, environmental,
and anti-corruption standards as defined bythe United Nations
Global Compact Principles, as well as companies that fail tomeet
two of the following three diversity criteria: (1) at least one
woman on theboard; (2) diversity policies in place; and (3)
diversity management systems inplace. FTSE analyzes various factors
in determining whether a company meetsthe Index’s ESG criteria
and/or falls within a particular industry, including whetherthe
company has a certain amount of revenue derived from an industry,
thecompany’s level of activity in an industry, and the severity of
certaincontroversies. For additional details regarding the Index
methodology, please seethe Methodology section of FTSE’s website
for the FTSE4Good Index Series.The components of the Index are
reconstituted on a quarterly basis, and arelikely to change over
time.
Additional information related to the United Nations Global
Compact Principles isavailable at
https://www.unglobalcompact.org/what-is-gc/mission/principles.
Other Investment Policies and RisksThe Fund reserves the right
to substitute a different index for the index itcurrently tracks if
the current index is discontinued, if the Fund’s agreement withthe
sponsor of its target index is terminated, or for any other reason
determinedin good faith by the Fund’s board of trustees. In any
such instance, the substituteindex would represent the same market
segment as the current index.
The Fund may invest in foreign securities to the extent
necessary to carry out itsinvestment strategy of holding all, or
substantially all, of the stocks that make upthe index it tracks.
To track its target index as closely as possible, the Fundattempts
to remain fully invested in stocks. To help stay fully invested and
toreduce transaction costs, the Fund may invest, to a limited
extent, in derivatives,including equity futures. The Fund may also
use derivatives such as total returnswaps to obtain exposure to a
stock, a basket of stocks, or an index. Generallyspeaking, a
derivative is a financial contract whose value is based on the
value of
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a financial asset (such as a stock, a bond, or a currency), a
physical asset (suchas gold, oil, or wheat), a market index, or a
reference rate. Investments inderivatives may subject the Fund to
risks different from, and possibly greaterthan, those of
investments directly in the underlying securities or assets.
TheFund will not use derivatives for speculation or for the purpose
of leveraging(magnifying) investment returns. Derivatives will not
be screened based onESG criteria.
Cash ManagementThe Fund’s daily cash balance may be invested in
Vanguard Market LiquidityFund and/or Vanguard Municipal Cash
Management Fund (each, a CMT Fund),which are low-cost money market
funds. When investing in a CMT Fund, theFund bears its
proportionate share of the expenses of the CMT Fund in which
itinvests. Vanguard receives no additional revenue from Fund assets
invested in aCMT Fund.
Methods Used to Meet Redemption RequestsUnder normal
circumstances, the Fund typically expects to meet redemptionswith
positive cash flows. When this is not an option, the Fund seeks to
maintainits risk exposure by selling a cross section of the Fund’s
holdings to meetredemptions, while also factoring in transaction
costs. Additionally, the Fund maywork with larger clients to
implement their redemptions in a manner that is leastdisruptive to
the portfolio; see “Potentially disruptive redemptions”
underRedeeming Shares in the Investing With Vanguard section.
Under certain circumstances, including under stressed market
conditions, thereare additional tools that the Fund may use in
order to meet redemptions,including advancing the settlement of
market trades with counterparties tomatch investor redemption
payments or delaying settlement of an investor’stransaction to
match trade settlement within regulatory requirements. The Fundmay
also suspend payment of redemption proceeds for up to seven days;
see“Emergency circumstances” under Redeeming Shares in the
Investing WithVanguard section. Additionally under these unusual
circumstances, the Fundmay borrow money (subject to certain
regulatory conditions and if availableunder board-approved
procedures) through an interfund lending facility; througha bank
line-of-credit, including a joint committed credit facility; or
through anuncommitted line-of-credit from Vanguard in order to meet
redemption requests.
Temporary Investment MeasuresThe Fund may temporarily depart
from its normal investment policies andstrategies 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
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investment objective. For instance, the Fund may invest beyond
its normal limitsin derivatives or exchange-traded funds that are
consistent with the Fund‘sinvestment objective when those
instruments are more favorably priced orprovide needed liquidity,
as might be the case when the Fund receives largecash flows that it
cannot prudently invest immediately.
Frequent Trading or Market-TimingBackground. Some investors try
to profit from strategies involving frequenttrading of mutual fund
shares, such as market-timing. For funds holding foreignsecurities,
investors may try to take advantage of an anticipated
differencebetween the price of the fund’s shares and price
movements in overseasmarkets, a practice also known as time-zone
arbitrage. Investors also may try toengage in frequent trading of
funds holding investments such as small-capstocks and high-yield
bonds. As money is shifted into and out of a fund by ashareholder
engaging in frequent trading, the fund incurs costs for buying
andselling securities, resulting in increased brokerage and
administrative costs.These costs are borne by all fund
shareholders, including the long-term investorswho do not generate
the costs. In addition, frequent trading may interfere withan
advisor’s ability to efficiently manage the fund.
Policies to address frequent trading. The Vanguard funds (other
than moneymarket funds and short-term bond funds, but including
Vanguard Short-TermInflation-Protected Securities Index Fund) do
not knowingly accommodatefrequent trading. The board of trustees of
each Vanguard fund (other than moneymarket funds and short-term
bond funds, but including Vanguard Short-TermInflation-Protected
Securities Index Fund) has adopted policies and
proceduresreasonably designed to detect and discourage frequent
trading and, in somecases, to compensate the fund for the costs
associated with it. These policiesand procedures do not apply to
ETF Shares because frequent trading in ETFShares generally does not
disrupt portfolio management or otherwise harm fundshareholders.
Although there is no assurance that Vanguard will be able todetect
or prevent frequent trading or market-timing in all circumstances,
thefollowing policies have been adopted to address these
issues:
• Each Vanguard fund reserves the right to reject any
purchaserequest—including exchanges from other Vanguard
funds—without notice andregardless of size. For example, a purchase
request could be rejected becausethe investor has a history of
frequent trading or if Vanguard determines that suchpurchase may
negatively affect a fund’s operation or performance.
• Each Vanguard fund (other than money market funds and
short-term bondfunds, but including Vanguard Short-Term
Inflation-Protected Securities IndexFund) generally prohibits,
except as otherwise noted in the Investing WithVanguard section, an
investor’s purchases or exchanges into a fund account for
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30 calendar days after the investor has redeemed or exchanged
out of thatfund account.
• Certain Vanguard funds charge shareholders purchase and/or
redemption feeson transactions.
See the Investing With Vanguard section of this prospectus for
further detailson Vanguard’s transaction policies.
