Vanguard Energy Index Fund NCSRS Certified semi-annual shareholder report (management investment company)

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-01027

Name of Registrant: Vanguard World Fund
Address of Registrant:
P.O. Box 2600
Valley Forge, PA 19482

Name and address of agent for service:
Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482

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

Date of fiscal year end: August 31

Date of reporting period: September 1, 2013 – February 28, 2014

Item 1: Reports to Shareholders

Semiannual Report | February 28, 2014

Vanguard U.S. Growth Fund

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Advisors’ Report.	8
Fund Profile.	13
Performance Summary.	15
Financial Statements.	16
About Your Fund’s Expenses.	30
Trustees Approve Advisory Arrangements.	32
Glossary.	34

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the
risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas.
This one is a replica based on an 18th-century British vessel. The HMS Vanguard, another ship of that era, served as the
flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

Your Fund’s Total Returns


Six Months Ended February 28, 2014
				Total
				Returns
Vanguard U.S. Growth Fund
Investor Shares				21.16%
Admiral™ Shares				21.20
Russell 1000 Growth Index				17.84
Large-Cap Growth Funds Average				19.74
Large-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.


Your Fund’s Performance at a Glance
August 31, 2013, Through February 28, 2014
			Distributions Per Share
	Starting	Ending	Income	Capital
	Share Price	Share Price	Dividends	Gains
Vanguard U.S. Growth Fund
Investor Shares	$24.67	$29.77	$0.111	$0.000
Admiral Shares	63.91	77.04	0.390	0.000

Chairman’s Letter

Dear Shareholder,

For the six months ended February 28, 2014, growth stocks outshined value. This marked a change from the stock market’s recent path, as investors seemed willing to pay more for the shares of quickly expanding companies. Vanguard U.S. Growth Fund flourished in this environment, aided by its advisors’ insightful decisions.

The fund returned about 21%, ahead of the average result of its large-capitalization growth peers and the broad U.S. stock market, which includes both growth and value stocks.

Please note that Vanguard Growth Equity Fund’s merger with the U.S. Growth Fund was completed in the final week of the six-month period. The move is one of a number of recent Vanguard efforts to simplify and lower the cost of investing for our clients. Fund advisors Delaware Investments Fund Advisers, Wellington Management Company, llp, and William Blair & Company, L.L.C., have now been joined by Baillie Gifford Overseas Ltd. and Jennison Associates LLC, who previously managed the Growth Equity Fund.

I would also like to congratulate and thank the team at William Blair, which in April marked its tenth anniversary advising the U.S. Growth Fund. William Blair has helped the fund emerge from a challenging stretch and begin to deliver the type of competitive performance results that have

characterized it for many of its 55 years. We are grateful to William Blair for its service to Vanguard shareholders.

A mostly positive environment lifted U.S. stock market returns
Favorable corporate earnings, generally positive economic news, improved investor sentiment, and the Federal Reserve’s accommodative bond-buying program all helped the broad U.S. stock market post a six-month return of about 16%.

International stocks, in aggregate, rose about 12%. Most of this strength came from the developed markets of Europe; the developed markets of the Pacific region managed single-digit returns, as did emerging markets. Emerging markets experienced particularly volatile results amid concerns about China’s slowing economy and the effects of higher interest rates as the Fed winds down its stimulus.

Bonds staged rebound after last year’s swoon
Bonds, which had slumped notably in 2013 as investors worried over the future of the Fed’s bond-buying program, delivered solid results for the six months. Even as the Fed began trimming its purchases in January, bonds seemed to regain their appeal for investors.

The broad U.S. taxable bond market returned 2.84%. The yield of the 10-year Treasury note finished at 2.64%, down


Market Barometer

			Total Returns
		Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	-0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

a bit from 2.76% at the end of August. (Bond prices and yields move in opposite directions.)

Municipal bonds, which had declined sharply in the fiscal year ended August 31, regained some ground, returning 5.71%. The market was roiled during the summer by concerns about Detroit’s bankruptcy and Puerto Rico’s fiscal woes, but as the headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment officer, Tim Buckley, noted recently that, on the whole, “Municipalities out there are actually doing a lot better than they were a few years ago.”

Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates. International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 4.93%.

The fund’s rebound continued as growth stocks moved ahead
The U.S. Growth Fund grappled with a variety of challenges in the first decade of the 21st century. Many of its struggles were the result of two historic bear markets and dynamics that favored value and small-capitalization stocks over growth and large-cap for long periods as the markets recovered. Other problems stemmed from subpar stock and sector decisions.


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Admiral	Peer Group
	Shares	Shares	Average
U.S. Growth Fund	0.45%	0.31%	1.22%

The fund expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year.
For the six months ended February 28, 2014, the annualized expense ratios were 0.44% for Investor Shares and 0.30% for Admiral Shares.
The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through
year-end 2013.

Peer group: Large-Cap Growth Funds.

Over the last few years, however, the fund has been rebounding from that decade, and its previous missteps don’t loom quite as large in the rearview mirror. The positive results correspond with fund management

changes. In October 2010, Wellington and Delaware Investments Fund Advisers joined William Blair on the fund’s advisory team, replacing a previous advisor. We are encouraged by the fund’s performance and

The appeal of low-cost investing is growing

Minimizing investment costs is a critical part of every investor’s toolkit. Why? Because every

dollar paid for fund management expenses is simply a dollar less that can work on your behalf.

Put another way, the lower your mutual fund’s costs, the greater your share of the fund’s return.

Not surprisingly, research indicates that lower-cost investments have tended to outperform

their higher-cost counterparts.

Investors are catching on to the value of lower-cost mutual funds. Funds with lower expense

ratios dominated in attracting investment dollars over the decade ended December 31, 2012,

according to a Vanguard research paper. (You can read the paper, Costs Matter: Are Fund

Investors Voting With Their Feet?, at vanguard.com/research.) And, as the chart below shows,

Vanguard’s leadership in keeping down costs for investors seems to have encouraged the

industry to reduce its average costs—at least over the past decade.

Even so, Vanguard’s average expenses continue to be less than one-fifth the industry average:

0.19% versus 1.08% (as of December 31, 2013). That cost difference remains a powerful tool

in the hands of Vanguard clients.

Vanguard fund costs remain far below industry average

management since the transition, and we expect Baillie Gifford and Jennison to add diversity of thought to an already sound investment approach.

Growth funds hold stocks of companies expected to generate above-average earnings growth; these companies are inclined to direct their profits to expansion rather than to shareholder dividends. Although growth stocks have the potential to rise sharply, they may also experience greater volatility than their value counterparts and decline more quickly when expectations aren’t met.

The information technology sector, home to many growth-oriented companies and comprising one-third of the fund’s holdings on average, was one of the top performers. Technology stocks returned about 25%, and the fund benefited from both its heavy exposure and its advisors’ stock choices. Electronic payment, internet, software, hardware, and storage companies were standouts and offset some misses in the semiconductor industry.

Health care stocks, with a weighting of about 13%, on average, composed a smaller percentage of the fund’s holdings but returned an unrivaled 33%. Again, strong stock choices were an advantage. Pharmaceutical and biotechnology companies excelled in a hospitable business climate and found opportunities in new ventures.

The advisors’ decisions within the consumer discretionary and consumer staples sectors also lifted results. Internet retailers made a significant difference in the former category and drug retailers in the latter. Overall, the fund notched positive returns in all nine of the industry sectors it invested in. Stock selection wasn’t as sharp in industrials, financials, materials, and energy, but smaller holdings in those groups minimized any adverse effects.

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

Investing in one piece of the market can add risk to your portfolio
Like other Vanguard funds that are devoted to a particular investment style, the U.S. Growth Fund offers you a low-cost, transparent way to gain exposure to a specific segment of the market. Such funds can do important work within a portfolio by providing access to a sizable but distinct part of the broader stock market.

But keep in mind that no matter how important that part is or how well-regarded the fund, such an investment isn’t like owning the broad stock market. By choosing just a slice of the market’s vast pie, you’re also choosing to take on additional risk. Investors overweighting a single segment are exposing themselves to more volatility by reducing their portfolio’s diversification.

Diversification is, of course, a powerful strategy for managing risk, and Vanguard generally counsels that investors have exposure to growth and value as well as large-, mid-, and small-cap stocks, in a proportion that approximates the U.S. stock market.

You can achieve broad market diversification through a total stock fund or by assembling segment-specific funds to mirror the overall market. Either way, appropriate diversification should remain paramount.

As we say in our Principles for Investing Success: “Leadership among market segments changes constantly and rapidly, so investors must diversify both to mitigate losses and to participate in gains.” (You can read more about our investment principles at vanguard.com/research.)

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
March 12, 2014

Advisors’ Report

For the half-year ended February 28, 2014, Vanguard U.S. Growth Fund returned about 21%, ahead of its benchmark index and its peer-group average. Your fund is managed by five advisors. The use of multiple independent advisors enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.

The table on page 12 presents the advisors, the percentage and amount of fund assets that each manages, and brief descriptions of their investment strategies. The three advisors serving for the entire six months have also prepared a discussion of the investment environment during the period and of how the portfolio’s positioning reflects this assessment. These reports were prepared on March 18, 2014. Baillie Gifford Overseas Ltd. and Jennison Associates LLC joined the advisory team in the period’s final weeks; their comments will be in the annual report for the period ended August 31, 2014.

Wellington Management Company, LLP

Portfolio Manager:
Andrew J. Shilling, CFA,
Senior Vice President

We aim for our portion of the fund to outperform growth benchmarks and, in the longer term, the broader market. We employ proprietary fundamental research and a rigorous valuation discipline to invest in large-capitalization companies with attractive growth characteristics. Our investment approach is based on identifying companies that possess a clear competitive advantage that will enable them to maintain sustainable, above-average growth. We take a long-term perspective, because we believe that investors often underestimate the potential for growth.

Over the past six months, our portfolio performed well and benefited from strong security selection in information technology and consumer staples. Choices were weaker among energy stocks. The portfolio was also aided by sector allocation arising from bottom-up stock selection decisions. This resulted in a lower-than-benchmark weight to consumer staples and almost no holdings in telecommunication services, the weakest sector in the index.

Stock selection in information technology—most notably our position in Facebook—boosted relative performance. The company’s shares soared after it reported strong mobile ad revenues. We maintain a position because we view Facebook as a unique asset that continues to experience strong user growth. We believe the company can monetize its user base and traffic at significantly higher rates over time.

In consumer staples, the top relative contributor was Green Mountain Coffee Roasters, the leading provider of single-cup brewers and portion packs (K-cups) for

coffee and other hot beverages. The market responded favorably to Green Mountain’s better-than-expected earnings results.

In February, the stock soared after the company announced a ten-year collaborative agreement with Coca-Cola and Coca-Cola’s purchase of a 10% interest in Green Mountain. We trimmed our position but continue to hold the stock.

In our weakest-performing sector, energy, our holdings in Cobalt International Energy, an oil-focused exploration and production company, detracted from relative returns. Shares declined as a result of disappointing well test results. We remain confident in the company’s long-term prospects and maintain a position.

At the period’s close, we were most overweighted in the consumer discretionary sector, where we hold several stocks that should benefit from strength in the U.S. housing market. We reduced our exposure to information technology and are now underweighted relative to the benchmark. We are also underweighted in the traditionally defensive consumer staples sector, where we feel valuations are fairly high.

We believe the U.S. economy is poised for continued moderate growth, which is in line with consensus expectations. Real gross domestic product and Institute for Supply Management manufacturing data both point to a fairly healthy outlook. Housing remains a bright spot and the employment picture is gradually improving. Last year’s fiscal drag should abate on a year-over-year basis, and the Federal Reserve is likely to remain accommodative through 2014, continuing its zero interest rate policy and only modestly tapering its bond buying.

The biggest domestic risks are disruption related to the Affordable Care Act, rising interest rates, and only average valuation support after the past year’s strong equity market. Despite solid returns for the portfolio, we are still finding attractive opportunities in several areas and have been adding to those that have been weak or lagged on a relative basis.

Delaware Investments Fund Advisers

Portfolio Managers:
Christopher J. Bonavico, CFA,
Vice President, Senior Portfolio Manager,
and Equity Analyst

Christopher M. Ericksen, CFA,
Vice President, Portfolio Manager,
and Equity Analyst

Daniel J. Prislin, CFA,
Vice President, Senior Portfolio Manager,
and Equity Analyst

Jeffrey S. Van Harte, CFA,
Senior Vice President
and CIO–Focus Growth Equity

Our philosophy focuses on owning what we believe to be strong companies with strong long-term growth prospects, solid business models, and competitive positions that we believe can expand market share and deliver shareholder value in a variety of

market environments. Consistent with our philosophy, stock selection was the main contributor to returns during the period.

Commercial travel website Priceline.com was a top performer. The company continues to post attractive financial results based on growth both domestically and in its European hotel booking business. We feel that market share gain is still possible in Europe and that expansion into areas such as Asia will continue to provide growth opportunities. The North American online travel industry has become increasingly competitive and domestic returns may be difficult to sustain. However, opportunities still exist overseas for companies like Priceline.com that have established a lead in markets experiencing significant secular growth.

Data solutions company Teradata was one of the largest detractors during the period. The stock declined as the firm reported a mixed outlook and financial results based on weaker-than-expected sales outside the United States and Europe. Although investor concern is rising regarding increasing pressure from competitors, we believe the database warehousing market is growing and can accommodate them. These concerns should be relatively transitory as Teradata continues to sign up new clients and expand its existing business.

Despite positive absolute returns in the equity market during the past few years, we believe the many short-term swings in sentiment demonstrate that more than just basic factors are affecting stock prices. The recent volatility suggests to us that investors appear to be struggling with predicting the pace of global economic recovery and are assessing factors such as central bank actions and fiscal policy debates that threaten economic fundamentals.

Although fundamentals in some regions may be trending upward (from a very low base during the 2008–2009 financial crisis), we don’t believe we are entering a typical postrecessionary boom cycle. Rather, the lingering effects of the credit crisis could lead to moderate growth at best. In such a tenuous environment, the quality of a company’s business model, competitive position, and management may prove to be of utmost importance.

William Blair & Company, L.L.C.

Portfolio Managers: James Golan, CFA, Partner, Portfolio Manager

David Ricci, CFA, Partner, Portfolio Manager

Despite fiscal drag and reduced monetary stimulus, stocks advanced during the period, helped by solid economic and corporate performance. Domestic equities were boosted by an improving housing market, better employment data, and strong corporate profitability. An expanded market valuation multiple driven by lower perceived global systematic risk compared

with the elevated risk levels that equity prices had been discounting following the 2008 financial crisis also helped.

Strong stock selection drove the portfolio’s outperformance. The largest contributor to relative results was Cognizant Technology Solutions. This leading provider of information technology consulting services benefited from a growing new business pipeline and an expanded range of services.

Other standouts included Google (technology) and Green Mountain Coffee Roasters (consumer staples). Shares of Google advanced as the internet search leader reported strong growth. Green Mountain rose after the company announced an agreement to bring Coca-Cola’s global brand portfolio to its forthcoming Keurig Cold beverage system. Stock selection within health care, including positions in Gilead Sciences and Allergan, also added to results.

The biggest detractor during the period was Citrix Systems. Investors were disappointed by company results attributable to sluggish corporate IT infrastructure spending and sales issues. Other notable detractors included Citigroup (financials) and Stericycle (industrials).

The market is likely to continue to be data dependent, seeking signs that the economic recovery is sustainable. The pace of the Federal Reserve’s tapering and its management of expectations will be critical to limiting volatility. As corporate profit margins remain high, further earnings growth will largely be a function of revenue growth. Although a boost from accelerating GDP growth would be helpful, we look for companies with company-specific revenue and margin drivers. Our bottom-up perspective allows us to focus on identifying and constructing portfolios of high-quality businesses that we believe can sustain outsized earnings growth over the long run.


Vanguard U.S. Growth Fund Investment Advisors

	Fund Assets Managed
Investment Advisor	%	$ Million	Investment Strategy
Wellington Management	36	2,087	Employs proprietary fundamental research and a
Company, LLP			rigorous valuation discipline in an effort to invest in
			high-quality, large-cap, sustainable-growth companies.
			The investment approach is based on the belief that
			stock prices often overreact to short-term trends, and
			that bottom-up, intensive research focused on
			longer-term fundamentals can be used to identify
			stocks that will outperform the market over time.
Delaware Investments Fund	36	2,067	Uses a bottom-up approach, seeking companies that
Advisers			have large end-market potential, dominant business
			models, and strong free cash flow generation that is
			attractively priced compared with the intrinsic value of
			the securities.
William Blair & Company, L.L.C.	12	726	Uses a fundamental investment approach in pursuit of
			superior long-term investment results from
			growth-oriented companies with leadership positions
			and strong market presence.
Jennison Associates LLC	7	381	Uses a research-driven, fundamental investment
			approach that relies on in-depth company knowledge
			gleaned through meetings with management,
			customers, and suppliers.
Baillie Gifford Overseas Ltd.	7	379	Uses a fundamental approach to identify quality growth
			companies. The firm considers the sustainability of
			earnings growth to be a critical factor in evaluating a
			company’s prospects. The firm looks for companies
			with attractive industry backgrounds, strong
			competitive positions within those industries,
			high-quality earnings, and a favorable attitude toward
			shareholders.
Cash Investments	2	180	These short-term reserves are invested by Vanguard in
			equity index products to simulate investment in stocks.
			Each advisor may also maintain a modest cash
			position.