Each Vanguard fund (other than retail and government money
market funds), indetermining its net asset value, will use
fair-value pricing when appropriate, asdescribed in the Share Price
section. Fair-value pricing may reduce or eliminatethe
profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
Turnover RateAlthough the Fund generally seeks to invest for the
long term, it may sellsecurities regardless of how long they have
been held. Generally, an index fundsells securities in response to
redemption requests or to changes in thecomposition of its target
index. The Financial Highlights section of thisprospectus shows
historical turnover rates for the Fund. A turnover rate of100%, for
example, would mean that the Fund had sold and replaced
securitiesvalued at 100% of its net assets within a one-year
period. The Fund’s turnoverrate will vary as stocks pass or fail
the screening policies employed by thebenchmark index, resulting in
changes to the stocks that make up the index. Ingeneral, the
greater the turnover rate, the greater the impact transaction
costswill have on a fund’s return. Also, funds with high turnover
rates may be morelikely to generate capital gains, including
short-term capital gains, that must bedistributed to shareholders
and will be taxable to shareholders investing througha taxable
account.
The Fund and Vanguard
The Fund is a member of The Vanguard Group, a family of over 200
funds. All ofthe funds that are members of The Vanguard Group
(other than funds of funds)share in the expenses associated with
administrative services and businessoperations, such as personnel,
office space, and equipment.
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Vanguard Marketing Corporation provides marketing services to
the funds.Although fund shareholders do not pay sales commissions
or 12b-1 distributionfees, each fund (other than a fund of funds)
or each share class of a fund (in thecase of a fund with multiple
share classes) pays its allocated share of theVanguard funds’
marketing costs.
Plain Talk About Vanguard’s Unique Corporate Structure
The Vanguard Group is owned jointly by the funds it oversees and
thusindirectly by the shareholders in those funds. Most other
mutual funds areoperated by management companies that are owned by
third parties—eitherpublic 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 beganoperations in 1975, serves as advisor to the Fund
through its Equity IndexGroup. As of August 31, 2020, Vanguard
served as advisor for approximately$5.4 trillion in assets.
Vanguard provides investment advisory services to theFund pursuant
to the Funds’ Service Agreement and subject to the supervisionand
oversight of the trustees and officers of the Fund.
For the fiscal year ended August 31, 2020, the advisory expenses
representedan effective annual rate of 0.01% of the Fund’s average
net assets.
Under the terms of an SEC exemption, the Fund’s board of
trustees may,without prior approval from shareholders, change the
terms of an advisoryagreement with a third-party investment advisor
or hire a new third-partyinvestment advisor—either as a replacement
for an existing advisor or as anadditional advisor. Any significant
change in the Fund’s advisory arrangementswill be communicated to
shareholders in writing. As the Fund’s sponsor andoverall manager,
Vanguard may provide investment advisory services to the Fundat any
time. Vanguard may also recommend to the board of trustees that
anadvisor be hired, terminated, or replaced or that the terms of an
existingadvisory agreement be revised. The Fund has filed an
application seeking asimilar SEC exemption with respect to
investment advisors that are whollyowned subsidiaries of Vanguard.
If the exemption is granted, the Fund may relyon the new SEC
relief.
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For a discussion of why the board of trustees approved the
Fund’s investmentadvisory arrangement, see the most recent annual
report to shareholderscovering the fiscal year ended August 31.
The managers primarily responsible for the day-to-day management
of theFund are:
William A. Coleman, CFA, Portfolio Manager at Vanguard. He has
worked ininvestment management since joining Vanguard in 2006 and
has co-managedthe Fund since 2015. Education: B.S., King’s College;
M.S., SaintJoseph’s University.
Gerard C. O’Reilly, Principal of Vanguard. He has been with
Vanguard since1992, has managed investment portfolios since 1994,
and has co-managed theFund since 2015. Education: B.S., Villanova
University.
The Fund’s Statement of Additional Information provides
information about eachportfolio manager’s compensation, other
accounts under management, andownership of shares of the Fund.
Dividends, Capital Gains, and Taxes
Fund DistributionsThe Fund distributes to shareholders virtually
all of its net income (interest anddividends, less expenses) as
well as any net short-term or long-term capitalgains realized from
the sale of its holdings. Income dividends generally aredistributed
quarterly in March, June, September, and December; capital
gainsdistributions, if any, generally occur annually in December.
In addition, the Fundmay occasionally make a supplemental
distribution at some other time duringthe year.
You can receive distributions of income or capital gains in
cash, or you can havethem automatically reinvested in more shares
of the Fund. However, if you areinvesting through an
employer-sponsored retirement or savings plan, yourdistributions
will be automatically reinvested in additional Fund shares.
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Plain Talk About Distributions
As a shareholder, you are entitled to your portion of a fund’s
income frominterest and dividends as well as capital gains from the
fund’s sale ofinvestments. Income consists of both the dividends
that the fund earns fromany stock holdings and the interest it
receives from any money market andbond investments. Capital gains
are realized whenever the fund sellssecurities for higher prices
than it paid for them. These capital gains areeither short-term or
long-term, depending on whether the fund held thesecurities for one
year or less or for more than one year.
Basic Tax PointsInvestors in taxable accounts should be aware of
the following basic federalincome tax points:
• Distributions are taxable to you whether or not you reinvest
these amounts inadditional Fund shares.
• Distributions declared in December—if paid to you by the end
of January—aretaxable as if received in December.
• Any dividend distribution or short-term capital gains
distribution that youreceive is taxable to you as ordinary income.
If you are an individual and meetcertain holding-period
requirements with respect to your Fund shares, you maybe eligible
for reduced tax rates on “qualified dividend income,” if any,
distributedby the Fund.
• Any distribution of net long-term capital gains is taxable to
you as long-termcapital gains, no matter how long you have owned
shares in the Fund.
• Capital gains distributions may vary considerably from year to
year as a resultof the Fund’s normal investment activities and cash
flows.
• A sale or exchange of Fund shares is a taxable event. This
means that you mayhave a capital gain to report as income, or a
capital loss to report as a deduction,when you complete your tax
return.
• Any conversion between classes of shares of the same fund is a
nontaxableevent. By contrast, an exchange between classes of shares
of different funds isa taxable event.
• Vanguard (or your intermediary) will send you a statement each
year showingthe tax status of all of your distributions.
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Individuals, trusts, and estates whose income exceeds certain
thresholdamounts are subject to a 3.8% Medicare contribution tax on
“net investmentincome.” Net investment income takes into account
distributions paid by theFund and capital gains from any sale or
exchange of Fund shares.