U.S. Growth Fund

Fund Profile
As of February 28, 2014


Share-Class Characteristics
	Investor		Admiral
	Shares		Shares
Ticker Symbol	VWUSX		VWUAX
Expense Ratio¹	0.45%		0.31%
30-Day SEC Yield	0.47%		0.61%


Portfolio Characteristics
			DJ
			U.S.
		Russell	Total
		1000	Market
		Growth	FA
	Fund	Index	Index
Number of Stocks	175	624	3,622
Median Market Cap	$37.6B	$58.6B	$42.4B
Price/Earnings Ratio	28.3x	22.2x	19.8x
Price/Book Ratio	4.5x	5.0x	2.6x
Return on Equity	21.3%	22.9%	16.8%
Earnings Growth
Rate	21.0%	15.5%	12.0%
Dividend Yield	0.9%	1.6%	1.9%
Foreign Holdings	3.7%	0.0%	0.0%
Turnover Rate
(Annualized)	29%	—	—
Short-Term Reserves	1.0%	—	—


Volatility Measures
			DJ
		U.S. Total
	Russell 1000		Market
	Growth Index	FA Index
R-Squared	0.97		0.93
Beta	1.15		1.10
These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.


Ten Largest Holdings (% of total net assets)
Google Inc.	Internet Software &
	Services		4.7%
MasterCard Inc.	Data Processing &
	Outsourced Services		3.3
priceline.com Inc.	Internet Retail		2.8
Visa Inc.	Data Processing &
	Outsourced Services		2.6
Allergan Inc.	Pharmaceuticals		2.4
EOG Resources Inc.	Oil & Gas Exploration
	& Production		1.9
QUALCOMM Inc.	Communications
	Equipment		1.9
Gilead Sciences Inc.	Biotechnology		1.9
Microsoft Corp.	Systems Software		1.7
Celgene Corp.	Biotechnology		1.7
Top Ten			24.9%
The holdings listed exclude any temporary cash investments and
equity index products.

Investment Focus

1 The expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the annualized expense ratios were 0.44% for Investor Shares and 0.30% for Admiral Shares.

U.S. Growth Fund

Sector Diversification (% of equity exposure)


		Russell	DJ
		1000	U.S. Total
		Growth	Market
	Fund	Index	FA Index
Consumer
Discretionary	23.2%	19.6%	13.2%
Consumer Staples	6.6	11.4	8.2
Energy	4.9	4.6	9.3
Financials	8.7	5.5	17.2
Health Care	15.6	12.8	13.3
Industrials	7.2	12.2	11.5
Information
Technology	30.8	27.1	18.3
Materials	2.5	4.5	3.9
Other	0.1	0.0	0.0
Telecommunication
Services	0.4	2.2	2.1
Utilities	0.0	0.1	3.0

U.S. Growth Fund

Performance Summary

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

Fiscal-Year Total Returns (%): August 31, 2003, Through February 28, 2014

Average Annual Total Returns: Periods Ended December 31, 2013
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.


	Inception	One	Five	Ten
	Date	Year	Years	Years
Investor Shares	1/6/1959	35.49%	19.12%	7.12%
Admiral Shares	8/13/2001	35.71	19.30	7.32

See Financial Highlights for dividend and capital gains information.

U.S. Growth Fund

Financial Statements (unaudited)

Statement of Net Assets
As of February 28, 2014

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


			Market
			Value
		Shares	($000)
Common Stocks (96.0%)¹
Consumer Discretionary (22.4%)
*	priceline.com Inc.	121,514	163,903
	Home Depot Inc.	1,076,985	88,345
*	Liberty Interactive Corp.
	Class A	2,968,816	86,689
	L Brands Inc.	1,105,525	62,274
	Harley-Davidson Inc.	863,986	57,075
	NIKE Inc. Class B	717,900	56,212
	Twenty-First Century
	Fox Inc. Class A	1,245,825	41,785
*	AutoZone Inc.	74,705	40,224
	Lennar Corp. Class A	888,360	38,981
	Walt Disney Co.	481,580	38,917
	DR Horton Inc.	1,558,760	38,283
	Lowe’s Cos. Inc.	700,825	35,062
	Wynn Resorts Ltd.	142,315	34,510
*	Dollar General Corp.	545,040	32,648
	Dunkin’ Brands Group Inc.	610,395	31,539
*	Sally Beauty Holdings Inc.	1,089,645	31,273
	Starwood Hotels &
	Resorts Worldwide Inc.	376,400	31,038
*	TripAdvisor Inc.	292,567	29,327
*	Michael Kors Holdings Ltd.	298,532	29,265
	Comcast Corp. Class A	557,040	28,793
*	Amazon.com Inc.	78,322	28,360
*	O’Reilly Automotive Inc.	166,901	25,177
	Ross Stores Inc.	311,015	22,642
	Wyndham Worldwide
	Corp.	307,800	22,432
*	Lululemon Athletica Inc.	420,725	21,167
	Harman International
	Industries Inc.	188,050	19,695
*	DIRECTV	248,390	19,275
	Yum! Brands Inc.	251,300	18,616
	PVH Corp.	132,370	16,736
*	Sirius XM Holdings Inc.	4,170,465	15,055
	Ralph Lauren Corp.
	Class A	92,535	14,906


			Market
			Value
		Shares	($000)
	Starbucks Corp.	186,171	13,211
*	Netflix Inc.	29,103	12,969
	TJX Cos. Inc.	182,818	11,236
*	Panera Bread Co. Class A	48,040	8,711
	BorgWarner Inc.	127,000	7,804
	Inditex SA ADR	245,392	7,028
	Luxottica Group SPA ADR	85,880	4,774
	ASOS plc ADR	39,991	4,716
	CarMax Inc.	91,169	4,415
	Tesla Motors Inc.	17,611	4,311
	Burberry Group plc	149,294	3,847
	ASOS plc	13,766	1,602
			1,304,828
Consumer Staples (6.3%)
	Walgreen Co.	1,423,662	96,738
	Green Mountain Coffee
	Roasters Inc.	455,901	50,049
	CVS Caremark Corp.	408,690	29,891
*	Monster Beverage Corp.	351,286	25,995
	Mondelez International Inc.
	Class A	736,550	25,065
	Mead Johnson Nutrition
	Co.	305,020	24,874
	Anheuser-Busch InBev NV
	ADR	236,800	24,772
	Colgate-Palmolive Co.	347,662	21,843
	Diageo plc ADR	129,975	16,339
	Brown-Forman Corp.
	Class B	172,455	14,452
	Whole Foods Market Inc.	253,241	13,688
	Beam Inc.	106,390	8,826
	Costco Wholesale Corp.	62,960	7,354
	Kraft Foods Group Inc.	121,820	6,733
			366,619
Energy (4.6%)
	EOG Resources Inc.	597,059	113,095
	Kinder Morgan Inc.	2,127,355	67,756
	Schlumberger Ltd.	240,107	22,330
	Anadarko Petroleum Corp.	191,890	16,150


U.S. Growth Fund



			Market
			Value
		Shares	($000)
	Noble Energy Inc.	205,700	14,144
*	Cobalt International
	Energy Inc.	662,380	12,771
	Apache Corp.	136,754	10,843
	Exxon Mobil Corp.	110,970	10,683
*	Kinder Morgan Inc.
	Warrants, Exp. Date
	5/25/17	563,272	1,042
			268,814
Financials (6.6%)
	IntercontinentalExchange
	Group Inc.	354,445	74,022
	Progressive Corp.	2,634,249	64,513
	CME Group Inc.	553,275	40,843
	BlackRock Inc.	100,730	30,707
	American Express Co.	254,095	23,194
	JPMorgan Chase & Co.	368,800	20,955
	First Republic Bank	381,993	19,852
	Citigroup Inc.	333,300	16,208
	American Tower
	Corporation	180,505	14,706
	US Bancorp	340,365	14,003
	Berkshire Hathaway Inc.
	Class B	106,874	12,374
*	Affiliated Managers
	Group Inc.	62,300	11,715
	Fairfax Financial Holdings
	Ltd.	24,720	10,268
	M&T Bank Corp.	83,528	9,738
	Goldman Sachs Group Inc.	46,511	7,742
	Morgan Stanley	240,932	7,421
	Markel Corp.	12,100	6,994
			385,255
Health Care (15.0%)
	Allergan Inc.	1,092,600	138,760
*	Gilead Sciences Inc.	1,331,927	110,270
*	Celgene Corp.	626,149	100,653
	Novo Nordisk A/S ADR	1,487,733	70,712
	Perrigo Co. plc	386,850	63,614
*	Biogen Idec Inc.	172,240	58,679
	Bristol-Myers Squibb Co.	1,015,917	54,626
	Covidien plc	460,575	33,138
*	IDEXX Laboratories Inc.	230,019	28,959
	Merck & Co. Inc.	503,170	28,676
*	Regeneron
	Pharmaceuticals Inc.	70,805	23,543
*	Actavis plc	93,000	20,536
	Johnson & Johnson	221,960	20,447
*	Intuitive Surgical Inc.	45,415	20,202
*	Vertex Pharmaceuticals
	Inc.	226,400	18,307
	Pfizer Inc.	516,210	16,576
	WellPoint Inc.	120,410	10,908


			Market
			Value
		Shares	($000)
	Alexion Pharmaceuticals
	Inc.	50,654	8,956
	BioMarin Pharmaceutical
	Inc.	98,509	7,979
	Shire plc ADR	37,859	6,252
	Express Scripts Holding
	Co.	78,810	5,935
	McKesson Corp.	28,640	5,071
	Intercept Pharmaceuticals
	Inc.	12,217	5,015
	Illumina Inc.	27,819	4,771
	Seattle Genetics Inc.	82,130	4,319
	Waters Corp.	35,404	3,944
	Genomic Health Inc.	106,620	2,816
			873,664
Industrials (6.9%)
	Equifax Inc.	606,840	42,515
	Precision Castparts Corp.	141,575	36,509
	Union Pacific Corp.	173,800	31,350
	Nielsen Holdings NV	556,100	26,326
	AMETEK Inc.	491,800	26,183
	Eaton Corp. plc	323,985	24,205
*	Hertz Global Holdings Inc.	849,690	23,800
	Safran SA ADR	1,363,260	23,707
*	IHS Inc. Class A	194,641	23,334
	TransDigm Group Inc.	100,974	17,988
	JB Hunt Transport
	Services Inc.	242,695	17,442
	Kansas City Southern	177,555	16,676
	Boeing Co.	126,400	16,295
	Watsco Inc.	150,600	14,816
	United Parcel Service Inc.
	Class B	153,405	14,692
*	Stericycle Inc.	123,600	14,090
	Danaher Corp.	175,928	13,457
	Canadian Pacific Railway
	Ltd.	51,809	8,134
	WW Grainger Inc.	16,750	4,272
	Rockwell Automation Inc.	31,189	3,831
			399,622
Information Technology (29.8%)
*	Google Inc. Class A	226,571	275,431
	MasterCard Inc. Class A	2,485,727	193,191
	Visa Inc. Class A	674,415	152,377
	QUALCOMM Inc.	1,474,535	111,018
	Microsoft Corp.	2,648,600	101,468
*	Adobe Systems Inc.	1,302,425	89,359
	Intuit Inc.	1,142,960	89,322
*	eBay Inc.	1,322,784	77,740
*	Facebook Inc. Class A	1,020,026	69,831
*	Cognizant Technology
	Solutions Corp. Class A	643,685	66,982
	Apple Inc.	101,518	53,423
*	VeriSign Inc.	782,719	43,136


U.S. Growth Fund



			Market
			Value
		Shares	($000)
*	Salesforce.com Inc.	639,675	39,896
*	Alliance Data Systems
	Corp.	133,575	38,084
*	LinkedIn Corp. Class A	174,812	35,669
*	Teradata Corp.	768,250	35,278
	Oracle Corp.	827,560	32,366
*	Red Hat Inc.	446,734	26,353
*	Yelp Inc. Class A	227,925	21,521
*	Equinix Inc.	105,425	20,026
*	Splunk Inc.	206,703	19,172
*	ServiceNow Inc.	260,105	17,703
*	VeriFone Systems Inc.	608,808	17,625
*	Juniper Networks Inc.	585,220	15,649
*	Gartner Inc.	211,900	14,740
*	Citrix Systems Inc.	221,800	13,319
*	Akamai Technologies Inc.	200,600	12,263
	Texas Instruments Inc.	221,600	9,963
	F5 Networks Inc.	56,939	6,396
	VMware Inc. Class A	64,853	6,229
	Workday Inc. Class A	51,550	5,666
	Linear Technology Corp.	117,347	5,496
	Xilinx Inc.	94,530	4,934
	Analog Devices Inc.	92,410	4,696
	Altera Corp.	107,975	3,921
	FleetCor Technologies Inc.	28,544	3,709
	Twitter Inc.	38,089	2,091
			1,736,043
Materials (2.4%)
	Monsanto Co.	578,731	63,672
	Syngenta AG ADR	472,575	34,318
	Sherwin-Williams Co.	118,125	23,682
	Praxair Inc.	111,440	14,528
	Martin Marietta Materials
	Inc.	32,610	3,978
			140,178
Other (0.0%)
2	Vanguard Growth ETF	3,100	295

Telecommunication Services (2.0%)
*	Crown Castle International
	Corp.	1,248,936	94,794
*	SBA Communications
	Corp. Class A	205,362	19,545
			114,339
Total Common Stocks
(Cost $3,777,560)			5,589,657


		Market
		Value
	Shares	($000)
Preferred Stocks (0.1%)
^*,3Cloudera Inc. PFD.
(Cost $4,369)	300,088	4,369
Temporary Cash Investments (4.1%)¹
Money Market Fund (3.9%)
4 Vanguard Market
Liquidity Fund,
0.130%	227,134,000	227,134

	Face
	Amount
	($000)
Repurchase Agreement (0.0%)
Bank of America Securities,
LLC 0.050%, 3/3/14
(Dated 2/28/14,
Repurchase Value
$400,000, collateralized
by Federal Home Loan
Mortgage Corp. 0.000%,
1/15/23, with a value of
$409,000)	400	400

U.S. Government and Agency Obligations (0.2%)


^5,6	Fannie Mae Discount Notes,
	0.079%–0.080%, 5/14/14	3,000	2,999
^6,7	Federal Home Loan Bank
	Discount Notes,
	0.056%, 4/9/14	4,400	4,399
^5,6	Freddie Mac Discount Notes,
	0.060%, 3/17/14	1,300	1,300
5	Freddie Mac Discount Notes,
	0.080%, 3/18/14	1,000	1,000
			9,698
Total Temporary Cash Investments
(Cost $237,232)			237,232
Total Investments (100.2%)
(Cost $4,019,161)			5,831,258
Other Assets and Liabilities (-0.2%)
Other Assets			22,541
Liabilities			(33,698)
			(11,157)
Net Assets (100%)			5,820,101

U.S. Growth Fund


At February 28, 2014, net assets consisted of:
	Amount
	($000)
Paid-in Capital	3,881,896
Overdistributed Net Investment Income	(135)
Accumulated Net Realized Gains	120,733
Unrealized Appreciation (Depreciation)
Investment Securities	1,812,097
Futures Contracts	5,510
Net Assets	5,820,101


Investor Shares—Net Assets
Applicable to 145,430,044 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	4,328,729
Net Asset Value Per Share—
Investor Shares	$29.77


Admiral Shares—Net Assets
Applicable to 19,357,295 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	1,491,372
Net Asset Value Per Share—
Admiral Shares	$77.04

See Note A in Notes to Financial Statements.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.1% and 1.0%, respectively, of net assets.
2 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.
3 Restricted security represents 0.1% of net assets.
4 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
5 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
6 Securities with a value of $8,598,000 have been segregated as initial margin for open futures contracts.
7 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
ADR—American Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.


U.S. Growth Fund


Statement of Operations

	Six Months Ended
	February 28, 2014
	($000)
Investment Income
Income
Dividends^1,2	24,894
Interest²	92
Securities Lending	5
Total Income	24,991
Expenses
Investment Advisory Fees—Note B
Basic Fee	4,027
Performance Adjustment	(377)
The Vanguard Group—Note C
Management and Administrative—Investor Shares	4,473
Management and Administrative—Admiral Shares	845
Marketing and Distribution—Investor Shares	243
Marketing and Distribution—Admiral Shares	86
Custodian Fees	25
Shareholders’ Reports—Investor Shares	24
Shareholders’ Reports—Admiral Shares	3
Trustees’ Fees and Expenses	5
Total Expenses	9,354
Expenses Paid Indirectly	(30)
Net Expenses	9,324
Net Investment Income	15,667
Realized Net Gain (Loss)
Investment Securities Sold²	249,425
Futures Contracts	8,788
Realized Net Gain (Loss)	258,213
Change in Unrealized Appreciation (Depreciation)
Investment Securities	614,082
Futures Contracts	8,041
Change in Unrealized Appreciation (Depreciation)	622,123
Net Increase (Decrease) in Net Assets Resulting from Operations	896,003

1 Dividends are net of foreign withholding taxes of $79,000.

2 Dividend income, interest income, and realized net gain (loss) from affiliated companies of the fund were $2,000, $87,000, and $0, respectively.

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


U.S. Growth Fund


Statement of Changes in Net Assets

	Six Months Ended	Year Ended
	February 28,	August 31,
	2014	2013
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	15,667	25,716
Realized Net Gain (Loss)	258,213	354,950
Change in Unrealized Appreciation (Depreciation)	622,123	341,747
Net Increase (Decrease) in Net Assets Resulting from Operations	896,003	722,413
Distributions
Net Investment Income
Investor Shares	(13,264)	(15,893)
Admiral Shares	(7,331)	(6,323)
Realized Capital Gain
Investor Shares	—	—
Admiral Shares	—	—
Total Distributions	(20,595)	(22,216)
Capital Share Transactions
Investor Shares	558,175	(371,753)
Admiral Shares	108,944	104,599
Net Increase (Decrease) from Capital Share Transactions	667,119	(267,154)
Total Increase (Decrease)	1,542,527	433,043
Net Assets
Beginning of Period	4,277,574	3,844,531
End of Period¹	5,820,101	4,277,574

1 Net Assets—End of Period includes undistributed (overdistributed) net investment income of ($135,000) and $4,793,000.

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


U.S. Growth Fund


Financial Highlights


Investor Shares
	Six Months
	Ended
For a Share Outstanding	February 28,			Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$24.67	$20.79	$18.12	$14.75	$14.83	$17.89
Investment Operations
Net Investment Income	. 088	.134	. 068	.108¹	.105	.105
Net Realized and Unrealized Gain (Loss)
on Investments	5.123	3.861	2.679	3.370	(.099)	(3.049)
Total from Investment Operations	5.211	3.995	2.747	3.478	.006	(2.944)
Distributions
Dividends from Net Investment Income	(.111)	(.115)	(. 077)	(.108)	(. 086)	(.116)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(.111)	(.115)	(. 077)	(.108)	(. 086)	(.116)
Net Asset Value, End of Period	$29.77	$24.67	$20.79	$18.12	$14.75	$14.83

Total Return²	21.16%	19.31%	15.22%	23.58%	-0.02%	-16.29%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$4,329	$3,137	$2,975	$2,893	$2,796	$2,956
Ratio of Total Expenses to
Average Net Assets³	0.44%	0.45%	0.45%	0.44%	0.45%	0.49%
Ratio of Net Investment Income to
Average Net Assets	0.63%	0.59%	0.35%	0.61%¹	0.66%	0.79%
Portfolio Turnover Rate	29%	38%	43%	89%	74%	101%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

1 Net investment income per share and the ratio of net investment income to average net assets include $.016 and 0.09%, respectively, resulting from a special dividend from VeriSign Inc. in December 2010.