Dividend distributions and capital gains distributions that you
receive, as well asyour gains or losses from any sale or exchange
of Fund shares, may be subjectto state and local income taxes.
This prospectus provides general tax information only. If you
are investingthrough a tax-advantaged account, such as an IRA or an
employer-sponsoredretirement or savings plan, special tax rules
apply. Please consult your taxadvisor for detailed information
about any tax consequences for you.
Plain Talk About Buying a Dividend
Unless you are a tax-exempt investor or investing through a
tax-advantagedaccount (such as an IRA or an employer-sponsored
retirement or savingsplan), you should consider avoiding a purchase
of fund shares shortly beforethe fund makes a distribution, because
doing so can cost you money intaxes. This is known as “buying a
dividend.” For example: On December 15,you invest $5,000, buying
250 shares for $20 each. If the fund pays adistribution of $1 per
share on December 16, its share price will drop to $19(not counting
market change). You still have only $5,000 (250 shares x $19
=$4,750 in share value, plus 250 shares x $1 = $250 in
distributions), but youowe tax on the $250 distribution you
received—even if you reinvest it inmore shares. To avoid buying a
dividend, check a fund’s distribution schedulebefore you
invest.
General InformationBackup withholding. By law, Vanguard must
withhold 24% of any taxabledistributions or redemptions from your
account if you do not:
• Provide your correct taxpayer identification number.
• Certify that the taxpayer identification number is
correct.
• Confirm that you are not subject to backup withholding.
Similarly, Vanguard (or your intermediary) must withhold taxes
from your accountif the IRS instructs us to do so.
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Foreign investors. Vanguard funds offered for sale in the United
States(Vanguard U.S. funds), including the Fund offered in this
prospectus, are notwidely available outside the United States.
Non-U.S. investors should be awarethat U.S. withholding and estate
taxes and certain U.S. tax reportingrequirements may apply to any
investments in Vanguard U.S. funds. Foreigninvestors should visit
the non-U.S. investors page on our website atvanguard.com for
information on Vanguard’s non-U.S. products.
Invalid addresses. If a dividend distribution or capital gains
distribution checkmailed to your address of record is returned as
undeliverable, Vanguard willautomatically reinvest the distribution
and all future distributions until you provideus with a valid
mailing address. Reinvestments will receive the net asset
valuecalculated on the date of the reinvestment.
Share Price
Share price, also known as net asset value (NAV), is calculated
as of the close ofregular 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 isunavailable at the
close of the trading day, NAVs will be calculated as of theclose of
regular trading on the Nasdaq (or another alternate exchange if
theNasdaq is unavailable, as determined at Vanguard’s discretion),
generally 4 p.m.,Eastern time. Each share class has its own NAV,
which is computed by dividingthe total assets, minus liabilities,
allocated to the share class by the number ofFund shares
outstanding for that class. On U.S. holidays or other days when
theNYSE is closed, the NAV is not calculated, and the Fund does not
sell or redeemshares. However, on those days the value of the
Fund’s assets may be affectedto 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).
Stocks held by a Vanguard fund are valued at their market value
when reliablemarket quotations are readily available from the
principal exchange or market onwhich they are traded. Such
securities are generally valued at their official closingprice, the
last reported sales price, or if there were no sales that day, the
meanbetween the closing bid and asking prices. When a fund
determines that marketquotations either are not readily available
or do not accurately reflect the value ofa security, the security
is priced at its fair value (the amount that the ownermight
reasonably expect to receive upon the current sale of the
security).
The values of any foreign securities held by a fund are
converted into U.S. dollarsusing an exchange rate obtained from an
independent third party as of the closeof regular trading on the
NYSE. The values of any mutual fund shares, including
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institutional money market fund shares, held by a fund are based
on the NAVs ofthe shares. The values of any ETF shares or
closed-end fund shares held by afund are based on the market value
of the shares.
A fund also will use fair-value pricing if the value of a
security it holds has beenmaterially affected by events occurring
before the fund’s pricing time but afterthe close of the principal
exchange or market on which the security is traded.This most
commonly occurs with foreign securities, which may trade on
foreignexchanges that close many hours before the fund’s pricing
time. Interveningevents might be company-specific (e.g., earnings
report, merger announcement)or country-specific or regional/global
(e.g., natural disaster, economic or politicalnews, act of
terrorism, interest rate change). Intervening events include
pricemovements in U.S. markets that exceed a specified threshold or
that areotherwise deemed to affect the value of foreign
securities.
Fair-value pricing may be used for domestic securities—for
example, if (1) tradingin a security is halted and does not resume
before the fund’s pricing time or asecurity does not trade in the
course of a day and (2) the fund holds enough ofthe security that
its price could affect the NAV.
Fair-value prices are determined by Vanguard according to
procedures adoptedby the board of trustees. When fair-value pricing
is employed, the prices ofsecurities used by a fund to calculate
the NAV may differ from quoted orpublished prices for the same
securities.
Vanguard fund share prices are published daily on our website
atvanguard.com/prices.
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Financial Highlights
Financial highlights information is intended to help you
understand a fund’sperformance for the past five years (or, if
shorter, its period of operations).Certain information reflects
financial results for a single fund share. Total returnrepresents
the rate that an investor would have earned or lost each period on
aninvestment in a fund or share class (assuming reinvestment of all
distributions).This information has been obtained from the
financial statements audited byPricewaterhouseCoopers LLP, an
independent registered public accounting firm,whose report, along
with fund financial statements, is included in a fund’s mostrecent
annual report to shareholders. You may obtain a free copy of a
fund’slatest annual or semiannual report, which is available upon
request.
Vanguard FTSE Social Index Fund Institutional Shares
Year Ended August 31,For a Share Outstanding Throughout Each
Period 2020 2019 2018 2017 2016Net Asset Value, Beginning of Period
$19.63 $19.28 $16.15 $13.96 $13.00
Investment Operations
Net Investment Income 0.3391 0.3141 0.3051 0.2711 0.254Net
Realized and Unrealized Gain (Loss) onInvestments
5.037 0.351 3.105 2.175 1.029
Total from Investment Operations 5.376 0.665 3.410 2.446
1.283Distributions
Dividends from Net Investment Income (0.336) (0.315) (0.280)
(0.256) (0.323)Distributions from Realized Capital Gains — — — —
—Total Distributions (0.336) (0.315) (0.280) (0.256) (0.323)Net
Asset Value, End of Period $24.67 $19.63 $19.28 $16.15 $13.96
Total Return 27.86% 3.58% 21.34% 17.72% 10.09%
Ratios/Supplemental Data
Net Assets, End of Period (Millions) $4,003 $2,701 $2,349 $1,443
$876Ratio of Total Expenses to Average Net Assets 0.12% 0.12% 0.12%
0.12% 0.12%Ratio of Net Investment Income to Average Net Assets
1.62% 1.49% 1.71% 1.79% 1.97%Portfolio Turnover Rate 18% 11%2 8%2
11%2 16%2
1 Calculated based on average shares outstanding.2 Excludes the
value of portfolio securities received or delivered as a result of
in-kind purchases or redemptions of
the fund’s capital shares.
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Investing With Vanguard
This section of the prospectus explains the basics of doing
business withVanguard. Vanguard fund shares can be held directly
with Vanguard or indirectlythrough an intermediary, such as a bank,
a broker, or an investment advisor. Ifyou hold Vanguard fund shares
directly with Vanguard, you should carefully readeach topic within
this section that pertains to your relationship with Vanguard.
Ifyou hold Vanguard fund shares indirectly through an intermediary
(includingshares held in a brokerage account through Vanguard
Brokerage Services®),please see Investing With Vanguard Through
Other Firms, and also refer to youraccount agreement with the
intermediary for information about transacting inthat account. If
you hold Vanguard fund shares through an
employer-sponsoredretirement or savings plan, please see
Employer-Sponsored Plans. Vanguardreserves the right to change the
following policies without notice. Please call orcheck online for
current information. See Contacting Vanguard.
For Vanguard fund shares held directly with Vanguard, each fund
you hold in anaccount is a separate “fund account.” For example, if
you hold three funds in anonretirement account titled in your own
name, two funds in a nonretirementaccount titled jointly with your
spouse, and one fund in an individual retirementaccount, you have
six fund accounts—and this is true even if you hold the samefund in
multiple accounts. Note that each reference to “you” in this
prospectusapplies to any one or more registered account owners or
persons authorized totransact on your account.
Purchasing Shares
Vanguard reserves the right, without notice, to increase or
decrease theminimum amount required to open, convert shares to, or
maintain a fundaccount or to add to an existing fund account.
Investment minimums may differ for certain categories of
investors.
Account Minimums for Institutional SharesTo open and maintain an
account. $5 million. If you request InstitutionalShares when you
open a new account but the investment amount does notmeet the
account minimum for Institutional Shares, your investment will
beplaced in another share class of the Fund, as appropriate.
Certain Vanguard institutional clients may meet the minimum
investmentamount by aggregating separate accounts within the same
fund. Thisaggregation policy does not apply to financial
intermediaries.
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Vanguard may charge additional recordkeeping fees for
institutional clientswhose accounts are recordkept by Vanguard.
Please contact your Vanguardrepresentative to determine whether
additional recordkeeping fees apply toyour account.
To add to an existing account. Generally $1.
How to Initiate a Purchase RequestBe sure to check Exchanging
Shares, Frequent-Trading Limitations, and OtherRules You Should
Know before placing your purchase request.
Online. You may open certain types of accounts, request a
purchase of shares,and request an exchange through our website or
our mobile application if youraccount is eligible and you are
registered for online access.
By telephone. You may call Vanguard to begin the account
registration processor request that the account-opening forms be
sent to you. You may also callVanguard to request a purchase of
shares in your account or to request anexchange. See Contacting
Vanguard.
By mail. You may send Vanguard your account registration form
and check toopen a new fund account. To add to an existing fund
account, you may send yourcheck with an Invest-by-Mail form (from a
transaction confirmation or youraccount statement) or with a
deposit slip (available online).
How to Pay for a PurchaseBy electronic bank transfer. You may
purchase shares of a Vanguard fundthrough an electronic transfer of
money from a bank account. To establish theelectronic bank transfer
service on an account, you must designate the bankaccount online,
complete a form, or fill out the appropriate section of youraccount
registration form. After the service is set up on your account, you
canpurchase shares by electronic bank transfer on a regular
schedule (AutomaticInvestment Plan), if eligible, or upon request.
Your purchase request can beinitiated online (if you are registered
for online access), by telephone, or by mail.
By wire. Wiring instructions vary for different types of
purchases. Please callVanguard for instructions and policies on
purchasing shares by wire. SeeContacting Vanguard.
By check. You may make initial or additional purchases to your
fund account bysending a check with a deposit slip or by utilizing
our mobile application if youraccount is eligible and you are
registered for online access. Also see How toInitiate a Purchase
Request. Make your check payable to Vanguard and includethe
appropriate fund number (Vanguard—223).
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By exchange. You may purchase shares of a Vanguard fund using
the proceedsfrom the simultaneous redemption of shares of another
Vanguard fund. You mayinitiate an exchange online (if you are
registered for online access), by telephone,or by mail with an
exchange form. See Exchanging Shares.
Trade DateThe trade date for any purchase request received in
good order will depend onthe day and time Vanguard receives your
request, the manner in which you arepaying, and the type of fund
you are purchasing. Your purchase will be executedusing the NAV as
calculated on the trade date. NAVs are calculated only on daysthat
the NYSE is open for trading (a business day). In the rare event
the NYSEexperiences unanticipated disruptions and is unavailable at
the close of thetrading day, NAVs will be calculated as of the
close of regular trading on theNasdaq (or another alternate
exchange if the Nasdaq is unavailable, asdetermined at Vanguard’s
discretion), generally 4 p.m., Eastern time. The timeselected for
NAV calculation in this rare event shall also serve as the
conclusionof the trading day. See Share Price.
For purchases by check into all funds other than money market
funds and forpurchases by exchange, wire, or electronic bank
transfer into all funds: If thepurchase request is received by
Vanguard on a business day before the close ofregular trading on
the NYSE (generally 4 p.m., Eastern time), the trade date forthe
purchase will be the same day. If the purchase request is received
on abusiness day after the close of regular trading on the NYSE, or
on a nonbusinessday, the trade date for the purchase will be the
next business day.
For purchases by check into money market funds: If the purchase
request isreceived by Vanguard on a business day before the close
of regular trading onthe NYSE (generally 4 p.m., Eastern time), the
trade date for the purchase will bethe next business day. If the
purchase request is received on a business dayafter the close of
regular trading on the NYSE, or on a nonbusiness day, the tradedate
for the purchase will be the second business day following the
dayVanguard receives the purchase request. Because money market
instrumentsmust be purchased with federal funds and it takes a
money market mutual fundone business day to convert check proceeds
into federal funds, the trade date forthe purchase will be one
business day later than for other funds.