2 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

3 Includes performance-based investment advisory fee increases (decreases) of (0.02%), (0.01%), (0.01%), (0.01%), (0.03%), and (0.03%).

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


U.S. Growth Fund


Financial Highlights


Admiral Shares
	Six Months
	Ended
For a Share Outstanding	February 28,			Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$63.91	$53.85	$46.94	$38.20	$38.41	$46.37
Investment Operations
Net Investment Income	.282	.440	.258	.345¹	.338	.335
Net Realized and Unrealized Gain (Loss)
on Investments	13.238	10.002	6.924	8.734	(.256)	(7.919)
Total from Investment Operations	13.520	10.442	7.182	9.079	.082	(7.584)
Distributions
Dividends from Net Investment Income	(. 390)	(. 382)	(. 272)	(. 339)	(. 292)	(. 376)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(. 390)	(. 382)	(. 272)	(. 339)	(. 292)	(. 376)
Net Asset Value, End of Period	$77.04	$63.91	$53.85	$46.94	$38.20	$38.41

Total Return	21.20%	19.51%	15.38%	23.77%	0.13%	-16.15%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,491	$1,141	$869	$678	$737	$838
Ratio of Total Expenses to
Average Net Assets²	0.30%	0.31%	0.31%	0.30%	0.29%	0.30%
Ratio of Net Investment Income to
Average Net Assets	0.77%	0.73%	0.49%	0.75%¹	0.82%	0.98%
Portfolio Turnover Rate	29%	38%	43%	89%	74%	101%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

1 Net investment income per share and the ratio of net investment income to average net assets include $.041 and 0.09%, respectively, resulting from a special dividend from VeriSign Inc. in December 2010.

2 Includes performance-based investment advisory fee increases (decreases) of (0.02%), (0.01%), (0.01%), (0.01%), (0.03%), and (0.03%).

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

U.S. Growth Fund

Notes to Financial Statements

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

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

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

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

3. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements

U.S. Growth Fund

with its counterparties. The master repurchase agreements provide that, in the event of a counter-party’s default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2010–2013), and for the period ended February 28, 2014, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

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

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

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

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

B. Wellington Management Company, llp, Delaware Investments Fund Advisers, William Blair & Company, L.L.C., and beginning in February 2014, Jennison Associates LLC and Baillie Gifford Overseas Ltd. each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Wellington Management Company, llp, and Delaware Investments Fund Advisers are subject to quarterly adjustments based on performance for the preceding three years relative to the Russell 1000 Growth

U.S. Growth Fund

Index. The basic fee of William Blair & Company, L.L.C., is subject to quarterly adjustments based on performance for the preceding five years relative to the Russell 1000 Growth Index. In accordance with the advisory contracts entered into with Jennison Associates LLC and Baillie Gifford Overseas Ltd., beginning March 1, 2015, the investment advisory fees will be subject to quarterly adjustments based on performance since February 28, 2014, relative to the Russell 1000 Growth Index and the S&P 500 Index, respectively.

The Vanguard Group manages the cash reserves of the fund on an at-cost basis.

For the six months ended February 28, 2014, the aggregate investment advisory fee represented an effective annual basic rate of 0.17% of the fund’s average net assets, before a decrease of $377,000 (0.02%) based on performance.

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2014, the fund had contributed capital of $610,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.24% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

D. The fund has asked its investment advisors to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund’s management and administrative expenses. For the six months ended February 28, 2014, these arrangements reduced the fund’s expenses by $30,000 (an annual rate of 0.00% of average net assets).

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

The following table summarizes the market value of the fund’s investments as of February 28, 2014, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
Common Stocks	5,584,209	5,448	—
Preferred Stocks	—	—	4,369
Temporary Cash Investments	227,134	10,098	—
Futures Contracts—Assets¹	360	—	—
Futures Contracts—Liabilities¹	(5)	—	—
Total	5,811,698	15,546	4,369
1 Represents variation margin on the last day of the reporting period.

U.S. Growth Fund

F. At February 28, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


				($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
E-mini S&P 500 Index	March 2014	954	88,608	1,594
S&P 500 Index	March 2014	167	77,555	3,306
E-mini S&P Mid-Cap 400 Index	March 2014	94	12,917	610
				5,510

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

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

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2013, the fund had available capital losses totaling $123,193,000 to offset future net capital gains of $31,366,000 through August 31, 2017, and $91,827,000 through August 31, 2018. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2014; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

The fund acquired additional realized losses of $16,083,000 to offset future net capital gains in connection with the acquisition of Vanguard Growth Equity Fund in February 2014 (see Note J); these losses have been reclassified from paid-in capital to accumulated net realized losses.

At February 28, 2014, the cost of investment securities for tax purposes was $4,019,161,000. Net unrealized appreciation of investment securities for tax purposes was $1,812,097,000, consisting of unrealized gains of $1,853,288,000 on securities that had risen in value since their purchase and $41,191,000 in unrealized losses on securities that had fallen in value since their purchase.

H. During the six months ended February 28, 2014, the fund purchased $667,535,000 of investment securities and sold $825,229,000 of investment securities, other than temporary cash investments.

U.S. Growth Fund

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


	Six Months Ended			Year Ended
	February 28, 2014		August 31, 2013
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	99,205	3,548	169,396	7,593
Issued in Connection with Acquisition of
Vanguard Growth Equity Fund	799,108	27,203	—	—
Issued in Lieu of Cash Distributions	13,072	475	15,668	744
Redeemed	(353,210)	(12,930)	(556,817)	(24,331)
Net Increase (Decrease)—Investor Shares	558,175	18,296	(371,753)	(15,994)
Admiral Shares
Issued	200,317	2,792	282,037	4,731
Issued in Lieu of Cash Distributions	6,850	96	5,877	108
Redeemed	(98,223)	(1,379)	(183,315)	(3,130)
Net Increase (Decrease)—Admiral Shares	108,944	1,509	104,599	1,709

J. On February 21, 2014, the fund acquired all the net assets of Vanguard Growth Equity Fund pursuant to a plan of reorganization approved by the funds’ board of trustees on September 26, 2013. The purpose of the transaction was to combine two funds with comparable investment objectives. The acquisition was accomplished by a tax-free exchange of 27,203,000 of the U.S. Growth Fund’s capital shares for the 48,088,000 shares of Growth Equity Fund outstanding on February 21, 2014. Investor shares of Growth Equity Fund were exchanged for Investor shares of U.S. Growth Fund. Growth Equity Fund’s net assets of $799,108,000, including $212,286,000 of unrealized appreciation, were combined with U.S. Growth Fund’s net assets of $4,939,402,000, resulting in combined net assets of $5,738,505,000 on February 21, 2014.

Assuming that the acquisition had been completed on September 1, 2013, the beginning of the fund’s reporting period, the fund’s pro forma results of operations for the six months ended February 28, 2014, would be:


	($000)
Net Investment Income	17,934
Realized Net Gain (Loss)	310,056
Change in Unrealized Appreciation (Depreciation)	689,154
Net Increase (Decrease) in Net Assets Resulting from Operations	1,017,144

U.S. Growth Fund

Because the combined funds have been managed as a single integrated fund since the acquisition was completed, it is not practical to separate the results of operations of Vanguard Growth Equity Fund that have been included in the fund’s statement of operations since February 21, 2014.

K. Management has determined that no material events or transactions occurred subsequent to February 28, 2014, that would require recognition or disclosure in these financial statements.

Special 2014 tax information (unaudited) for Vanguard Growth Equity Fund

This information for the fiscal period ended February 21, 2014, is included pursuant to provisions

of the Internal Revenue Code.

The fund distributed $3,110,000 of qualified dividend income to shareholders during the fiscal period

ended February 21, 2014.

For corporate shareholders, 100% of investment income (dividend income plus short-term gains,

if any) qualifies for the dividends-received deduction.

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.


Six Months Ended February 28, 2014
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
U.S. Growth Fund	8/31/2013	2/28/2014	Period
Based on Actual Fund Return
Investor Shares	$1,000.00	$1,211.59	$2.41
Admiral Shares	1,000.00	1,212.04	1.65
Based on Hypothetical 5% Yearly Return
Investor Shares	$1,000.00	$1,022.61	$2.21
Admiral Shares	1,000.00	1,023.31	1.51

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.44% for Investor Shares and 0.30% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard U.S. Growth Fund has renewed the fund’s investment advisory agreements with Delaware Investments Fund Advisers (Delaware), William Blair & Company, L.L.C. (William Blair), and Wellington Management Company, LLP (Wellington Management). In addition, the board approved the addition of Baillie Gifford Overseas Ltd. (Baillie Gifford) and Jennison Associates LLC (Jennison) to the fund’s advisory team in conjunction with the reorganization of the Growth Equity Fund into the U.S. Growth Fund. Baillie Gifford and Jennison previously managed the Growth Equity Fund. The board determined that the renewal of the fund’s advisory arrangements and the addition of the new advisors were in the best interests of the fund and its shareholders.

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

Nature, extent, and quality of services

The board considered the quality of the fund’s investment management services over both the short and long term, and took into account the organizational depth and stability of each advisor. The board noted the following:

Baillie Gifford. Baillie Gifford is a unit of Baillie Gifford & Co., which was founded in 1908 and is among the largest independently owned investment management firms in the United Kingdom. Baillie Gifford began managing a portion of the fund in February 2014.

Delaware. Delaware, an indirect subsidiary of Australia-based Macquarie Group, is a Philadelphia-based investment management firm. Delaware invests primarily in common stocks of large-capitalization, growth-oriented companies that it believes have long-term capital appreciation potential and are expected to grow faster than the U.S. economy. Delaware uses a bottom-up approach, seeking companies that have large-end market potential, dominant business models, and strong free cash flow generation that is attractively priced compared to the intrinsic value of the securities. Delaware has managed a portion of the fund since 2010.

Jennison. Jennison, founded in 1969, is an indirect, wholly owned subsidiary of Prudential Financial Inc. Jennison executes a research-driven investment approach that relies on in-depth company knowledge gleaned through meetings with management, customers, and suppliers. Jennison seeks to invest in stocks of large-capitalization companies with above-average growth in revenues, earnings, and cash flows that are trading at attractive valuations. Jennison began managing a portion of the fund in February 2014.

Wellington Management. Wellington Management, which was founded in 1928, is among the nation’s oldest and most respected institutional managers. The firm employs a traditional, bottom-up fundamental research approach to identify securities that possess sustainable growth at reasonable valuations. Wellington Management invests in companies that have demonstrated above-average growth in the past, followed by a thorough review of each company’s business model and an assessment of its valuation. Wellington Management has managed a portion of the fund since 2010.

William Blair. Founded in 1935, William Blair is an independently owned full-service investment firm. The firm uses an investment process that relies on thorough, in-depth fundamental analysis. Based on this process, William Blair invests in companies that it believes are of high quality and that have sustainable, above-average growth. In selecting stocks, William Blair considers each company’s

leadership position within the market it serves, the quality of products or services it provides, its return on equity, its accounting policies, and the quality of the management team. William Blair has advised a portion of the fund since 2004.

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

Investment performance

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

Cost

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

The board did not consider the profitability of the fund’s advisors in determining whether to approve the advisory fees, because the advisors are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the advisory fee schedules. The breakpoints reduce the effective rate of the fees as the fund’s assets managed by each advisor increase.

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

Glossary

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The People Who Govern Your Fund

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

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 179 Vanguard funds.

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


InterestedTrustee¹	and Delphi Automotive LLP (automotive components);
	Senior Advisor at New Mountain Capital.
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the	Amy Gutmann
Board. Principal Occupation(s) During the Past Five	Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group,	Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served	the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director	Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive	Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of	Annenberg School for Communication, with secondary
each of the investment companies served by The	faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard	School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The	School of Education, University of Pennsylvania;
Vanguard Group (1995–2008).	Trustee of the National Constitution Center; Chair
	of the Presidential Commission for the Study of
	Bioethical Issues.
IndependentTrustees

Emerson U. Fullwood	JoAnn Heffernan Heisen
Born 1948. Trustee Since January 2008. Principal	Born 1950. Trustee Since July 1998. Principal
Occupation(s) During the Past Five Years: Executive	Occupation(s) During the Past Five Years: Corporate
Chief Staff and Marketing Officer for North America	Vice President and Chief Global Diversity Officer
and Corporate Vice President (retired 2008) of Xerox	(retired 2008) and Member of the Executive
Corporation (document management products and	Committee (1997–2008) of Johnson & Johnson
services); Executive in Residence and 2010	(pharmaceuticals/medical devices/consumer
Distinguished Minett Professor at the Rochester	products); Director of Skytop Lodge Corporation
Institute of Technology; Director of SPX Corporation	(hotels), the University Medical Center at Princeton,
(multi-industry manufacturing), the United Way of	the Robert Wood Johnson Foundation, and the Center
Rochester, Amerigroup Corporation (managed health	for Talent Innovation; Member of the Advisory Board
care), the University of Rochester Medical Center,	of the Maxwell School of Citizenship and Public Affairs
Monroe Community College Foundation, and North	at Syracuse University.
Carolina A&T University.
	F. Joseph Loughrey
Rajiv L. Gupta	Born 1949. Trustee Since October 2009. Principal
Born 1945. Trustee Since December 2001.²	Occupation(s) During the Past Five Years: President
Principal Occupation(s) During the Past Five Years:	and Chief Operating Officer (retired 2009) of Cummins
Chairman and Chief Executive Officer (retired 2009)	Inc. (industrial machinery); Chairman of the Board
and President (2006–2008) of Rohm and Haas Co.	of Hillenbrand, Inc. (specialized consumer services),
(chemicals); Director of Tyco International, Ltd.	and of Oxfam America; Director of SKF AB (industrial
(diversified manufacturing and services), Hewlett-	machinery), Hyster-Yale Materials Handling, Inc.
Packard Co. (electronic computer manufacturing),	(forklift trucks), the Lumina Foundation for Education,


and the V Foundation for Cancer Research; Member	Executive Officers
of the Advisory Council for the College of Arts and
Letters and of the Advisory Board to the Kellogg	Glenn Booraem
Institute for International Studies, both at the	Born 1967. Controller Since July 2010. Principal
University of Notre Dame.	Occupation(s) During the Past Five Years: Principal
	of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge	the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal	Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice	companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)
at IBM (information technology services); Fiduciary	Thomas J. Higgins
Member of IBM’s Retirement Plan Committee (2004–	Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth.	2008. Principal Occupation(s) During the Past Five
	Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass	Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal	served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief	the investment companies served by The Vanguard
Investment Officer and Vice President at the University	Group (1998–2008).
of Notre Dame; Assistant Professor of Finance at the
Mendoza College of Business at Notre Dame; Member	Kathryn J. Hyatt
of the Notre Dame 403(b) Investment Committee;	Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc.	Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment	The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry	investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League	Group; Assistant Treasurer of each of the investment
Baseball.	companies served by The Vanguard Group (1988–2008).

André F. Perold	Heidi Stam
Born 1952. Trustee Since December 2004. Principal	Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George	Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus	Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011);	of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of	Group and of each of the investment companies
HighVista Strategies LLC (private investment firm);	served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the	Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.
	Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.
Born 1941. Trustee Since January 1993. Principal	Mortimer J. Buckley	Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman,	Kathleen C. Gubanich	Michael S. Miller
President, and Chief Executive Officer of NACCO	Paul A. Heller	James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster-	Martha G. King	Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman	John T. Marcante
of the Board of University Hospitals of Cleveland.

Peter F. Volanakis	Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years: President	John J. Brennan
and Chief Operating Officer (retired 2010) of Corning	Chairman, 1996–2009
Incorporated (communications equipment); Trustee of	Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board
of the Norris Cotton Cancer Center and of the Advisory	Founder
Board of the Parthenon Group (strategy consulting).
	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996

1 Mr. McNabb is considered an “interested person,” as defined in the Investment Company Act of 1940, because he is an officer of the Vanguard funds.

2 December 2002 for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, and the Vanguard State Tax-Exempt Funds.


	P.O. Box 2600
	Valley Forge, PA 19482-2600

Connect with Vanguard® > vanguard.com


Fund Information > 800-662-7447	CFA® is a trademark owned by CFA Institute.
Direct Investor Account Services > 800-662-2739
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Text Telephone for People
With Hearing Impairment > 800-749-7273

This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by
the fund’s current prospectus.