If your purchase request is not accurate and complete, it may be
rejected. SeeOther Rules You Should Know—Good Order.
For further information about purchase transactions, consult our
website atvanguard.com or see Contacting Vanguard.
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Other Purchase Rules You Should KnowCheck purchases. All
purchase checks must be written in U.S. dollars, be drawnon a U.S.
bank, and be accompanied by good order instructions. Vanguard
doesnot accept cash, traveler’s checks, starter checks, or money
orders. In addition,Vanguard may refuse checks that are not made
payable to Vanguard.
New accounts. We are required by law to obtain from you certain
personalinformation that we will use to verify your identity. If
you do not provide theinformation, we may not be able to open your
account. If we are unable to verifyyour identity, Vanguard reserves
the right, without notice, to close your accountor take such other
steps as we deem reasonable. Certain types of accounts mayrequire
additional documentation.
Refused or rejected purchase requests. Vanguard reserves the
right to stopselling fund shares or to reject any purchase request
at any time and withoutnotice, including, but not limited to,
purchases requested by exchange fromanother Vanguard fund. This
also includes the right to reject any purchaserequest because the
investor has a history of frequent trading or because thepurchase
may negatively affect a fund’s operation or performance.
Large purchases. Call Vanguard before attempting to invest a
largedollar amount.
No cancellations. Vanguard will not accept your request to
cancel any purchaserequest once processing has begun. Please be
careful when placing apurchase request.
Converting Shares
When a conversion occurs, you receive shares of one class in
place of shares ofanother class of the same fund. At the time of
conversion, the dollar value of the“new” shares you receive equals
the dollar value of the “old” shares that wereconverted. In other
words, the conversion has no effect on the value of yourinvestment
in the fund at the time of the conversion. However, the number
ofshares you own after the conversion may be greater than or less
than thenumber of shares you owned before the conversion, depending
on the NAVs ofthe two share classes.
Vanguard will not accept your request to cancel any
self-directed conversionrequest once processing has begun. Please
be careful when placing aconversion request.
A conversion between share classes of the same fund is a
nontaxable event.
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Trade DateThe trade date for any conversion request received in
good order will depend onthe day and time Vanguard receives your
request. Your conversion will beexecuted using the NAVs of the
different share classes on the trade date. NAVsare calculated only
on days that the NYSE is open for trading (a business day). Inthe
rare event the NYSE experiences unanticipated disruptions and is
unavailableat the close of the trading day, NAVs will be calculated
as of the close of regulartrading on the Nasdaq (or another
alternate exchange if the Nasdaq isunavailable, as determined at
Vanguard’s discretion), generally 4 p.m., Easterntime. The time
selected for NAV calculation in this rare event shall also serve
asthe conclusion of the trading day. See Share Price.
For a conversion request received by Vanguard on a business day
before theclose of regular trading on the NYSE (generally 4 p.m.,
Eastern time), the tradedate will be the same day. For a conversion
request received on a business dayafter the close of regular
trading on the NYSE, or on a nonbusiness day, the tradedate will be
the next business day. See Other Rules You Should Know.
Conversions to Institutional SharesYou are eligible for a
self-directed conversion from Admiral Shares to InstitutionalShares
of the Fund, provided that your account meets all eligibility
requirements.You may request a conversion through our website (if
you are registered foronline access), or you may contact Vanguard
by telephone or by mail to requestthis transaction. Accounts that
qualify for Institutional Shares will not beautomatically
converted.
Mandatory Conversions to Admiral SharesIf an account no longer
meets the balance requirements for Institutional Shares,Vanguard
may automatically convert the shares in the account to Admiral
Shares.A decline in the account balance because of market movement
may result insuch a conversion. Vanguard will notify the investor
in writing before anymandatory conversion occurs.
Redeeming Shares
How to Initiate a Redemption RequestBe sure to check Exchanging
Shares, Frequent-Trading Limitations, and OtherRules You Should
Know before placing your redemption request.
Online. You may request a redemption of shares or request an
exchange throughour website or our mobile application if your
account is eligible and you areregistered for online access.
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By telephone. You may call Vanguard to request a redemption of
shares or anexchange. See Contacting Vanguard.
By mail. You may send a form (available online) to Vanguard to
redeem from afund account or to make an exchange. See Contacting
Vanguard.
How to Receive Redemption ProceedsBy electronic bank transfer.
You may have the proceeds of a fund redemptionsent directly to a
designated bank account. To establish the electronic banktransfer
service on an account, you must designate a bank account
online,complete a form, or fill out the appropriate section of your
account registrationform. After the service is set up on your
account, you can redeem shares byelectronic bank transfer on a
regular schedule (Automatic Withdrawal Plan), ifeligible, or upon
request. Your redemption request can be initiated online (if youare
registered for online access), by telephone, or by mail.
By wire. To receive your proceeds by wire, you may instruct
Vanguard to wireyour redemption proceeds ($100 minimum) to a
previously designated bankaccount. To establish the wire redemption
service, you generally must designatea bank account online,
complete a form, or fill out the appropriate section of youraccount
registration form.
Please note that Vanguard charges a $10 wire fee for outgoing
wireredemptions. The fee is assessed in addition to, rather than
being withheld from,redemption proceeds and is paid directly to the
fund in which you invest. Forexample, if you redeem $100 via a
wire, you will receive the full $100, and the$10 fee will be
assessed to your fund account through an additional redemptionof
fund shares. If you redeem your entire fund account, your
redemptionproceeds will be reduced by the amount of the fee. The
wire fee does not applyto accounts held by Flagship and Flagship
Select clients; accounts held throughintermediaries, including
Vanguard Brokerage Services; or accounts held byinstitutional
clients.
By exchange. You may have the proceeds of a Vanguard fund
redemptioninvested directly in shares of another Vanguard fund. You
may initiate anexchange online (if you are registered for online
access), by telephone, or bymail. See Exchanging Shares.
By check. If you have not chosen another redemption method,
Vanguard will mailyou a redemption check, generally payable to all
registered account owners,normally within two business days of your
trade date, and generally to theaddress of record.
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Trade DateThe trade date for any redemption request received in
good order will depend onthe day and time Vanguard receives your
request and the manner in which youare redeeming. Your redemption
will be executed using the NAV as calculated onthe trade date. NAVs
are calculated only on days that the NYSE is open fortrading (a
business day). In the rare event the NYSE experiences
unanticipateddisruptions and is unavailable at the close of the
trading day, NAVs will becalculated as of the close of regular
trading on the Nasdaq (or another alternateexchange 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
rareevent shall also serve as the conclusion of the trading day.