All comparative mutual fund data are from Lipper, a
Thomson Reuters Company, or Morningstar, Inc., unless
otherwise noted.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
voted the proxies for securities it owned during the 12
months ended June 30. To get the report, visit either
vanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via e-mail addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2014 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q232 042014

Semiannual Report | February 28, 2014

Vanguard International Growth Fund

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Advisors’ Report.	8
Fund Profile.	13
Performance Summary.	15
Financial Statements.	16
About Your Fund’s Expenses.	31
Trustees Approve Advisory Arrangements.	33
Glossary.	35

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice.
Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.
See the Glossary for definitions of investment terms used in this report.
About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas.
This one is a replica based on an 18th-century British vessel. The HMS Vanguard, another ship of that era, served as the flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

Your Fund’s Total Returns


Six Months Ended February 28, 2014
				Total
				Returns
Vanguard International Growth Fund
Investor Shares				15.33%
Admiral™ Shares				15.45
MSCI All Country World Index ex USA				12.32
International Funds Average				14.14
International Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.
Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.


Your Fund’s Performance at a Glance
August 31, 2013, Through February 28, 2014
			Distributions Per Share
	Starting	Ending	Income	Capital
	Share Price	Share Price	Dividends	Gains
Vanguard International Growth Fund
Investor Shares	$20.42	$23.20	$0.336	$0.000
Admiral Shares	64.98	73.80	1.170	0.000

Chairman’s Letter

Dear Shareholder,

Most stock markets outside the United States kept climbing—almost uninterrupted—during the six months ended February 28, 2014. This helped Vanguard International Growth Fund return more than 15%, outpacing its comparative index and the average return of international peer funds. It was the fund’s best fiscal first half since 2011.

In an otherwise lackluster period for emerging-market equities, your advisors’ selections, especially in China, stood out. So, too, did holdings in the developed Pacific Rim, notably in Japan—the fund’s second-largest country stake. Both China and Japan provided significant boosts to the fund’s total return and performance against its benchmark.

A mostly positive environment lifted global stock markets
Stock markets around the world generally posted solid gains for the six months ended February 28. In aggregate, international stocks returned about 12%, led by developed European markets. Investors were encouraged by economic growth—although it occurred at a sluggish rate—in the Eurozone and the United Kingdom. The developed Pacific region, held back somewhat by the slower pace of Japan’s stock market climb, produced a mid-single-digit return. Results were similar in emerging markets, which have been

particularly volatile amid concerns about slower growth in China and the effects of higher interest rates as the U.S. Federal Reserve winds down its stimulus program.

In the United States, favorable corporate earnings, generally positive economic news, and the Fed’s still accommodative bond-buying policy helped the broad market deliver a strong six-month return of about 16%.

Bonds staged a rebound after last year’s swoon
Bond markets posted six-month gains after slumping in 2013 as investors worried about the future of the Fed’s bond-buying program. International bond markets (as measured by the Barclays Global Aggregate Index ex USD, unhedged for currency exposure) returned 4.93%—a robust result by the standards of bond performance.

Even as the Fed began trimming (or “tapering”) its purchases in January, U.S. bonds seemed to regain their appeal for investors. The broad U.S. taxable bond market returned 2.84% for the half year. The yield of the 10-year Treasury note finished at 2.64%, down a bit from 2.76% at the end of August. (Bond prices and yields move in opposite directions.) Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates.


Market Barometer

			Total Returns
		Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	-0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

Municipal bonds, which had declined sharply in the fiscal year ended August 31, returned 5.71%. The market was roiled during the summer by concerns about Detroit’s bankruptcy and Puerto Rico’s fiscal woes, but as the headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment officer, Tim Buckley, noted recently that, on the whole, “municipalities out there are actually doing a lot better than they were a few years ago.”

Fund did well in emerging markets

Strength was broad and deep across the International Growth Fund, and emerging markets were an especially bright spot.

Issues such as inflation in some Latin American nations and global concern about China’s economy and the impact of the Fed’s tapering on international capital flows weighed on emerging markets overall. But your fund’s advisors steered a path to success with benchmark-beating returns in several countries—particularly China. Chinese stocks, which constituted nearly 10% of the fund’s assets, returned more than 30% for the fund but less than 5% in the benchmark.

In developed markets, the fund advanced on a country-by-country basis, delivering mostly double-digit gains across Europe, the Pacific, and North America. Portugal was the only developed country to backtrack over the six months.


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Admiral	Peer Group
	Shares	Shares	Average
International Growth Fund	0.48%	0.35%	1.36%

The fund expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the fund’s annualized expense ratios were 0.48% for Investor Shares and 0.35% for Admiral Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2013.

Peer group: International Funds.

By virtue of its size, developed Europe—which made up more than half of fund assets, on average—was the largest contributor to total return. The European Central Bank’s decision to cut its benchmark interest rate late in 2013 and hints at more stimulus to come were well-received by investors. And the euro’s strengthening relative to the U.S. dollar lifted returns for U.S. investors. The reverse was true in the Pacific Rim: The weaker yen shaved several percentage

The appeal of low-cost investing is growing

Minimizing investment costs is a critical part of every investor’s toolkit. Why? Because every dollar paid for fund management expenses is simply a dollar less that can work on your behalf.

Put another way, the lower your mutual fund’s costs, the greater your share of the fund’s return. Not surprisingly, research indicates that lower-cost investments have tended to outperform their higher-cost counterparts.

Investors are catching on to the value of lower-cost mutual funds. Funds with lower expense ratios dominated in attracting investment dollars over the decade ended December 31, 2012, according to a Vanguard research paper. (You can read the paper, Costs Matter: Are Fund Investors Voting With Their Feet?, at vanguard.com/research.) And, as the chart below shows, Vanguard’s leadership in keeping down costs for investors seems to have encouraged the industry to reduce its average costs—at least over the past decade.

Even so, Vanguard’s average expenses continue to be less than one-fifth the industry average: 0.19% versus 1.08% (as of December 31, 2013). That cost difference remains a powerful tool in the hands of Vanguard clients.

Vanguard fund costs remain far below industry average

Industry average expense ratio
Vanguard average expense ratio

Sources: Vanguard and Lipper, a Thomson Reuters Company.

points off the return of the MSCI Japan Index for U.S. investors. Still, the fund’s Japanese holdings posted a solid double-digit gain.

Compared with the benchmark, the fund had some disappointments in developed European markets such as France, Germany, and the United Kingdom—the largest country holding. Japan, however, provided a sizable boost, in a reversal of the relative performance dynamics of fiscal year 2013.

For the fund overall, returns were positive for all industry groups except the tiny utilities sector. The advisors’ selections were particularly successful in two of the largest sectors. Financials (which constituted almost one-quarter of fund assets on average) and information technology added the most to the fund’s total return and to its performance against the benchmark.

For more about the advisors’ strategies and the fund’s positioning during the six months, see the Advisors’ Report that follows this letter. Also please note that in late 2013, Simon Webber assumed sole responsibility for managing the portion of the International Growth Fund advised by Schroder Investment Management North America. In early 2014, James Anderson returned to Baillie Gifford Overseas Ltd. from sabbatical and resumed his role as co-manager.

Balancing investors’ “home bias” and the benefits of diversification

Many investors have a natural tendency to focus on companies close to home. But this “home bias” can lead to missed opportunities to diversify your portfolio internationally.

Stocks of companies based outside the United States account for about half of the global equity market. Vanguard’s analysis of more than four decades of data shows that, on average, adding such stocks to a U.S. portfolio would have reduced the volatility of returns. This benefit has generally persisted even as economies and markets have become more integrated.

International stocks offer exposure to a wider array of economic and market forces, producing returns that vary from those of U.S. stocks—which helps reduce volatility risk. Of course, the impact of diversification changes over time as returns, volatilities, and correlations between foreign and domestic stocks change.

When it comes to deciding how much to allocate to international stocks, there’s no one-size-fits-all answer. It depends on your view regarding some of the short-term and long-term trade-offs, which include potential exposure to currency fluctuations and generally higher transaction and investment costs.

Vanguard suggests that allocating 20% of your equity portfolio to non-U.S. stocks may be a reasonable starting point. (You can read more in Global Equities: Balancing Home Bias and Diversification, available at vanguard.com/research.)

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
March 14, 2014

Advisors’ Report

For the six months ended February 28, 2014, Vanguard International Growth Fund returned more than 15%, outpacing its benchmark index and the average return of peer funds. Your fund is managed by three independent advisors, a strategy that enhances the fund’s diversification by providing exposure to distinct yet complementary investment approaches. It is not uncommon for different advisors to have different views about individual securities or the broader investment environment.

The advisors, the percentage of fund assets each manages, and brief descriptions of their investment strategies are presented in the table below. The advisors have also prepared a discussion of the investment environment that existed during the fiscal half year and of how the portfolio’s positioning reflects this assessment. These comments were prepared on March 13, 2014.

Vanguard International Growth Fund Investment Advisors


	Fund Assets Managed
Investment Advisor	%	$ Million	Investment Strategy
Baillie Gifford Overseas Ltd.	52	11,757	The advisor seeks stocks that can generate
			above-average growth in earnings and cash flow,
			producing a bottom-up, stock-driven approach to
			country and asset allocation. An in-depth view on each
			company is measured against the consensus view,
			leading to discrepancies and potential opportunities to
			add value.
Schroder Investment	34	7,770	Equity analysts located around the world and an
Management North America Inc.			international team of global sector specialists help to
			identify reasonably priced companies with strong
			growth prospects and a sustainable competitive
			advantage.
M&G Investment Management	13	2,969	The advisor constructs a portfolio using a long-term,
Limited			bottom-up investment approach focusing on identifying
			underappreciated companies—particularly those with
			scarce assets—with the ability to deliver high returns
			and growth potential.
Cash Investments	1	333	These short-term reserves are invested by Vanguard in
			equity index products to simulate investment in stocks.
			Each advisor may also maintain a modest cash
			position.

Baillie Gifford Overseas Ltd.

Portfolio Managers:
James K. Anderson, Head of Global Equities

Kave Sigaroudinia

Five years into a recovery from the lows of early 2009, international equity markets have finally rediscovered some genuine optimism. The second half of 2013 marked a notable shift in preference from defensive stocks toward those with more substantial but less predictable growth prospects.

We view this sea change in sentiment as a delayed response to the considerable progress made since the global financial crisis at both the macroeconomic and corporate levels. The broadening of the U.S. recovery, resumption of growth in Southern Europe, and ambitious reform proposals emerging from China and Japan are all encouraging signs for sustainable global growth.

The vigor of the rise of some of our technology holdings has been notable over the past six months. Internet companies such as Baidu, Tencent, and NAVER performed well, reflecting their considerable progress in monetizing mobile users. The internet’s expanding worldwide reach through smartphones and tablets is also driving growth in e-commerce. This benefited our positions in Amazon, Japanese e-mall operator Rakuten, and Japanese telecom company SoftBank, which has a significant stake in the dominant Chinese e-commerce platform, Alibaba.

Such gains more than offset weakness in companies with greater exposure to possible short-term effects of the Federal Reserve’s tapering of bond purchases. These holdings included Turkish bank Garanti Bankasi and the Brazilian stock exchange, BM&FBovespa.

Over the last six months, we established a new position in Christian Hansen, our third Danish company based in the “Medicon Valley” bioscience cluster. We also recently added Volvo, the Swedish truck and construction machinery manufacturer, to the portfolio.

We funded these purchases by selling several commodity and traditional energy-related stocks, including Impala Platinum and Woodside Petroleum, reflecting our decreasing confidence in their long-term growth prospects. We also sold our longstanding holding in Brambles, the Australian company whose main asset is CHEP, the global operator of pallet pools (which can help companies improve the efficiency of storage and handling). We believe its developed-market bias and capital-intense business are likely to limit its future growth.

We remain optimistic about the outlook for the growth companies in which we are invested, and we have entered 2014 with a rich seam of exciting firms, themes, and countries about which we want to learn more.

Schroder Investment Management North America Inc.

Portfolio Manager:
Simon Webber, CFA

Equity markets rose strongly during the fiscal period, led by European domestic stocks as the region’s economy continues to heal. Once again, emerging markets were the notable laggards. Tighter liquidity, slowing growth, and weaker currencies left them broadly treading water in dollar terms.

The volatility and trauma caused by the global financial and Eurozone crises have led investors to overpay for “defensive,” or stable, earnings and in turn to undervalue cyclical earnings. This can be seen, for example, in the high valuations being paid for consumer staples companies. These generally good-quality growth businesses have high underlying exposure to the emerging markets that are now experiencing weak earnings growth.

We continued to reduce our exposure to this group, selling down stocks such as Heineken.

In contrast, recovery in Europe, the United States, and Japan is likely to lead to a stronger capital investment cycle as output gaps close and business confidence to invest recovers. We have added several new stocks that should benefit from this spending, including SAP, the German productivity software company, and Hitachi of Japan, which makes a range of social infrastructure equipment. We have also increased our exposure to Schneider, an electrical products company that is a leader in energy-efficiency technology.

Many of our Japanese holdings did very well, including SMC, a manufacturer of pneumatic equipment for factory automation, which has a high and rising level of profitability. We lagged overall equity markets somewhat in the Eurozone, where recovering yet still risky peripheral markets such as Spain and Italy performed strongly. Our focus on companies in the stronger core European countries still produced a good absolute return.

The single best contributor to our results was Shire, a pharmaceutical company that specializes in niche diseases such as attention deficit disorder. The company, which is under new management, has found a good balance of organic growth from new products, margin improvement from cost-cutting, and some acquisitions.

Portfolio exposure to emerging market-listed stocks decreased. Although we see increasing value in some emerging markets, in aggregate they remain a difficult environment for companies to grow their earnings.

As we look ahead, we see some potential for upside surprise arising from the continued healing in the European economy and some downside risk from the serious challenge facing Chinese authorities in the aftermath of China’s recent vast credit growth.

M&G Investment Management Limited

Portfolio Manager:
Greg Aldridge

In the run-up to the New Year, international equity markets were largely dominated by speculation about the Federal Reserve’s tapering of its asset-buying program and about Chinese growth prospects, with emerging markets bearing the brunt of negative investor sentiment. News in December that the Fed would indeed be cutting back its program provided some certainty to markets. But currency pressures hit some of the largest emerging economies as we moved into January, stifling the positive mood. Some of the tensions eased in February, and markets finished the period on a generally buoyant note.

Some of our holdings, particularly in the industrial sector, experienced difficulties. The largest detractor was Vallourec, the French specialist steel pipe maker, which faced uncertainty about when projects in Brazil and the United States would begin to materially benefit the company. The share price was also affected by short-term concerns about product orders. Because Vallourec is one of only two companies in the world capable of producing the high-quality pipes and connectors necessary for modern oil wells, we continue to believe in its long-term strength and ability to create value.

Another industrial holding—MTU Aero Engines, the German airplane engine manufacturer and aftermarket services provider—was also hit by share price weakness. Investors’ reaction to the company’s plans to invest for growth was exacerbated by some reported pressure on margins. We believe the company is doing the right things for the long term and retain our conviction in the strength of the business.

Other laggards included two oil companies, China’s CNOOC and Brazil’s Petróleo Brasileiro (Petrobras), which declined in difficult local market conditions. A holding in Standard Chartered trimmed some of our performance as well. This U.K.-listed bank generates the majority of its revenues in Asia and Africa and was hurt by poor sentiment in its end markets.

On the positive side, French banking group Société Générale continued to deliver solid returns. Its share price rose as investor perception of the company improved in recognition of its attractive market positions.

German banking and retail IT provider Wincor Nixdorf also did well, benefiting from a recovery and growing demand in its end markets. Other contributors included Publicis, a French advertising group, and AZ Electronic Materials, a U.K.-based specialist chemicals producer. AZ Electronic Material’s share price rose markedly in December when Merck KGaA, a German

chemical and pharmaceutical business, agreed to buy the company at a significant premium.

As active stockpickers, we continued to find compelling investment opportunities at attractive valuations. During the period, we increased our exposure to financials with the purchase of two banks. Canada’s Bank of Nova Scotia is a solid lender that generates a significant portion of its revenues in South America. Thailand’s Kasikornbank is one of the country’s two higher-quality banks; we like its traditional nature, customer focus, and conservative culture. We also bought shares in luggage specialist Samsonite, which contines to increase its share of a market that is growing largely because of the expansion of global travel in Asia.

We sold other holdings when we felt more attractively valued companies with better growth prospects were available. Sales included German fragrance and flavor manufacturer Symrise, pharmaceutical giant GlaxoSmithKline, Hong Kong-based clothing retailer Esprit, and AP Moller Maersk, a Danish diversified shipping company.

International Growth Fund

Fund Profile
As of February 28, 2014


Share-Class Characteristics
	Investor	Admiral
	Shares	Shares
Ticker Symbol	VWIGX	VWILX
Expense Ratio¹	0.48%	0.35%


Portfolio Characteristics
		MSCI AC
		World Index
	Fund	ex USA
Number of Stocks	174	1,812
Median Market Cap	$34.1B	$34.6B
Price/Earnings Ratio	17.8x	16.7x
Price/Book Ratio	2.2x	1.7x
Return on Equity	17.5%	14.7%
Earnings Growth
Rate	15.0%	7.9%
Dividend Yield	2.0%	2.9%
Turnover Rate
(Annualized)	21%	—
Short-Term Reserves	1.1%	—

Sector Diversification (% of equity exposure)


		MSCI AC
		World Index
	Fund	ex USA
Consumer Discretionary	16.8%	10.9%
Consumer Staples	5.7	9.7
Energy	3.9	9.0
Financials	24.3	26.4
Health Care	8.5	8.4
Industrials	14.6	11.2
Information Technology	15.5	6.8
Materials	6.6	8.8
Telecommunication Services	3.8	5.3
Utilities	0.3	3.5


Volatility Measures
	MSCI AC
	World
	Index
	ex USA
R-Squared	0.96
Beta	1.08

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Ten Largest Holdings (% of total net assets)


Tencent Holdings Ltd.	Internet Software &
	Services	3.1%
Baidu Inc.	Internet Software &
	Services	2.5
AIA Group Ltd.	Life & Health
	Insurance	2.3
SoftBank Corp.	Wireless
	Telecommunication
	Services	2.3
Prudential plc	Life & Health
	Insurance	1.8
Atlas Copco AB	Industrial Machinery	1.7
Inditex SA	Apparel Retail	1.7
SMC Corp.	Industrial Machinery	1.7
Amazon.com Inc.	Internet Retail	1.6
Banco Popular Espanol
SA	Diversified Banks	1.5
Top Ten		20.2%

The holdings listed exclude any temporary cash investments and equity index products.