See Share Price.
For redemptions by check, exchange, or wire: If the redemption
request isreceived by Vanguard on a business day before the close
of regular trading onthe NYSE (generally 4 p.m., Eastern time), the
trade date will be the same day. Ifthe redemption request is
received on a business day after the close of regulartrading on the
NYSE, or on a nonbusiness day, the trade date will be the
nextbusiness day.
• Note on timing of wire redemptions from money market funds:
Fortelephone requests received by Vanguard on a business day
before10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard
Cash ReservesFederal Money Market Fund; 12:30 p.m., Eastern time,
for Vanguard FederalMoney Market Fund), the redemption proceeds
generally will leave Vanguardby the close of business the same day.
For telephone requests received byVanguard on a business day after
those cut-off times, or on a nonbusinessday, and for all requests
other than by telephone, the redemption proceedsgenerally will
leave Vanguard by the close of business on the nextbusiness
day.
• Note on timing of wire redemptions from all other funds: For
requestsreceived by Vanguard on a business day before the close of
regular trading onthe NYSE (generally 4 p.m., Eastern time), the
redemption proceeds generallywill leave Vanguard by the close of
business on the next business day. Forrequests received by Vanguard
on a business day after the close of regulartrading on the NYSE, or
on a nonbusiness day, the redemption proceedsgenerally will leave
Vanguard by the close of business on the second businessday after
Vanguard receives the request.
For redemptions by electronic bank transfer: If the redemption
request isreceived by Vanguard on a business day before the close
of regular trading onthe NYSE (generally 4 p.m., Eastern time), the
trade date will be the same day. If
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the redemption request is received on a business day after the
close of regulartrading on the NYSE, or on a nonbusiness day, the
trade date will be the nextbusiness day.
If your redemption request is not accurate and complete, it may
be rejected. Ifwe are unable to send your redemption proceeds by
wire or electronic banktransfer because the receiving institution
rejects the transfer, Vanguard will makeadditional efforts to
complete your transaction. If Vanguard is still unable tocomplete
the transaction, we may send the proceeds of the redemption to
youby check, generally payable to all registered account owners, or
use yourproceeds to purchase new shares of the fund from which you
sold shares for thepurpose of the wire or electronic bank transfer
transaction. See Other Rules YouShould Know—Good Order.
If your redemption request is received in good order, we
typically expect thatredemption proceeds will be paid by the Fund
within one business day of thetrade date; however, in certain
circumstances, investors may experience a longersettlement period
at the time of the transaction. For further information,
see“Potentially disruptive redemptions” and “Emergency
circumstances.”
For further information about redemption transactions, consult
our website atvanguard.com or see Contacting Vanguard.
Other Redemption Rules You Should KnowDocumentation for certain
accounts. Special documentation may be requiredto redeem from
certain types of accounts, such as trust, corporate, nonprofit,
orretirement accounts. Please call us before attempting to redeem
from thesetypes of accounts.
Potentially disruptive redemptions. Vanguard reserves the right
to pay all orpart of a redemption in kind—that is, in the form of
securities—if we reasonablybelieve that a cash redemption would
negatively affect the fund’s operation orperformance or that the
shareholder may be engaged in market-timing orfrequent trading.
Under these circumstances, Vanguard also reserves the right todelay
payment of the redemption proceeds for up to seven calendar days.
Bycalling us before you attempt to redeem a large dollar amount,
you may avoidin-kind or delayed payment of your redemption. Please
see Frequent-TradingLimitations for information about Vanguard’s
policies to limit frequent trading.
Recently purchased shares. Although you can redeem shares at any
time,proceeds may not be made available to you until the fund
collects payment foryour purchase. This may take up to seven
calendar days for shares purchased by
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check or by electronic bank transfer. If you have written a
check on a fund in anaccount with checkwriting privileges, that
check may be rejected if your fundaccount does not have a
sufficient available balance.
Address change. If you change your address online or by
telephone, there maybe up to a 14-day restriction (starting on the
business day after your address ischanged) on your ability to
request check redemptions online and by telephone.You can request a
redemption in writing (using a form available online) at anytime.
Confirmations of address changes are sent to both the old andnew
addresses.
Payment to a different person or address. At your request, we
can make yourredemption check payable, or wire your redemption
proceeds, to a differentperson or send it to a different address.
However, this generally requires thewritten consent of all
registered account owners and may require additionaldocumentation,
such as a signature guarantee or a notarized signature. You
mayobtain a signature guarantee from some commercial or savings
banks, creditunions, trust companies, or member firms of a U.S.
stock exchange.
No cancellations. Vanguard will not accept your request to
cancel anyredemption request once processing has begun. Please be
careful when placinga redemption request.
Emergency circumstances. Vanguard funds can postpone payment
ofredemption proceeds for up to seven calendar days. In addition,
Vanguard fundscan suspend redemptions and/or postpone payments of
redemption proceedsbeyond seven calendar days at times when the
NYSE is closed or duringemergency circumstances, as determined by
the SEC.
Exchanging Shares
An exchange occurs when you use the proceeds from the redemption
of shares ofone Vanguard fund to simultaneously purchase shares of
a different Vanguardfund.You can make exchange requests online (if
you are registered for onlineaccess), by telephone, or by mail. See
Purchasing Shares and Redeeming Shares.
If the NYSE is open for regular trading (generally until 4 p.m.,
Eastern time, on abusiness day) at the time an exchange request is
received in good order, thetrade date generally will be the same
day. See Other Rules You ShouldKnow—Good Order for additional
information on all transaction requests.
Vanguard will not accept your request to cancel any exchange
request onceprocessing has begun. Please be careful when placing an
exchange request.
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Call Vanguard before attempting to exchange a large dollar
amount. By calling usbefore you attempt to exchange a large dollar
amount, you may avoid delayed orrejected transactions.
Please note that Vanguard reserves the right, without notice, to
revise orterminate the exchange privilege, limit the amount of any
exchange, or reject anexchange, at any time, for any reason. See
Frequent-Trading Limitations foradditional restrictions on
exchanges.
Frequent-Trading Limitations
Because excessive transactions can disrupt management of a fund
and increasethe fund’s costs for all shareholders, the board of
trustees of each Vanguard fundplaces certain limits on frequent
trading in the funds. Each Vanguard fund (otherthan money market
funds and short-term bond funds, but including VanguardShort-Term
Inflation-Protected Securities Index Fund) limits an
investor’spurchases or exchanges into a fund account for 30
calendar days after theinvestor has redeemed or exchanged out of
that fund account. ETF Shares arenot subject to these
frequent-trading limits.
For Vanguard Retirement Investment Program pooled plans, the
limitations applyto exchanges made online or by telephone.
These frequent-trading limitations do not apply to the
following:
• Purchases of shares with reinvested dividend or capital gains
distributions.
• Transactions through Vanguard’s Automatic Investment Plan,
AutomaticExchange Service, Direct Deposit Service, Automatic
Withdrawal Plan, RequiredMinimum Distribution Service, and Vanguard
Small Business Online®.
• Discretionary transactions through Vanguard Personal Advisor
Services®,Vanguard Institutional Advisory Services®, and Vanguard
Digital Advisor™.
• Redemptions of shares to pay fund or account fees.
• Redemptions of shares to remove excess shareholder
contributions to certaintypes of retirement accounts (including,
but not limited to, IRAs and VanguardIndividual 401(k) Plans).
• Transfers and reregistrations of shares within the same
fund.
• Purchases of shares by asset transfer or direct rollover.
• Conversions of shares from one share class to another in the
same fund.
• Checkwriting redemptions.
• Section 529 college savings plans.
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• Certain approved institutional portfolios and asset allocation
programs, as wellas trades made by funds or trusts managed by
Vanguard or its affiliates thatinvest in other Vanguard funds.
(Please note that shareholders of Vanguard’sfunds of funds are
subject to the limitations.)
For participants in employer-sponsored defined contribution
plans,* thefrequent-trading limitations do not apply to:
• Purchases of shares with participant payroll or employer
contributions orloan repayments.
• Purchases of shares with reinvested dividend or capital gains
distributions.
• Distributions, loans, and in-service withdrawals from a
plan.
• Redemptions of shares as part of a plan termination or at the
direction ofthe plan.
• Transactions executed through the Vanguard Managed Account
Program.
• Redemptions of shares to pay fund or account fees.
• Share or asset transfers or rollovers.
• Reregistrations of shares.
• Conversions of shares from one share class to another in the
same fund.
• Exchange requests submitted by written request to Vanguard.
(Exchangerequests submitted by fax, if otherwise permitted, are
subject to the limitations.)
* The following Vanguard fund accounts are subject to the
frequent-tradinglimitations: SEP-IRAs, SIMPLE IRAs, certain
Individual 403(b)(7) CustodialAccounts, and Vanguard Individual
401(k) Plans.
Accounts Held by Institutions (Other Than Defined Contribution
Plans)Vanguard will systematically monitor for frequent trading in
institutional clients’accounts. If we detect suspicious trading
activity, we will investigate and takeappropriate action, which may
include applying to a client’s accounts the 30-daypolicy previously
described, prohibiting a client’s purchases of fund shares,and/or
revoking the client’s exchange privilege.
Accounts Held by IntermediariesWhen intermediaries establish
accounts in Vanguard funds for the benefit oftheir clients, we
cannot always monitor the trading activity of the
individualclients. However, we review trading activity at the
intermediary (omnibus) level,and if we detect suspicious activity,
we will investigate and take appropriateaction. If necessary,
Vanguard may prohibit additional purchases of fund shares
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by an intermediary, including for the benefit of certain of the
intermediary’sclients. Intermediaries also may monitor their
clients’ trading activities withrespect to Vanguard funds.
For those Vanguard funds that charge purchase and/or redemption
fees,intermediaries will be asked to assess these fees on client
accounts and remitthese fees to the funds. The application of
purchase and redemption fees andfrequent-trading limitations may
vary among intermediaries. There are noassurances that Vanguard
will successfully identify all intermediaries or thatintermediaries
will properly assess purchase and redemption fees or
administerfrequent-trading limitations. If you invest with Vanguard
through an intermediary,please read that firm’s materials carefully
to learn of any other rules or fees thatmay apply.
Other Rules You Should Know
Prospectus and Shareholder Report MailingsWhen two or more
shareholders have the same last name and address, just onesummary
prospectus (or prospectus) and/or shareholder report may be sent
inan attempt to eliminate the unnecessary expense of duplicate
mailings. You mayrequest individual prospectuses and reports by
contacting our Client ServicesDepartment in writing, by telephone,
or online. See Contacting Vanguard.
Vanguard.comRegistration. If you are a registered user of
vanguard.com, you can review youraccount holdings; buy, sell, or
exchange shares of most Vanguard funds; andperform most other
transactions through our website. You must register for thisservice
online.
Electronic delivery. Vanguard can deliver your account
statements, transactionconfirmations, prospectuses, certain tax
forms, and shareholder reportselectronically. If you are a
registered user of vanguard.com, you can consent tothe electronic
delivery of these documents by logging on and changing yourmailing
preferences under “Account Maintenance.” You can revoke
yourelectronic consent at any time through our website, and we will
begin to sendpaper copies of these documents within 30 days of
receiving your revocation.
Telephone TransactionsAutomatic. When we set up your account, we
will automatically enable you todo business with us by telephone,
unless you instruct us otherwise in writing.
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Tele-Account®. To obtain fund and account information through
Vanguard’sautomated telephone service, you must first establish a
Personal IdentificationNumber (PIN) by calling Tele-Account at
800-662-6273.
Proof of a caller’s authority. We reserve the right to refuse a
telephone requestif the caller is unable to provide the requested
information or if we reasonablybelieve that the caller is not an
individual authorized to act on the account.Before we allow a
caller to act on an account, we may request thefollowing
information:
• Authorization to act on the account (as the account owner or
by legaldocumentation or other means).
• Account registration and address.
• Fund name and account number, if applicable.
• Other information relating to the caller, the account owner,
or the account.
Good OrderWe reserve the right to reject any transaction
instructions that are not in “goodorder.” Good order generally
means that your instructions:
• Are provided by the person(s) authorized in accordance with
Vanguard’spolicies and procedures to access the account and request
transactions.
• Include the fund name and account number.
• Include the amount of the transaction (stated in dollars,
shares,or percentage).
Written instructions also must generally be provided on a
Vanguard formand include:
• Signature(s) and date from the authorized person(s).
• Signature guarantees or notarized signatures, if required for
the type oftransaction. (Call Vanguard for specific
requirements.)
• Any supporting documentation that may be required.
Good order requirements may vary among types of accounts and
transactions.For more information, consult our website at
vanguard.com or seeContacting Vanguard.
Vanguard reserves the right, without notice, to revise the
requirements forgood order.