Allocation by Region (% of equity exposure)

1 The expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the annualized expense ratios were 0.48% for Investor Shares and 0.35% for Admiral Shares.

International Growth Fund

Market Diversification (% of equity exposure)


		MSCI AC
		World
		Index
	Fund	ex USA
Europe
United Kingdom	16.7%	15.7%
France	8.0	7.5
Switzerland	7.1	6.7
Sweden	6.6	2.4
Germany	6.0	7.0
Spain	4.8	2.5
Italy	2.6	1.8
Denmark	2.1	1.0
Norway	1.8	0.6
Other	1.6	4.3
Subtotal	57.3%	49.5%
Pacific
Japan	11.1%	14.5%
Hong Kong	3.8	2.0
South Korea	2.8	3.2
Australia	1.7	5.5
Other	0.3	1.1
Subtotal	19.7%	26.3%
Emerging Markets
China	8.4%	3.9%
Brazil	2.1	2.0
India	1.9	1.3
Other	5.1	9.4
Subtotal	17.5%	16.6%
North America
Canada	2.3%	7.2%
United States	2.0	0.0
Subtotal	4.3%	7.2%
Middle East
Israel	1.2%	0.4%

International Growth Fund

Performance Summary

Fiscal-Year Total Returns (%): August 31, 2003, Through February 28, 2014

^–12.83–14.41 ^–13.75–14.95

International Growth Fund Investor Shares

Spliced International Index

For a benchmark description, see the Glossary.

Note: For 2014, performance data reflect the six months ended February 28, 2014.

Average Annual Total Returns: Periods Ended December 31, 2013

This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.

Securities and Exchange Commission rules require that we provide this information.


	Inception	One	Five	Ten
	Date	Year	Years	Years
Investor Shares	9/30/1981	22.95%	15.84%	8.66%
Admiral Shares	8/13/2001	23.12	16.01	8.85

See Financial Highlights for dividend and capital gains information.

International Growth Fund

Financial Statements (unaudited)

Statement of Net Assets
As of February 28, 2014


		Market
		Value
	Shares	($000)
Common Stocks (97.5%)¹
Australia (1.5%)
Fortescue Metals
Group Ltd.	37,171,012	180,938
James Hardie
Industries plc	6,196,069	80,577
Brambles Ltd.	5,946,464	49,879
Cochlear Ltd.	743,560	38,089
		349,483
Brazil (2.0%)
Itau Unibanco Holding
SA ADR	7,255,682	96,646
BM&FBovespa SA	20,386,500	87,737
Vale SA Class B ADR	6,764,400	84,487
Raia Drogasil SA	8,288,549	58,515
Vale SA Preference
Shares	3,977,000	49,467
Petroleo Brasileiro SA
Preference Shares	6,263,000	36,386
Cia Brasileira de
Distribuicao Grupo
Pao de Acucar ADR	659,949	28,068
Banco do Brasil SA	2,627,967	23,242
		464,548
Canada (2.3%)
Toronto-Dominion Bank	5,017,326	227,282
Suncor Energy Inc.	3,867,636	127,594
Canadian Pacific
Railway Ltd.	560,306	87,919
Bank of Nova Scotia	990,000	56,612
* Dominion Diamond Corp.	732,000	10,445
Sherritt International Corp.	2,615,219	7,227
		517,079
Chile (0.3%)
Sociedad Quimica y
Minera de Chile SA ADR	2,334,900	71,915


			Market
			Value
		Shares	($000)
China (8.3%)
	Tencent Holdings Ltd.	8,838,200	709,672
*	Baidu Inc. ADR	3,288,700	562,138
	New Oriental Education
	& Technology Group
	Inc. ADR	3,663,200	101,984
	CNOOC Ltd.	56,461,000	92,433
	Beijing Enterprises
	Holdings Ltd.	7,987,000	76,710
	China Overseas Land
	& Investment Ltd.	26,480,000	71,366
*	Youku Tudou Inc. ADR	2,077,149	68,941
	China Construction
	Bank Corp.	88,655,000	61,082
	Shandong Weigao
	Group Medical
	Polymer Co. Ltd.	44,588,000	57,142
^	Mindray Medical
	International Ltd. ADR	962,074	33,615
	Belle International
	Holdings Ltd.	23,826,000	29,475
	Yingde Gases Group
	Co. Ltd.	32,400,000	29,074
*	Chaoda Modern
	Agriculture
	Holdings Ltd.	17,258,719	1,553
			1,895,185
Denmark (2.1%)
*	Novo Nordisk A/S Class B	5,645,300	268,654
	Novozymes A/S	3,172,000	147,427
	Chr Hansen Holding A/S	1,508,200	62,397
			478,478
Finland (0.7%)
*	Nokia Oyj	19,966,682	151,980


International Growth Fund



			Market
			Value
		Shares	($000)
France (7.7%)
	L’Oreal SA	1,945,916	329,669
	Schneider Electric SA	3,106,423	276,432
	Kering	1,182,302	241,597
	BNP Paribas SA	2,025,912	165,481
	Essilor International SA	1,364,626	142,147
	Sanofi	1,332,453	138,589
	Societe Generale SA	1,182,740	78,482
	Publicis Groupe SA	807,000	76,589
	Airbus Group NV	910,000	66,864
	Total SA	1,008,000	65,398
	Arkema SA	585,606	63,522
	Vallourec SA	1,128,147	60,396
	Safran SA	792,230	55,689
			1,760,855
Germany (5.8%)
	SAP AG	2,326,122	187,095
	HeidelbergCement AG	2,252,441	185,316
	Adidas AG	1,405,726	163,445
	Volkswagen AG	483,893	123,305
	Porsche Automobil
	Holding SE
	Preference Shares	1,173,456	123,253
	GEA Group AG	2,057,110	99,550
	Bayerische Motoren
	Werke AG	778,499	90,327
	Continental AG	328,271	79,788
	Fresenius Medical Care
	AG & Co. KGaA	956,000	65,591
	Wincor Nixdorf AG	750,000	60,045
^{^,*}	Aixtron SE	3,130,112	52,404
	MTU Aero Engines AG	616,000	51,744
^	SMA Solar Technology AG	719,595	42,960
			1,324,823
Hong Kong (3.7%)
	AIA Group Ltd.	107,159,600	525,033
	Jardine Matheson
	Holdings Ltd.	3,035,947	176,635
	Hong Kong Exchanges
	and Clearing Ltd.	4,582,630	71,238
	Techtronic Industries Co.	17,027,782	45,314
	Hang Lung
	Properties Ltd.	12,681,000	35,289
			853,509
India (1.9%)
	Idea Cellular Ltd.	51,099,111	106,510
	Housing Development
	Finance Corp.	7,692,900	102,044
	Tata Motors Ltd.	13,488,310	91,519
	HDFC Bank Ltd.	5,446,764	58,921
	Zee Entertainment
	Enterprises Ltd.	11,343,842	49,240
	Axis Bank Ltd.	1,059,947	21,769
			430,003


			Market
			Value
		Shares	($000)
Indonesia (0.3%)
	Bank Mandiri Persero
	Tbk PT	77,192,500	60,766

Ireland (0.3%)
	Kerry Group plc Class A	950,400	71,783
	Kerry Group plc Class A
	(London Shares)	25,000	1,884
			73,667
Israel (1.1%)
*	Check Point Software
	Technologies Ltd.	3,876,314	261,341

Italy (2.6%)
	UniCredit SPA	40,251,271	319,427
*	Fiat SPA	25,782,643	269,200
			588,627
Japan (10.7%)
	SoftBank Corp.	6,785,600	514,235
	SMC Corp.	1,483,200	377,856
	Rakuten Inc.	19,991,600	287,394
	Astellas Pharma Inc.	3,426,088	222,698
	Sumitomo Mitsui
	Financial Group Inc.	4,332,100	194,503
	Suzuki Motor Corp.	4,877,100	131,218
	Nissan Motor Co. Ltd.	11,737,600	104,765
	Hitachi Ltd.	12,733,000	100,833
	FANUC Corp.	555,700	96,738
	Toyota Motor Corp.	1,300,983	74,876
	Sekisui Chemical Co. Ltd.	6,343,000	72,483
	East Japan Railway Co.	801,300	62,663
	MISUMI Group Inc.	1,768,610	51,648
	Kyocera Corp.	910,200	41,231
	Canon Inc.	1,298,922	40,527
	Sysmex Corp.	539,996	32,353
^	Gree Inc.	2,710,000	30,074
			2,436,095
Luxembourg (0.2%)
	Samsonite
	International SA	16,140,000	44,630

Mexico (0.5%)
	Grupo Financiero
	Banorte SAB de CV	18,792,622	121,918

Netherlands (0.1%)
	TNT Express NV	1,492,047	14,494

Norway (1.7%)
	Statoil ASA	6,822,228	179,943
	Schibsted ASA	1,760,994	115,917
	DNB ASA	5,584,384	101,084
			396,944


International Growth Fund



			Market
			Value^•
		Shares	($000)
Peru (0.7%)
	Credicorp Ltd.	1,191,679	154,799

Portugal (0.3%)
	Jeronimo Martins
	SGPS SA	3,627,182	61,497

Russia (0.7%)
	Sberbank of Russia ADR	5,395,919	55,536
	Magnit OJSC GDR	964,300	53,873
	Mail.ru Group Ltd. GDR	1,266,000	53,736
			163,145
Singapore (0.4%)
	DBS Group Holdings Ltd.	3,318,439	43,289
	Singapore Exchange Ltd.	6,541,000	35,533
			78,822
South Africa (0.3%)
	MTN Group Ltd.	1,855,000	33,885
	Sasol Ltd.	661,000	33,561
			67,446
South Korea (2.8%)
	NAVER Corp.	268,246	205,089
	Samsung Electronics
	Co. Ltd.	155,358	196,808
^	Celltrion Inc.	1,804,466	81,124
	Hyundai Motor Co.	284,257	65,308
	Hankook Tire Co. Ltd.	847,000	49,418
	Shinhan Financial Group
	Co. Ltd.	771,836	32,207
			629,954
Spain (4.7%)
	Inditex SA	2,683,385	385,319
*	Banco Popular
	Espanol SA	48,504,305	347,831
*	Banco Santander SA	27,573,835	248,899
	Distribuidora
	Internacional de
	Alimentacion SA	10,902,891	93,386
			1,075,435
Sweden (6.5%)
	Atlas Copco AB Class A	13,802,479	386,965
	Svenska Handelsbanken
	AB Class A	5,986,752	312,410
	Investment AB Kinnevik	6,416,882	248,861
	Alfa Laval AB	5,199,985	140,905
	Sandvik AB	8,283,298	115,368
	Volvo AB Class B	6,810,975	102,345
	Telefonaktiebolaget LM
	Ericsson Class B	5,418,000	70,038
	Svenska Cellulosa
	AB SCA Class B	1,881,653	57,071
	Elekta AB Class B	4,093,089	54,460
			1,488,423


		Market
		Value^•
	Shares	($000)
Switzerland (7.0%)
Roche Holding AG	1,077,579	331,787
Syngenta AG	867,342	315,748
* Cie Financiere
Richemont SA	1,826,264	181,431
Credit Suisse Group AG	5,370,604	168,628
Geberit AG	494,180	155,304
ABB Ltd.	3,984,182	101,685
Novartis AG	963,000	80,150
Zurich Insurance Group AG	238,000	72,831
Nestle SA	932,000	70,408
Swatch Group AG (Bearer)	96,145	64,029
Holcim Ltd.	705,000	57,203
		1,599,204
Taiwan (0.9%)
Taiwan Semiconductor
Manufacturing Co. Ltd.	58,387,508	210,621

Thailand (0.7%)
Kasikornbank PCL
(Foreign)	30,102,556	160,026

Turkey (0.6%)
Turkiye Garanti
Bankasi AS	37,457,981	102,341
BIM Birlesik
Magazalar AS	2,397,092	44,397
		146,738
United Kingdom (16.1%)
Prudential plc	17,732,776	401,522
ARM Holdings plc	18,243,000	305,810
Standard Chartered plc	12,764,732	270,211
Rolls-Royce Holdings plc	14,445,916	241,418
Diageo plc	7,401,784	232,433
BHP Billiton plc	5,959,768	192,066
HSBC Holdings plc	17,010,546	179,531
BG Group plc	9,807,108	178,430
Meggitt plc	17,809,913	150,032
Shire plc	2,581,000	142,770
Royal Dutch Shell plc
Class A	3,774,854	137,757
Aggreko plc	5,250,608	137,060
WPP plc	4,927,226	107,918
Vodafone Group plc	24,677,070	102,829
Barclays plc	22,919,974	96,553
BT Group plc	12,725,883	87,527
Burberry Group plc	3,217,639	82,904
Inchcape plc	7,263,000	76,273
Unilever plc	1,843,000	75,379
Ultra Electronics
Holdings plc	2,066,000	66,540
Carnival plc	1,584,000	65,140
British American
Tobacco plc	1,187,759	64,747


International Growth Fund



			Market
			Value
		Shares	($000)
	AZ Electronic
	Materials SA	9,150,000	61,135
	AstraZeneca plc	892,344	60,660
	G4S plc	14,457,000	57,489
	Centrica plc	10,742,154	57,369
	Spectris plc	1,220,000	50,111
			3,681,614
United States (2.0%)
*	Amazon.com Inc.	1,000,200	362,172
^	MercadoLibre Inc.	815,200	84,928
			447,100
Total Common Stocks
(Cost $16,646,041)			22,261,164


		Market
		Value
	Shares	($000)
Temporary Cash Investments (3.2%)¹
Money Market Fund (3.1%)
^2,3Vanguard Market
Liquidity Fund,
0.130%	709,823,357	709,823

Face

Amount

($000)

U.S. Government and Agency Obligations (0.1%)


^4,5	Federal Home Loan
	Bank Discount Notes,
	0.072%, 5/2/14	2,000	2,000
^4,5	Federal Home Loan
	Bank Discount Notes,
	0.090%, 7/16/14	5,200	5,197
^4,5	Federal Home Loan
	Bank Discount Notes,
	0.080%-0.092%, 7/18/14	8,300	8,294
6	Freddie Mac
	Discount Notes,
	0.090%, 3/3/14	6,000	6,000
^5,6	Freddie Mac
	Discount Notes,
	0.070%, 3/31/14	2,000	2,000
			23,491
Total Temporary Cash Investments
(Cost $733,318)			733,314
Total Investments (100.7%)
(Cost $17,379,359)			22,994,478
Other Assets and Liabilities (-0.7%)
Other Assets			305,713
Liabilities³			(471,400)
			(165,687)
Net Assets (100%)			22,828,791

International Growth Fund


At February 28, 2014, net assets consisted of:
	Amount
	($000)
Paid-in Capital	18,297,497
Undistributed Net Investment Income	55,722
Accumulated Net Realized Losses	(1,149,899)
Unrealized Appreciation (Depreciation)
Investment Securities	5,615,119
Futures Contracts	5,435
Forward Currency Contracts	4,284
Foreign Currencies	633
Net Assets	22,828,791


Investor Shares—Net Assets
Applicable to 409,988,390 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	9,513,010
Net Asset Value Per Share—
Investor Shares	$23.20


Admiral Shares—Net Assets
Applicable to 180,441,893 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	13,315,781
Net Asset Value Per Share—
Admiral Shares	$73.80

See Note A in Notes to Financial Statements.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $169,555,000.
* Non-income-producing security.
1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 98.9% and 1.8%, respectively, of net assets.
2 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
3 Includes $175,725,000 of collateral received for securities on loan.
4 The issuer operates under a congressional charter; its securities are generally neither guaranteed by the U.S. Treasury nor backed by the full faith and credit of the U.S. government.
5 Securities with a value of $16,891,000 have been segregated as initial margin for open futures contracts.
6 The issuer was placed under federal conservatorship in September 2008; since that time, its daily operations have been managed by the Federal Housing Finance Agency and it receives capital from the U.S. Treasury, as needed to maintain a positive net worth, in exchange for senior preferred stock.
ADR—American Depositary Receipt.
GDR—Global Depositary Receipt.
See accompanying Notes, which are an integral part of the Financial Statements.


International Growth Fund


Statement of Operations

	Six Months Ended
	February 28, 2014
	($000)
Investment Income
Income
Dividends¹	195,922
Interest²	437
Securities Lending	5,142
Total Income	201,501
Expenses
Investment Advisory Fees—Note B
Basic Fee	15,892
Performance Adjustment	3,343
The Vanguard Group—Note C
Management and Administrative—Investor Shares	12,499
Management and Administrative—Admiral Shares	8,214
Marketing and Distribution—Investor Shares	823
Marketing and Distribution—Admiral Shares	1,018
Custodian Fees	1,979
Shareholders’ Reports—Investor Shares	49
Shareholders’ Reports—Admiral Shares	30
Trustees’ Fees and Expenses	21
Total Expenses	43,868
Net Investment Income	157,633
Realized Net Gain (Loss)
Investment Securities Sold	406,529
Futures Contracts	48,918
Foreign Currencies and Forward Currency Contracts	5,003
Realized Net Gain (Loss)	460,450
Change in Unrealized Appreciation (Depreciation)
Investment Securities	2,394,962
Futures Contracts	525
Foreign Currencies and Forward Currency Contracts	12,438
Change in Unrealized Appreciation (Depreciation)	2,407,925
Net Increase (Decrease) in Net Assets Resulting from Operations	3,026,008
1 Dividends are net of foreign withholding taxes of $8,234,000.
2 Interest income from an affiliated company of the fund was $421,000.

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


International Growth Fund


Statement of Changes in Net Assets

	Six Months Ended	Year Ended
	February 28,	August 31,
	2014	2013
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	157,633	331,611
Realized Net Gain (Loss)	460,450	718,176
Change in Unrealized Appreciation (Depreciation)	2,407,925	1,858,380
Net Increase (Decrease) in Net Assets Resulting from Operations	3,026,008	2,908,167
Distributions
Net Investment Income
Investor Shares	(139,508)	(167,941)
Admiral Shares	(202,880)	(166,372)
Realized Capital Gain
Investor Shares	—	—
Admiral Shares	—	—
Total Distributions	(342,388)	(334,313)
Capital Share Transactions
Investor Shares	(759,107)	(1,400,123)
Admiral Shares	1,292,192	1,800,455
Net Increase (Decrease) from Capital Share Transactions	533,085	400,332
Total Increase (Decrease)	3,216,705	2,974,186
Net Assets
Beginning of Period	19,612,086	16,637,900
End of Period¹	22,828,791	19,612,086

1 Net Assets—End of Period includes undistributed net investment income of $55,722,000 and $239,172,000.

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


International Growth Fund


Financial Highlights


Investor Shares
	Six Months
	Ended
For a Share Outstanding	February 28,			Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$20.42	$17.69	$18.27	$16.27	$15.73	$20.43
Investment Operations
Net Investment Income	.149¹	.336	.361	.351	.291	.398²
Net Realized and Unrealized Gain (Loss)
on Investments	2.967	2.741	(.607)	1.954	.535	(3.633)
Total from Investment Operations	3.116	3.077	(.246)	2.305	.826	(3.235)
Distributions
Dividends from Net Investment Income	(. 336)	(. 347)	(. 334)	(. 305)	(. 286)	(. 562)
Distributions from Realized Capital Gains	—	—	—	—	—	(.903)
Total Distributions	(. 336)	(. 347)	(. 334)	(. 305)	(. 286)	(1.465)
Net Asset Value, End of Period	$23.20	$20.42	$17.69	$18.27	$16.27	$15.73

Total Return³	15.33%	17.54%	-1.14%	14.10%	5.19%	-13.75%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$9,513	$9,056	$9,115	$10,878	$10,493	$10,226
Ratio of Total Expenses to
Average Net Assets⁴	0.48%	0.48%	0.49%	0.47%	0.49%	0.53%
Ratio of Net Investment Income to
Average Net Assets	1.01%¹	1.71%	2.04%	1.85%	1.74%	2.84%²
Portfolio Turnover Rate	21%	31%	30%	43%	44%	51%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

1 Net investment income per share and the ratio of net investment income to average net assets include $.080 and 0.36%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

2 Net investment income per share and the ratio of net investment income to average net assets include $.061 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.

3 Total returns do not include transaction or account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction and account service fees.

4 Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.04%, 0.03%, 0.03%, and 0.03%.

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


International Growth Fund


Financial Highlights


Admiral Shares
	Six Months
	Ended
For a Share Outstanding	February 28,				Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$64.98	$56.31	$58.17	$51.81	$50.08	$65.09
Investment Operations
Net Investment Income	. 533¹	1.157	1.229	1.192	1.009	1.340²
Net Realized and Unrealized Gain (Loss)
on Investments	9.457	8.697	(1.945)	6.209	1.708	(11.571)
Total from Investment Operations	9.990	9.854	(.716)	7.401	2.717	(10.231)
Distributions
Dividends from Net Investment Income	(1.170)	(1.184)	(1.144)	(1.041)	(.987)	(1.909)
Distributions from Realized Capital Gains	—	—	—	—	—	(2.870)
Total Distributions	(1.170)	(1.184)	(1.144)	(1.041)	(.987)	(4.779)
Net Asset Value, End of Period	$73.80	$64.98	$56.31	$58.17	$51.81	$50.08

Total Return³	15.45%	17.66%	-1.01%	14.21%	5.36%	-13.57%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$13,316	$10,556	$7,523	$6,487	$4,353	$3,934
Ratio of Total Expenses to
Average Net Assets⁴	0.35%	0.35%	0.36%	0.34%	0.33%	0.34%
Ratio of Net Investment Income to
Average Net Assets	1.14%¹	1.84%	2.17%	1.98%	1.90%	3.03%²
Portfolio Turnover Rate	21%	31%	30%	43%	44%	51%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

1 Net investment income per share and the ratio of net investment income to average net assets include $.255 and 0.36%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

2 Net investment income per share and the ratio of net investment income to average net assets include $.194 and 0.48%, respectively, resulting from income accrued in connection with a spinoff in October 2008 by Reinet Investments SA of British American Tobacco plc.

3 Total returns do not include transaction fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable transaction fees.

4 Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.04%, 0.03%, 0.03%, and 0.03%.

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

International Growth Fund

Notes to Financial Statements

Vanguard International Growth Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. The fund offers two classes of shares: Investor Shares and Admiral Shares. Investor Shares are available to any investor who meets the fund’s minimum purchase requirements. Admiral Shares are designed for investors who meet certain administrative, service, and account-size criteria.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted by the board of trustees. These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund’s net asset value. Temporary cash investments acquired over 60 days to maturity are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash investments are valued at amortized cost, which approximates market value.

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).

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

International Growth Fund

The fund enters into forward currency contracts to provide the appropriate currency exposure related to any open futures contracts or to protect the value of securities and related receivables and payables against changes in foreign exchange rates. The fund’s risks in using these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty risk by entering into forward currency contracts only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. The master netting arrangements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate the forward currency contracts, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The forward currency contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral for open contracts are noted in the Statement of Net Assets. The value of collateral received or pledged is compared daily to the value of the forward currency contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are valued at their quoted daily prices obtained from an independent third party, adjusted for currency risk based on the expiration date of each contract. The aggregate notional amounts of the contracts are not recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures or forward currency contracts.

During the six months ended February 28, 2014, the fund’s average investments in long and short futures contracts represented 3% and 0% of net assets, respectively, based on quarterly average aggregate settlement values. The fund’s average investment in forward currency contracts represented 3% of net assets, based on quarterly average notional amounts.

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

International Growth Fund

to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the absence of a default the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability for the return of the collateral, during the period the securities are on loan. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan.

B. Baillie Gifford Overseas Ltd., Schroder Investment Management North America Inc., and M&G Investment Management Limited each provide investment advisory services to a portion of the fund for a fee calculated at an annual percentage rate of average net assets managed by the advisor. The basic fees of Baillie Gifford Overseas Ltd., Schroder Investment Management North America Inc., and M&G Investment Management Limited are subject to quarterly adjustments based on performance for the preceding three years relative to the MSCI All Country World Index ex USA.

The Vanguard Group manages the cash reserves of the fund on an at-cost basis.

For the six months ended February 28, 2014, the aggregate investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets, before an increase of $3,343,000 (0.03%) based on performance.

C. The Vanguard Group furnishes at cost corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2014, the fund had contributed capital of $2,418,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.97% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

International Growth Fund

The following table summarizes the market value of the fund’s investments as of February 28, 2014, based on the inputs used to value them:


	Level 1	Level 2	Level 3
Investments	($000)	($000)	($000)
Common Stocks—North and South America	1,522,012	255,347	—
Common Stocks—Other	1,028,019	19,455,786	—
Temporary Cash Investments	709,823	23,491	—
Futures Contracts—Liabilities¹	(742)	—	—
Forward Currency Contracts—Assets	—	4,285	—
Forward Currency Contracts—Liabilities	—	(1)	—
Total	3,259,112	19,738,908	—
1 Represents variation margin on the last day of the reporting period.

Securities in certain countries may transfer between Level 1 and Level 2 due to differences in stock market closure times that may result from transitions between standard and daylight saving time in those countries and the U.S. Securities valued at $255,347,000 on February 28, 2014, based on Level 2 inputs were transferred from Level 1 during the fiscal period.

E. At February 28, 2014, the fair values of derivatives were reflected in the Statement of Net Assets as follows:


		Foreign
	Equity	Exchange
	Contracts	Contracts	Total
Statement of Net Assets Caption	($000)	($000)	($000)
Other Assets	—	4,285	4,285
Liabilities	(742)	(1)	(743)

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for the six months ended February 28, 2014, were:


		Foreign
	Equity	Exchange
	Contracts	Contracts	Total
Realized Net Gain (Loss) on Derivatives	($000)	($000)	($000)
Futures Contracts	48,918	—	48,918
Forward Currency Contracts	—	3,698	3,698
Realized Net Gain (Loss) on Derivatives	48,918	3,698	52,616

Change in Unrealized Appreciation (Depreciation) on Derivatives
Futures Contracts	525	—	525
Forward Currency Contracts	—	11,576	11,576
Change in Unrealized Appreciation (Depreciation) on Derivatives	525	11,576	12,101

International Growth Fund

At February 28, 2014, the aggregate settlement value of open futures contracts and the related unrealized appreciation (depreciation) were:


				($000)
			Aggregate
		Number of	Settlement	Unrealized
		Long (Short)	Value	Appreciation
Futures Contracts	Expiration	Contracts	Long (Short)	(Depreciation)
FTSE 100 Index	March 2014	867	98,446	3,117
Dow Jones EURO STOXX 50 Index	March 2014	2,257	97,882	3,465
Topix Index	March 2014	621	73,682	(2,933)
S&P ASX 200 Index	March 2014	343	41,405	1,786
				5,435

Unrealized appreciation (depreciation) on open FTSE 100 Index and Dow Jones EURO STOXX 50 Index futures contracts is required to be treated as realized gain (loss) for tax purposes.

At February 28, 2014, the fund had open forward currency contracts to receive and deliver currencies as follows. Unrealized appreciation (depreciation) on open forward currency contracts is treated as realized gain (loss) for tax purposes.


						Unrealized
	Contract					Appreciation
	Settlement			Contract Amount (000)		(Depreciation)
Counterparty	Date		Receive		Deliver	($000)
Brown Brothers Harriman & Co.	3/26/14	GBP	56,038	USD	91,524	2,297
Brown Brothers Harriman & Co.	3/26/14	EUR	66,641	USD	91,287	696
Brown Brothers Harriman & Co.	3/18/14	JPY	7,807,589	USD	75,667	1,058
Brown Brothers Harriman & Co.	3/25/14	AUD	43,054	USD	38,119	234
Brown Brothers Harriman & Co.	3/25/14	AUD	384	USD	343	(1)
						4,284
AUD—Australian dollar.
EUR—Euro.
GBP—British pound.
JPY—Japanese yen.
USD—U.S. dollar.

At February 28, 2014, the counterparty had deposited in segregated accounts cash of $2,740,000 in connection with amounts due to the fund for open forward currency contracts. After February 28, 2014, the counterparty posted additional cash of $1,140,000 in connection with open forward currency contracts as of February 28, 2014.

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

International Growth Fund

During the six months ended February 28, 2014, the fund realized net foreign currency gains of $1,305,000, which increased distributable net income for tax purposes; accordingly, such gains have been reclassified from accumulated net realized losses to undistributed net investment income.

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2013, the fund had available capital losses totaling $1,613,959,000 to offset future net capital gains through August 31, 2018. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2014; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

At February 28, 2014, the cost of investment securities for tax purposes was $17,380,264,000. Net unrealized appreciation of investment securities for tax purposes was $5,614,214,000, consisting of unrealized gains of $6,338,223,000 on securities that had risen in value since their purchase and $724,009,000 in unrealized losses on securities that had fallen in value since their purchase.

G. During the six months ended February 28, 2014, the fund purchased $2,688,144,000 of investment securities and sold $2,164,321,000 of investment securities, other than temporary cash investments.

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


	Six Months Ended			Year Ended
	February 28, 2014		August 31, 2013
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	473,308	20,903	825,829	41,705
Issued in Lieu of Cash Distributions	136,274	6,114	164,255	8,645
Redeemed	(1,368,689)	(60,589)	(2,390,207)	(122,058)
Net Increase (Decrease)—Investor Shares	(759,107)	(33,572)	(1,400,123)	(71,708)
Admiral Shares
Issued	1,614,503	22,440	2,677,380	42,829
Issued in Lieu of Cash Distributions	189,998	2,681	155,794	2,578
Redeemed	(512,309)	(7,127)	(1,032,719)	(16,564)
Net Increase (Decrease)—Admiral Shares	1,292,192	17,994	1,800,455	28,843

I. Management has determined that no material events or transactions occurred subsequent to February 28, 2014, that would require recognition or disclosure in these financial statements.

About Your Fund’s Expenses

The accompanying table illustrates your fund’s costs in two ways:


Six Months Ended February 28, 2014
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
International Growth Fund	8/31/2013	2/28/2014	Period
Based on Actual Fund Return
Investor Shares	$1,000.00	$1,153.27	$2.56
Admiral Shares	1,000.00	1,154.48	1.87
Based on Hypothetical 5% Yearly Return
Investor Shares	$1,000.00	$1,022.41	$2.41
Admiral Shares	1,000.00	1,023.06	1.76

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.48% for Investor Shares and 0.35% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard International Growth Fund has renewed the fund’s investment advisory arrangements with Baillie Gifford Overseas Ltd. (Baillie Gifford), M&G Investment Management Limited (M&G), and Schroder Investment Management North America Inc. (Schroder Inc.), as well as the sub-advisory agreement with Schroder Investment Management North America Ltd. (Schroder Ltd.). The board determined that renewing the fund’s advisory arrangements was in the best interests of the fund and its shareholders.

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

Nature, extent, and quality of services

Baillie Gifford. Baillie Gifford, a unit of Baillie Gifford & Co., founded in 1908, is among the largest independently owned investment management firms in the United Kingdom. Baillie Gifford uses fundamental research to make long-term investments in high-quality growth companies with a sustainable competitive advantage. Baillie Gifford considers sustainable earnings and free cash flow growth to be the most important determinants of a company’s prospects. The firm takes a bottom-up, stock-driven approach to sector and country allocation, with the objective of selecting stocks that sustain an above-average growth rate and trade at a reasonable price. Baillie Gifford has advised a portion of the International Growth Fund since 2003.

M&G. M&G, founded in 1931, is based in London, England, and specializes in managing equity and fixed income portfolios for both institutional and retail clients worldwide. M&G constructs a portfolio using a long-term, bottom-up investment approach that focuses on identifying underappreciated, quality companies with high return and growth potential. M&G seeks companies in three categories: quality—high-quality companies with scarce assets that support sustainable, superior returns; growth —companies using scarce assets to grow faster than their competitors; and transforming —companies that are emerging from a heavy investment cycle that will lead to a strong rebound in returns. The firm has advised a portion of the fund since 2008.

Schroder. Schroders plc., the parent company of Schroder Inc. and Schroder Ltd. (collectively, Schroder), founded in 1804, specializes in global equity and fixed income management. Schroder employs a sound process, selecting attractive growth stocks from developed and emerging markets outside the United States. Stocks are selected using a bottom-up approach, supported by Schroder’s worldwide network of analysts, economists, and strategists. Schroder Inc. has advised the fund since its inception in 1981, and its affiliate Schroder Ltd. has advised the fund since 2003.

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

Investment performance

Cost

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

The board did not consider profitability of the fund’s advisors in determining whether to approve the advisory fees, because the firms are independent of Vanguard, and the advisory fees are the result of arm’s-length negotiations.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of breakpoints in the fund’s advisory fee schedules. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by each advisor increase.

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

Glossary

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

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

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

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

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

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

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

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

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

Benchmark Information

Spliced International Index: MSCI EAFE Index through May 31, 2010; MSCI All Country World Index ex USA thereafter.

This page intentionally left blank.

The People Who Govern Your Fund


InterestedTrustee¹	and Delphi Automotive LLP (automotive components);
	Senior Advisor at New Mountain Capital.
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the	Amy Gutmann
Board. Principal Occupation(s) During the Past Five	Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group,	Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served	the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director	Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive	Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of	Annenberg School for Communication, with secondary
each of the investment companies served by The	faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard	School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The	School of Education, University of Pennsylvania;
Vanguard Group (1995–2008).	Trustee of the National Constitution Center; Chair
	of the Presidential Commission for the Study of
	Bioethical Issues.
IndependentTrustees
	JoAnn Heffernan Heisen
Emerson U. Fullwood	Born 1950. Trustee Since July 1998. Principal
Born 1948. Trustee Since January 2008. Principal	Occupation(s) During the Past Five Years: Corporate
Occupation(s) During the Past Five Years: Executive	Vice President and Chief Global Diversity Officer
Chief Staff and Marketing Officer for North America	(retired 2008) and Member of the Executive
and Corporate Vice President (retired 2008) of Xerox	Committee (1997–2008) of Johnson & Johnson
Corporation (document management products and	(pharmaceuticals/medical devices/consumer
services); Executive in Residence and 2010	products); Director of Skytop Lodge Corporation
Distinguished Minett Professor at the Rochester	(hotels), the University Medical Center at Princeton,
Institute of Technology; Director of SPX Corporation	the Robert Wood Johnson Foundation, and the Center
(multi-industry manufacturing), the United Way of	for Talent Innovation; Member of the Advisory Board
Rochester, Amerigroup Corporation (managed health	of the Maxwell School of Citizenship and Public Affairs
care), the University of Rochester Medical Center,	at Syracuse University.
Monroe Community College Foundation, and North
Carolina A&T University.	F. Joseph Loughrey
	Born 1949. Trustee Since October 2009. Principal
Rajiv L. Gupta	Occupation(s) During the Past Five Years: President
Born 1945. Trustee Since December 2001.²	and Chief Operating Officer (retired 2009) of Cummins
Principal Occupation(s) During the Past Five Years:	Inc. (industrial machinery); Chairman of the Board
Chairman and Chief Executive Officer (retired 2009)	of Hillenbrand, Inc. (specialized consumer services),
and President (2006–2008) of Rohm and Haas Co.	and of Oxfam America; Director of SKF AB (industrial
(chemicals); Director of Tyco International, Ltd.	machinery), Hyster-Yale Materials Handling, Inc.
(diversified manufacturing and services), Hewlett-	(forklift trucks), the Lumina Foundation for Education,
Packard Co. (electronic computer manufacturing),


and the V Foundation for Cancer Research; Member	Executive Officers
of the Advisory Council for the College of Arts and
Letters and of the Advisory Board to the Kellogg	Glenn Booraem
Institute for International Studies, both at the	Born 1967. Controller Since July 2010. Principal
University of Notre Dame.	Occupation(s) During the Past Five Years: Principal
	of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge	the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal	Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice	companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)
at IBM (information technology services); Fiduciary	Thomas J. Higgins
Member of IBM’s Retirement Plan Committee (2004–	Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth.	2008. Principal Occupation(s) During the Past Five
	Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass	Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal	served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief	the investment companies served by The Vanguard
Investment Officer and Vice President at the University	Group (1998–2008).
of Notre Dame; Assistant Professor of Finance at the
Mendoza College of Business at Notre Dame; Member	Kathryn J. Hyatt
of the Notre Dame 403(b) Investment Committee;	Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc.	Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment	The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry	investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League	Group; Assistant Treasurer of each of the investment
Baseball.	companies served by The Vanguard Group (1988–2008).