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Future Trade-Date RequestsVanguard does not accept requests to
hold a purchase, conversion, redemption,or exchange transaction for
a future date. All such requests will receive tradedates as
previously described in Purchasing Shares, Converting
Shares,Redeeming Shares, and Exchanging Shares. Vanguard reserves
the right toreturn future-dated purchase checks.
Accounts With More Than One OwnerIf an account has more than one
owner or authorized person, Vanguard generallywill accept
instructions from any one owner or authorized person.
Responsibility for FraudYou should take precautions to protect
yourself from fraud. Keep youraccount-related information private,
and review any account confirmations,statements, or other
information that we provide to you as soon as you receivethem. Let
us know immediately if you discover unauthorized activity or
seesomething on your account that you do not understand or that
looks unusual.
Vanguard will not be responsible for losses that result from
transactions by aperson who we reasonably believe is authorized to
act on your account.
Uncashed ChecksPlease cash your distribution or redemption
checks promptly. Vanguard will notpay interest on uncashed checks.
Vanguard may be required to transfer assetsrelated to uncashed
checks to a state under the state’s abandoned property law.
Dormant AccountsIf your account has no activity in it for a
period of time, Vanguard may berequired to transfer it to a state
under the state’s abandoned property law,subject to potential
federal or state withholding taxes.
Unusual CircumstancesIf you experience difficulty contacting
Vanguard online or by telephone, you cansend us your transaction
request on a Vanguard form by regular or express mail.
Investing With Vanguard Through Other FirmsYou may purchase or
sell shares of most Vanguard funds through a financialintermediary,
such as a bank, a broker, or an investment advisor. Please
consultyour financial intermediary to determine which, if any,
shares are availablethrough that firm and to learn about other
rules that may apply. Your financial
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intermediary can provide you with account information and any
required taxforms. You may be required to pay a commission on
purchases of mutual fundshares made through a financial
intermediary.
Please see Frequent-Trading Limitations—Accounts Held by
Intermediaries forinformation about the assessment of any purchase
or redemption fees and themonitoring of frequent trading for
accounts held by intermediaries.
Low-Balance Accounts
The Fund reserves the right to convert an investor’s
Institutional Shares toAdmiral Shares if the fund account balance
falls below the account minimum forany reason, including market
fluctuation. Any such conversion will be precededby written notice
to the investor.
Right to Change PoliciesIn addition to the rights expressly
stated elsewhere in this prospectus, Vanguardreserves the right,
without notice, to (1) alter, add, or discontinue any conditionsof
purchase (including eligibility requirements), redemption,
exchange,conversion, service, or privilege at any time and (2)
alter, impose, discontinue, orwaive any purchase fee, redemption
fee, account service fee, or other feecharged to a shareholder or a
group of shareholders. Changes may affect any orall investors.
These actions will be taken when, at the sole discretion of
Vanguardmanagement, Vanguard believes they are in the best interest
of a fund.
Account RestrictionsVanguard reserves the right to: (1) redeem
all or a portion of a fund/account tomeet a legal obligation,
including tax withholding, tax lien, garnishment order, orother
obligation imposed on your account by a court or government agency;
(2)redeem shares, close an account, or suspend account privileges,
features, oroptions in the case of threatening conduct or activity;
(3) redeem shares, closean account, or suspend account privileges,
features, or options if Vanguardbelieves or suspects that not doing
so could result in a suspicious, fraudulent, orillegal transaction;
(4) place restrictions on the ability to redeem any or all sharesin
an account if it is required to do so by a court or government
agency; (5) placerestrictions on the ability to redeem any or all
shares in an account if Vanguardbelieves that doing so will prevent
fraud, financial exploitation or abuse, or toprotect vulnerable
investors; (6) freeze any account and/or suspend accountservices if
Vanguard has received reasonable notice of a dispute regarding
theassets in an account, including notice of a dispute between the
registered orbeneficial account owners; and (7) freeze any account
and/or suspend accountservices upon initial notification to
Vanguard of the death of an account owner.
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Share ClassesVanguard reserves the right, without notice, to
change the eligibilityrequirements of its share classes, including
the types of clients who are eligibleto purchase each share
class.
Fund and Account Updates
Confirmation StatementsWe will send (or provide through our
website, whichever you prefer) aconfirmation of your trade date and
the amount of your transaction when youbuy, sell, exchange, or
convert shares. However, we will not send confirmationsreflecting
only checkwriting redemptions or the reinvestment of dividend
orcapital gains distributions. For any month in which you had a
checkwritingredemption, a Checkwriting Activity Statement will be
sent to you itemizing thecheckwriting redemptions for that month.
Promptly review each confirmationstatement that we provide to you.
It is important that you contact Vanguardimmediately with any
questions you may have about any transaction reflected ona
confirmation statement, or Vanguard will consider the
transactionproperly processed.
Portfolio SummariesWe will send (or provide through our website,
whichever you prefer) quarterlyportfolio summaries to help you keep
track of your accounts throughout the year.Each summary shows the
market value of your account at the close of thestatement period,
as well as all distributions, purchases, redemptions,exchanges,
transfers, and conversions for the current calendar quarter
(ormonth). Promptly review each summary that we provide to you. It
is importantthat you contact Vanguard immediately with any
questions you may have aboutany transaction reflected on the
summary, or Vanguard will consider thetransaction properly
processed.
Tax Information StatementsFor most accounts, Vanguard (or your
intermediary) is required to provide annualtax forms to assist you
in preparing your income tax returns. These forms aregenerally
available for each calendar year early in the following year.
Registeredusers of vanguard.com can also view certain forms through
our website.Vanguard (or your intermediary) may also provide you
with additional tax-relateddocumentation. For more information,
consult our website at vanguard.com orsee Contacting Vanguard.
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Annual and Semiannual ReportsWe will send (or provide through
our website, whichever you prefer) reportsabout Vanguard FTSE
Social Index Fund twice a year, in April and October. Thesereports
include overviews of the financial markets and provide the
followingspecific Fund information:
• Performance assessments and comparisons with industry
benchmarks.
• Financial statements with listings of Fund holdings.
Portfolio HoldingsPlease consult the Fund’s Statement of
Additional Information or our website fora description of the
policies and procedures that govern disclosure of the
Fund’sportfolio holdings.
Employer-Sponsored Plans
Your plan administrator or your employee benefits office can
provide you withdetailed information on how to participate in your
plan and how to elect the Fundas an investment option.
• If you have any questions about the Fund or Vanguard,
including those aboutthe Fund’s investment objective, strategies,
or risks, contact Vanguard ParticipantServices toll-free at
800-523-1188 or visit our website at vanguard.com.
• If you have questions about your accoun