André F. Perold	Heidi Stam
Born 1952. Trustee Since December 2004. Principal	Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George	Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus	Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011);	of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of	Group and of each of the investment companies
HighVista Strategies LLC (private investment firm);	served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the	Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.
	Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.
Born 1941. Trustee Since January 1993. Principal	Mortimer J. Buckley	Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman,	Kathleen C. Gubanich	Michael S. Miller
President, and Chief Executive Officer of NACCO	Paul A. Heller	James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster-	Martha G. King	Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman	John T. Marcante
of the Board of University Hospitals of Cleveland.

Peter F. Volanakis	Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years: President	John J. Brennan
and Chief Operating Officer (retired 2010) of Corning	Chairman, 1996–2009
Incorporated (communications equipment); Trustee of	Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board
of the Norris Cotton Cancer Center and of the Advisory	Founder
Board of the Parthenon Group (strategy consulting).	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996

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


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This material may be used in conjunction
with the offering of shares of any Vanguard
fund only if preceded or accompanied by
the fund’s current prospectus.

All comparative mutual fund data are from Lipper, a
Thomson Reuters Company, or Morningstar, Inc., unless
otherwise noted.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
voted the proxies for securities it owned during the 12
months ended June 30. To get the report, visit either
vanguard.com/proxyreporting or sec.gov.

You can review and copy information about your fund at
the SEC’s Public Reference Room in Washington, D.C. To
find out more about this public service, call the SEC at
202-551-8090. Information about your fund is also
available on the SEC’s website, and you can receive
copies of this information, for a fee, by sending a
request in either of two ways: via e-mail addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2014 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q812 042014

Semiannual Report | February 28, 2014

Vanguard FTSE Social Index Fund

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.


Contents
Your Fund’s Total Returns.	1
Chairman’s Letter.	2
Fund Profile.	7
Performance Summary.	8
Financial Statements.	9
About Your Fund’s Expenses.	21
Glossary.	23

See the Glossary for definitions of investment terms used in this report.

About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas. This one is a replica based on an 18th-century British vessel. The HMS Vanguard, another ship of that era, served as the flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.


Your Fund’s Total Returns




Six Months Ended February 28, 2014
	Total
	Returns
Vanguard FTSE Social Index Fund
Investor Shares	16.71%
Institutional Shares	16.81
FTSE4Good US Select Index	16.86
Large-Cap Growth Funds Average	19.74
Large-Cap Growth Funds Average: Derived from data provided by Lipper, a Thomson Reuters Company.


Institutional Shares are available to certain institutional investors who meet specific administrative, service, and account-size criteria.


Your Fund’s Performance at a Glance
August 31, 2013, Through February 28, 2014
			Distributions Per Share
	Starting	Ending	Income	Capital
	Share Price	Share Price	Dividends	Gains
Vanguard FTSE Social Index Fund
Investor Shares	$10.28	$11.84	$0.149	$0.000
Institutional Shares	10.29	11.85	0.160	0.000

Chairman’s Letter

Dear Shareholder,

For the six months ended February 28, 2014, Vanguard FTSE Social Index Fund returned more than 16%, in line with its benchmark, the FTSE4Good US Select Index. This return was higher than that of the broad U.S. stock market but lower than the average return of the fund’s large-capitalization growth fund peers.

The fund gives investors broad-based exposure to large- and mid-cap stocks that meet strict environmental, social, and governance standards established by the index provider. As a result, its sector allocation diverges from that of the broad U.S. stock market.

Over the six months, your fund’s large allocation to health care, financial, and technology stocks proved an advantage. In a market in which most sectors turned in strong results, however, its smaller allocation to some sectors, including industrials, hurt its performance relative to its peers.

A set of positive factors combined to boost U.S. stocks
Favorable corporate earnings, generally positive economic news, improved investor sentiment, and the Federal Reserve’s accommodative bond-buying program all helped the broad U.S. stock market post a strong six-month return of about 16%.

International stocks, in aggregate, returned about 12%. Most of the strength came from the developed markets of Europe; those of the Pacific region managed single-digit returns for the period, as did emerging markets. The latter have seen particularly volatile results amid concerns about China’s slowing economy and the effects of higher interest rates as the Fed winds down its stimulus.

Bonds staged a rebound after last year’s swoon

Bonds, which slumped notably in 2013 as investors worried about the future of the bond-buying program, delivered solid results for the six months. Even as the Fed began trimming its purchases in January, bonds seemed to regain their appeal for investors.

The broad U.S. taxable bond market returned 2.84% for the half year. The yield of the 10-year U.S. Treasury note finished the six months at 2.64%, down a bit from 2.76% at the end of August. (Bond prices and yields move in opposite directions.)

Municipal bonds, which had declined sharply in the fiscal year ended August 31, regained some ground, returning 5.71%. The market was roiled last summer by Detroit’s bankruptcy and fresh coverage of Puerto Rico’s fiscal woes, but as the headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment officer, Tim Buckley, noted recently that, on the whole, “municipalities out there are actually doing a lot better than they were a few years ago.”


Market Barometer

			Total Returns
		Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	-0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 4.93%.

Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates.

The fund’s largest sectors produced much of its return

As I mentioned earlier, the index provider’s criteria for socially responsible investing determines which stocks the fund can hold. The companies included in the FTSE4Good US Select Index have been screened based on their record regarding the environment, human rights, labor rights, health and safety practices, and corporate responsibility. Companies whose business involves tobacco, firearms, alcohol, gambling, adult entertainment, or nuclear power are excluded.

The fund is heavily tilted toward financials, health care, and technology—sectors that tend to adhere to the index provider’s social, human rights, and environmental standards. It has little exposure to oil and gas companies or industrial firms, because many of them fall short of those environmental standards.

For the half year, each of the fund’s ten sectors posted positive returns, with eight reporting double-digit gains. The three most heavily weighted sectors—health care, financials, and technology, which


Expense Ratios
Your Fund Compared With Its Peer Group
	Investor	Institutional	Peer Group
	Shares	Shares	Average
FTSE Social Index Fund	0.28%	0.16%	1.22%

The fund expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the fund’s annualized expense ratios were 0.27% for Investor Shares and 0.16% for Institutional Shares. The peer-group expense ratio is derived from data provided by Lipper, a Thomson Reuters Company, and captures information through year-end 2013.

Peer group: Large-Cap Growth Funds.

together constituted more than 60% of the fund’s holdings, on average—produced more than two-thirds of the overall return.

Health care, which made up about a fifth of the fund’s holdings, contributed the most, with pharmaceutical, biotechnology, and medical-equipment makers performing best. Despite increased competition from generics, some drugmakers have benefited from significant cost-cutting, as well as from investment in research for new drugs to replenish their pipelines.

The appeal of low-cost investing is growing

Minimizing investment costs is a critical part of every investor’s toolkit. Why? Because every dollar paid for fund management expenses is simply a dollar less that can work on your behalf.

Vanguard fund costs remain far below industry average

Industry average expense ratio
Vanguard average expense ratio

Sources: Vanguard and Lipper, a Thomson Reuters Company.

The financial sector was another source of strength; improvements in the U.S. economy and further recovery of the labor and housing markets helped it outpace the broad stock market. Large banks, credit card companies, and financial services firms reported strong earnings and helped boost returns.

Technology was a bright spot too, with some companies benefiting from both increased sales of web advertisements and from their own streamlining efforts. Semiconductor manufacturers and enterprise software providers stood out as well.

The fund’s holdings in industrials and oil and gas held back its result a bit compared with its peers. In industrials, a lack of exposure to some top-performing stocks, including in aerospace and defense, held back returns. Generally weak results from oil and gas producers also hurt the fund’s performance.

Taking only a slice of the market can add risk to your portfolio

Like other Vanguard funds that are devoted to a specific segment of the market, Vanguard FTSE Social Index Fund offers a low-cost, transparent way to gain exposure to, if you will, a slice of a larger pie. These funds can do important work for an investor—filling a gap in a portfolio, for example, or, as with this fund, offering exposure to a set of stocks screened for social responsibility.

But keep in mind that by choosing just a slice of the market pie, you’re also choosing to take on additional risk. Investors who depart from a market-proportional approach by overweighting a certain segment of the market are exposing themselves to more volatility by reducing their portfolio’s degree of diversification.

Diversification is, of course, a powerful strategy for managing risk, and Vanguard generally counsels that investors have exposure to large-, mid-, and small-cap stocks in a way that approximates the U.S. stock market, because this approach helps ensure that they stay diversified.

As we say in Vanguard’s Principles for Investing Success: “Leadership among market segments changes constantly and rapidly, so investors must diversify both to mitigate losses and to participate in gains.” (You can read more about our investment principles at vanguard.com/research.)

You can achieve balanced market diversification through a total stock market fund, or you can assemble segment-specific funds in a way that mirrors the overall market. Either way, appropriate diversification should remain paramount.

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
March 12, 2014

FTSE Social Index Fund

Fund Profile
As of February 28, 2014


Share-Class Characteristics
	Investor	Institutional
	Shares		Shares
Ticker Symbol	VFTSX		VFTNX
Expense Ratio¹	0.28%		0.16%
30-Day SEC Yield	1.53%		1.63%
Portfolio Characteristics
			DJ
			U.S.
		FTSE	Total
		4Good	Market
		US Select	FA
	Fund	Index	Index
Number of Stocks	376	376	3,622
Median Market Cap	$49.8B	$49.8B	$42.4B
Price/Earnings Ratio	19.8x	19.8x	19.8x
Price/Book Ratio	2.4x	2.4x	2.6x
Return on Equity	16.6%	16.6%	16.8%
Earnings Growth
Rate	13.1%	13.1%	12.0%
Dividend Yield	1.8%	1.8%	1.9%
Foreign Holdings	0.0%	0.0%	0.0%
Turnover Rate
(Annualized)	26%	—	—
Short-Term Reserves	0.2%	—	—

Sector Diversification (% of equity exposure)


			DJ
			U.S.
		FTSE	Total
		4Good	Market
		US Select	FA
	Fund	Index	Index
Basic Materials	1.9%	1.9%	3.1%
Consumer Goods	12.1	12.1	9.9
Consumer Services	10.5	10.5	13.7
Financials	27.4	27.4	18.2
Health Care	21.2	21.2	12.5
Industrials	6.5	6.5	13.2
Oil & Gas	3.8	3.8	9.1
Technology	15.0	15.0	15.1
Telecommunications	0.2	0.2	2.1
Utilities	1.4	1.4	3.1


Volatility Measures
	FTSE	DJ
	4Good	U.S. Total
	US Select	Market
	Index	FA Index
R-Squared	1.00	0.97
Beta	1.00	0.99

These measures show the degree and timing of the fund’s fluctuations compared with the indexes over 36 months.

Ten Largest Holdings (% of total net assets)


Google Inc.	Internet	3.6%
Johnson & Johnson	Pharmaceuticals	2.7
Wells Fargo & Co.	Banks	2.6
JPMorgan Chase & Co.	Banks	2.3
Procter & Gamble Co.	Nondurable
	Household Products	2.3
Pfizer Inc.	Pharmaceuticals	2.2
Bank of America Corp.	Banks	1.9
Merck & Co. Inc.	Pharmaceuticals	1.8
Citigroup Inc.	Banks	1.6
Walt Disney Co.	Broadcasting &
	Entertainment	1.5
Top Ten		22.5%

The holdings listed exclude any temporary cash investments and equity index products.

Investment Focus

1 The expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the annualized expense ratios were 0.27% for Investor Shares and 0.16% for Institutional Shares.

FTSE Social Index Fund

Performance Summary

Fiscal-Year Total Returns (%): August 31, 2003, Through February 28, 2014

For a benchmark description, see the Glossary.
Note: For 2014, performance data reflect the six months ended February 28, 2014.

Average Annual Total Returns: Periods Ended December 31, 2013
This table presents returns through the latest calendar quarter—rather than through the end of the fiscal period.
Securities and Exchange Commission rules require that we provide this information.


	Inception	One	Five	Ten
	Date	Year	Years	Years
Investor Shares	5/31/2000	36.84%	19.86%	5.90%
Institutional Shares	1/14/2003	37.09	20.02	6.05

See Financial Highlights for dividend and capital gains information.

FTSE Social Index Fund

Financial Statements (unaudited)

Statement of Net Assets
As of February 28, 2014


			Market
			Value
		Shares	($000)
Common Stocks (100.0%)
Basic Materials (1.9%)
	Praxair Inc.	32,784	4,274
	Ecolab Inc.	30,016	3,234
	Air Products
	& Chemicals Inc.	22,971	2,787
	Mosaic Co.	37,644	1,839
	Alcoa Inc.	117,476	1,379
	Sigma-Aldrich Corp.	13,315	1,257
	FMC Corp.	14,775	1,140
	CONSOL Energy Inc.	25,283	1,014
	International Flavors
	& Fragrances Inc.	9,039	848
	Ashland Inc.	8,519	804
	Airgas Inc.	6,128	661
	Avery Dennison Corp.	10,668	531
	Cliffs Natural Resources Inc.	17,065	342
			20,110
Consumer Goods (12.1%)
	Procter & Gamble Co.	301,066	23,682
	PepsiCo Inc.	171,386	13,723
	Ford Motor Co.	426,655	6,566
	Colgate-Palmolive Co.	102,848	6,462
*	General Motors Co.	144,451	5,229
	NIKE Inc. Class B	65,052	5,094
	Kimberly-Clark Corp.	42,699	4,712
	Johnson Controls Inc.	75,072	3,709
	Kraft Foods Group Inc.	65,285	3,608
	General Mills Inc.	70,281	3,516
	Delphi Automotive plc	34,128	2,272
	VF Corp.	38,200	2,238
*	Michael Kors Holdings Ltd.	20,452	2,005
	Hershey Co.	17,989	1,904
	Mead Johnson Nutrition Co.	22,590	1,842
	Estee Lauder Cos. Inc.
	Class A	25,441	1,751
	Kellogg Co.	27,280	1,656
	Harley-Davidson Inc.	24,543	1,621
	Green Mountain
	Coffee Roasters Inc.	14,656	1,609


			Market
			Value
		Shares	($000)
	BorgWarner Inc.	25,392	1,560
	Coach Inc.	31,077	1,517
	Genuine Parts Co.	17,198	1,515
	Stanley Black & Decker Inc.	17,159	1,425
	Mattel Inc.	37,595	1,403
	Coca-Cola Enterprises Inc.	28,701	1,351
	ConAgra Foods Inc.	46,684	1,326
	Bunge Ltd.	16,298	1,297
	Whirlpool Corp.	8,820	1,276
	Clorox Co.	14,373	1,254
	Dr Pepper Snapple
	Group Inc.	22,278	1,161
	JM Smucker Co.	11,134	1,114
	Ralph Lauren Corp. Class A	6,716	1,082
	PVH Corp.	8,475	1,072
	Church & Dwight Co. Inc.	15,317	1,041
*	TRW Automotive
	Holdings Corp.	12,646	1,041
	Newell Rubbermaid Inc.	31,952	1,026
	Autoliv Inc.	10,508	1,012
*	Mohawk Industries Inc.	6,805	963
*	Electronic Arts Inc.	32,406	926
	McCormick & Co. Inc.	13,295	883
	Campbell Soup Co.	20,044	868
	Harman International
	Industries Inc.	7,509	786
	Lennar Corp. Class A	17,860	784
	Herbalife Ltd.	11,329	755
	Avon Products Inc.	47,875	741
	PulteGroup Inc.	34,607	726
	Hormel Foods Corp.	15,112	717
*	Toll Brothers Inc.	17,741	692
	Energizer Holdings Inc.	6,895	671
*	Lululemon Athletica Inc.	11,495	578
	Hillshire Brands Co.	13,684	514
	Leggett & Platt Inc.	15,729	504
			126,780
Consumer Services (10.5%)
	Walt Disney Co.	194,672	15,731
	Home Depot Inc.	155,979	12,795
*	priceline.com Inc.	5,720	7,715


FTSE Social Index Fund



			Market
			Value
		Shares	($000)
	Time Warner Inc.	100,122	6,721
	Lowe’s Cos. Inc.	116,552	5,831
	Starbucks Corp.	80,168	5,689
	TJX Cos. Inc.	79,921	4,912
	McKesson Corp.	25,098	4,444
	Viacom Inc. Class B	43,813	3,844
	Cardinal Health Inc.	37,866	2,709
	Macy’s Inc.	41,892	2,424
	Omnicom Group Inc.	28,609	2,165
*	AutoZone Inc.	3,762	2,026
*	Dollar General Corp.	33,409	2,001
*	Chipotle Mexican Grill Inc.
	Class A	3,439	1,944
*	O’Reilly Automotive Inc.	11,943	1,802
	Ross Stores Inc.	23,929	1,742
	AmerisourceBergen Corp.
	Class A	25,577	1,735
*	Bed Bath & Beyond Inc.	23,722	1,609
*	Hertz Global Holdings Inc.	49,752	1,393
*	Discovery Communications
	Inc. Class A	16,120	1,343
	L Brands Inc.	23,828	1,342
	Nielsen Holdings NV	27,916	1,321
	Gap Inc.	29,317	1,283
*	Dollar Tree Inc.	22,989	1,259
	Kohl’s Corp.	22,382	1,258
*	CarMax Inc.	24,731	1,198
	Staples Inc.	72,532	986
	H&R Block Inc.	29,887	946
*	IHS Inc. Class A	7,403	887
	Interpublic Group of
	Cos. Inc.	47,951	850
	Tractor Supply Co.	11,689	825
	Best Buy Co. Inc.	30,121	802
	PetSmart Inc.	11,464	769
	Scripps Networks
	Interactive Inc. Class A	9,319	757
	Gannett Co. Inc.	25,431	757
	Darden Restaurants Inc.	14,382	734
*	Discovery
	Communications Inc.	8,926	688
	Foot Locker Inc.	16,505	688
*	Urban Outfitters Inc.	12,239	458
	Dun & Bradstreet Corp.	4,270	424
	Abercrombie & Fitch Co.	8,420	334
	American Eagle
	Outfitters Inc.	19,850	288
^{*,^}	JC Penney Co. Inc.	32,397	236
*	AutoNation Inc.	3,730	196
			109,861
Financials (27.4%)
	Wells Fargo & Co.	585,838	27,195
	JPMorgan Chase & Co.	420,913	23,916
	Bank of America Corp.	1,188,679	19,649
	Citigroup Inc.	337,062	16,391
	Visa Inc. Class A	56,111	12,678


		Market
		Value
	Shares	($000)
American Express Co.	103,987	9,492
MasterCard Inc. Class A	115,710	8,993
US Bancorp	204,899	8,430
American International
Group Inc.	163,560	8,140
MetLife Inc.	100,639	5,099
PNC Financial Services
Group Inc.	58,964	4,822
Morgan Stanley	155,390	4,786
Prudential Financial Inc.	51,332	4,342
Capital One Financial Corp.	57,785	4,243
Bank of New York
Mellon Corp.	127,429	4,078
ACE Ltd.	37,515	3,672
American Tower
Corporation	44,019	3,586
Travelers Cos. Inc.	40,342	3,382
Charles Schwab Corp.	121,043	3,209
Aflac Inc.	50,000	3,204
State Street Corp.	48,647	3,195
Discover Financial Services	52,889	3,035
Marsh & McLennan
Cos. Inc.	61,121	2,944
BB&T Corp.	77,810	2,941
Aon plc	33,356	2,855
Allstate Corp.	50,320	2,730
Public Storage	15,811	2,672
IntercontinentalExchange
Group Inc.	12,698	2,652
CME Group Inc.	35,013	2,585
Franklin Resources Inc.	45,880	2,443
Chubb Corp.	27,860	2,437
McGraw Hill Financial Inc.	29,941	2,385
Ameriprise Financial Inc.	21,556	2,349
Equity Residential	39,531	2,311
Prologis Inc.	55,075	2,269
SunTrust Banks Inc.	59,481	2,241
T. Rowe Price Group Inc.	27,510	2,233
Fifth Third Bancorp	98,004	2,126
Ventas Inc.	32,667	2,039
HCP Inc.	50,178	1,945
Weyerhaeuser Co.	64,384	1,900
Boston Properties Inc.	16,827	1,892
Moody’s Corp.	23,842	1,884
AvalonBay Communities Inc.	14,360	1,852
Health Care REIT Inc.	31,476	1,849
Hartford Financial
Services Group Inc.	49,406	1,739
Northern Trust Corp.	26,649	1,648
Host Hotels & Resorts Inc.	82,480	1,622
Regions Financial Corp.	152,299	1,621
Progressive Corp.	61,539	1,507
Principal Financial Group Inc.	32,640	1,480
Loews Corp.	33,975	1,477
M&T Bank Corp.	12,662	1,476
Lincoln National Corp.	29,337	1,471


FTSE Social Index Fund



			Market
			Value
		Shares	($000)
	KeyCorp	99,273	1,307
	General Growth
	Properties Inc.	57,429	1,265
	Annaly Capital
	Management Inc.	104,811	1,172
	SLM Corp.	48,305	1,156
	CIT Group Inc.	22,050	1,073
	Western Union Co.	61,483	1,029
	Unum Group	29,103	1,012
	Realty Income Corp.	22,587	1,003
	Kimco Realty Corp.	44,963	1,001
	Comerica Inc.	20,249	976
	XL Group plc Class A	31,364	954
	American Capital
	Agency Corp.	42,474	947
	Equifax Inc.	13,423	940
	Macerich Co.	15,487	931
	Huntington Bancshares Inc.	91,535	872
*	CBRE Group Inc. Class A	30,874	863
*	Genworth Financial Inc.
	Class A	54,526	847
	Plum Creek Timber Co. Inc.	19,571	847
*	Markel Corp.	1,420	821
	Willis Group Holdings plc	19,684	810
	TD Ameritrade Holding Corp.	23,659	791
	Digital Realty Trust Inc.	14,258	772
	Cincinnati Financial Corp.	15,711	737
	Torchmark Corp.	9,446	732
*	Alleghany Corp.	1,877	724
	Arthur J Gallagher & Co.	14,462	668
	Rayonier Inc.	14,014	660
	Zions Bancorporation	20,390	636
	Liberty Property Trust	16,074	615
	Duke Realty Corp.	36,020	605
	PartnerRe Ltd.	5,933	587
*	Liberty Ventures Class A	3,959	564
	Legg Mason Inc.	12,092	556
	Assurant Inc.	8,044	528
	Axis Capital Holdings Ltd.	11,789	518
	Regency Centers Corp.	10,143	515
	WR Berkley Corp.	12,014	496
	People’s United
	Financial Inc.	34,842	494
	Commerce Bancshares Inc.	10,019	447
	RenaissanceRe Holdings Ltd.	4,629	442
	Weingarten Realty Investors	11,867	362
	White Mountains
	Insurance Group Ltd.	591	343
	Erie Indemnity Co. Class A	2,901	211
			285,941
Health Care (21.2%)
	Johnson & Johnson	304,181	28,021
	Pfizer Inc.	717,912	23,052
	Merck & Co. Inc.	324,160	18,474
	Amgen Inc.	83,822	10,396
	Bristol-Myers Squibb Co.	182,894	9,834


			Market
			Value
		Shares	($000)
*	Biogen Idec Inc.	26,186	8,921
	AbbVie Inc.	174,234	8,870
	UnitedHealth Group Inc.	111,580	8,622
*	Celgene Corp.	45,585	7,328
	Abbott Laboratories	172,174	6,849
*	Express Scripts Holding Co.	89,883	6,769
	Eli Lilly & Co.	111,868	6,668
	Medtronic Inc.	110,397	6,542
	Thermo Fisher Scientific Inc.	39,910	4,970
*	Actavis plc	19,183	4,236
	Baxter International Inc.	60,114	4,178
	Allergan Inc.	32,874	4,175
*	Alexion Pharmaceuticals Inc.	21,520	3,805
	Covidien plc	50,052	3,601
	WellPoint Inc.	32,731	2,965
	Aetna Inc.	40,686	2,958
*	Regeneron
	Pharmaceuticals Inc.	8,383	2,787
	Stryker Corp.	31,265	2,509
	Becton Dickinson and Co.	21,476	2,474
	Cigna Corp.	30,543	2,431
*	Mylan Inc.	42,145	2,342
	Perrigo Co. plc	13,685	2,250
	St. Jude Medical Inc.	32,268	2,172
*	Vertex Pharmaceuticals Inc.	25,754	2,083
	Humana Inc.	17,329	1,949
*	Boston Scientific Corp.	148,353	1,943
*	Intuitive Surgical Inc.	4,211	1,873
*	HCA Holdings Inc.	35,118	1,798
	Zimmer Holdings Inc.	18,645	1,750
*	DaVita HealthCare
	Partners Inc.	23,190	1,594
	CR Bard Inc.	8,654	1,248
*	Henry Schein Inc.	9,546	1,136
*	Varian Medical Systems Inc.	11,947	1,002
*	Waters Corp.	8,986	1,001
*	CareFusion Corp.	23,430	950
*	Laboratory Corp. of
	America Holdings	9,632	901
	Quest Diagnostics Inc.	16,028	850
*	Edwards Lifesciences Corp.	12,149	848
	Universal Health Services
	Inc. Class B	9,981	801
*	Hospira Inc.	18,159	786
	DENTSPLY International Inc.	15,785	716
	Patterson Cos. Inc.	9,430	388
			221,816
Industrials (6.5%)
	Union Pacific Corp.	51,374	9,267
	FedEx Corp.	32,774	4,370
	Automatic Data
	Processing Inc.	53,379	4,152
	Illinois Tool Works Inc.	44,247	3,650
	Deere & Co.	39,954	3,433
	Norfolk Southern Corp.	34,168	3,140
	CSX Corp.	113,155	3,135


FTSE Social Index Fund



			Market
			Value
		Shares	($000)
	PACCAR Inc.	39,131	2,576
	Waste Management Inc.	51,621	2,142
	Agilent Technologies Inc.	36,641	2,086
	Ingersoll-Rand plc	31,823	1,946
	Rockwell Automation Inc.	15,474	1,901
	Sherwin-Williams Co.	9,269	1,858
	Pentair Ltd.	22,038	1,781
	WW Grainger Inc.	6,681	1,704
*	Fiserv Inc.	28,728	1,668
	Xerox Corp.	135,223	1,486
	Kansas City Southern	12,095	1,136
*	Trimble Navigation Ltd.	28,255	1,078
	Vulcan Materials Co.	14,260	969
	Expeditors International
	of Washington Inc.	22,763	899
	CH Robinson Worldwide Inc.	16,861	874
	Fortune Brands Home
	& Security Inc.	18,262	854
	Xylem Inc.	20,496	806
	MeadWestvaco Corp.	19,637	735
	JB Hunt Transport
	Services Inc.	10,183	732
	Sealed Air Corp.	21,454	730
	MDU Resources Group Inc.	20,849	708
	ADT Corp.	22,364	687
	Cintas Corp.	11,239	682
	Manpowergroup Inc.	8,697	680
	Avnet Inc.	15,132	659
*	Arrow Electronics Inc.	11,183	633
*	Owens-Illinois Inc.	18,122	615
*	Flextronics International Ltd.	67,904	608
	Robert Half International Inc.	14,616	598
*	Allegion plc	10,708	582
	Iron Mountain Inc.	18,665	508
	Broadridge Financial
	Solutions Inc.	13,145	496
	Bemis Co. Inc.	11,407	448
	Ryder System Inc.	5,705	430
	Jabil Circuit Inc.	20,679	383
			67,825
Oil & Gas (3.8%)
	Occidental Petroleum Corp.	89,648	8,653
	Anadarko Petroleum Corp.	55,608	4,680
	Williams Cos. Inc.	75,461	3,116
	Devon Energy Corp.	44,748	2,883
	Noble Energy Inc.	39,615	2,724
	Marathon Oil Corp.	77,009	2,580
	Kinder Morgan Inc.	73,396	2,338
	Chesapeake Energy Corp.	73,571	1,906
	EQT Corp.	16,539	1,692
*	Southwestern Energy Co.	38,804	1,604
	Range Resources Corp.	18,044	1,553
	Ensco plc Class A	25,838	1,361
*	FMC Technologies Inc.	26,234	1,318
	Noble Corp. plc	27,896	866
	Denbury Resources Inc.	40,457	662


			Market
			Value
		Shares	($000)
	QEP Resources Inc.	19,666	569
*	Rowan Cos. plc Class A	13,717	457
*	Newfield Exploration Co.	14,936	421
*	WPX Energy Inc.	22,005	388
*	McDermott International Inc.	25,864	215
			39,986
Technology (15.0%)
*	Google Inc. Class A	31,003	37,689
	Oracle Corp.	383,645	15,004
	QUALCOMM Inc.	187,161	14,091
	Intel Corp.	553,350	13,701
	Hewlett-Packard Co.	213,670	6,385
	EMC Corp.	227,933	6,011
	Texas Instruments Inc.	122,851	5,523
*	Adobe Systems Inc.	55,644	3,818
*	Salesforce.com Inc.	60,140	3,751
*	Cognizant Technology
	Solutions Corp. Class A	33,444	3,480
	Corning Inc.	161,763	3,117
*	Micron Technology Inc.	116,644	2,822
	Applied Materials Inc.	132,970	2,521
	Intuit Inc.	29,146	2,278
	Western Digital Corp.	24,879	2,164
*	Cerner Corp.	32,701	2,007
	SanDisk Corp.	24,995	1,857
	Seagate Technology plc	34,717	1,812
	Broadcom Corp. Class A	57,413	1,706
	Avago Technologies Ltd.
	Class A	27,267	1,682
	Symantec Corp.	76,923	1,652
	Xilinx Inc.	29,400	1,535
*	Juniper Networks Inc.	56,053	1,499
*	NXP Semiconductor NV	26,169	1,472
*	Autodesk Inc.	24,860	1,304
	Altera Corp.	35,355	1,284
	CA Inc.	37,513	1,257
*	Red Hat Inc.	21,038	1,241
*	Citrix Systems Inc.	20,661	1,241
	KLA-Tencor Corp.	18,299	1,192
*	Akamai Technologies Inc.	18,898	1,155
*	Check Point Software
	Technologies Ltd.	16,574	1,117
	NVIDIA Corp.	60,277	1,108
*	Equinix Inc.	5,448	1,035
	Maxim Integrated
	Products Inc.	31,500	1,030
*	F5 Networks Inc.	8,658	973
*	Lam Research Corp.	17,937	928
*	VeriSign Inc.	15,086	831
*	Teradata Corp.	18,082	830
*	VMware Inc. Class A	8,103	778
*	Synopsys Inc.	16,938	684
	LSI Corp.	60,571	672
	DST Systems Inc.	3,488	328
			156,565


FTSE Social Index Fund



		Market
		Value
	Shares	($000)
Telecommunications (0.2%)
* Sprint Corp.	91,002	795
Frontier
Communications Corp.	108,612	530
Windstream Holdings Inc.	64,658	519
		1,844
Utilities (1.4%)
Spectra Energy Corp.	73,889	2,755
Consolidated Edison Inc.	32,094	1,799
Northeast Utilities	34,563	1,536
ONEOK Inc.	22,601	1,337
NiSource Inc.	34,333	1,195
CenterPoint Energy Inc.	47,201	1,116
Wisconsin Energy Corp.	25,270	1,111
American Water
Works Co. Inc.	19,578	878
CMS Energy Corp.	29,383	835
Alliant Energy Corp.	12,281	666
Pepco Holdings Inc.	27,505	561
Questar Corp.	19,461	462
TECO Energy Inc.	24,081	404
* ONE Gas Inc.	5,550	189
		14,844
Total Common Stocks
(Cost $785,643)		1,045,572
Temporary Cash Investment (0.2%)
Money Market Fund (0.2%)
^1,2Vanguard Market Liquidity
Fund, 0.130%
(Cost $1,714)	1,714,438	1,714
Total Investments (100.2%)
(Cost $787,357)		1,047,286
Other Assets and Liabilities (-0.2%)
Other Assets		9,236
Liabilities²		(11,114)
		(1,878)
Net Assets (100%)		1,045,408


At February 28, 2014, net assets consisted of:
	Amount
	($000)
Paid-in Capital	790,114
Undistributed Net Investment Income	1,059
Accumulated Net Realized Losses	(5,694)
Unrealized Appreciation (Depreciation)	259,929
Net Assets	1,045,408


Investor Shares—Net Assets
Applicable to 58,185,822 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	689,040
Net Asset Value Per Share—
Investor Shares	$11.84


Institutional Shares—Net Assets
Applicable to 30,076,538 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization)	356,368
Net Asset Value Per Share—
Institutional Shares	$11.85

See Note A in Notes to Financial Statements.
* Non-income-producing security.
^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $68,000.
1 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
2 Includes $74,000 of collateral received for securities on loan.
REIT—Real Estate Investment Trust.
See accompanying Notes, which are an integral part of the Financial Statements.


FTSE Social Index Fund


Statement of Operations

	Six Months Ended
	February 28, 2014
	($000)
Investment Income
Income
Dividends	8,308
Interest¹	3
Total Income	8,311
Expenses
The Vanguard Group—Note B
Investment Advisory Services	76
Management and Administrative—Investor Shares	712
Management and Administrative—Institutional Shares	170
Marketing and Distribution—Investor Shares	61
Marketing and Distribution—Institutional Shares	37
Custodian Fees	38
Shareholders’ Reports—Investor Shares	5
Shareholders’ Reports—Institutional Shares	5
Total Expenses	1,104
Net Investment Income	7,207
Realized Net Gain (Loss) on Investment Securities Sold	32,372
Change in Unrealized Appreciation (Depreciation) of Investment Securities	104,313
Net Increase (Decrease) in Net Assets Resulting from Operations	143,892
1 Interest income from an affiliated company of the fund was $2,000.

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


FTSE Social Index Fund


Statement of Changes in Net Assets

	Six Months Ended	Year Ended
	February 28,	August 31,
	2014	2013
	($000)	($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	7,207	11,977
Realized Net Gain (Loss)	32,372	40,848
Change in Unrealized Appreciation (Depreciation)	104,313	104,445
Net Increase (Decrease) in Net Assets Resulting from Operations	143,892	157,270
Distributions
Net Investment Income
Investor Shares	(8,211)	(6,443)
Institutional Shares	(4,672)	(3,902)
Realized Capital Gain
Investor Shares	—	—
Institutional Shares	—	—
Total Distributions	(12,883)	(10,345)
Capital Share Transactions
Investor Shares	48,059	78,528
Institutional Shares	36,758	23,215
Net Increase (Decrease) from Capital Share Transactions	84,817	101,743
Total Increase (Decrease)	215,826	248,668
Net Assets
Beginning of Period	829,582	580,914
End of Period¹	1,045,408	829,582
1 Net Assets—End of Period includes undistributed net investment income of $1,059,000 and $6,735,000.

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


FTSE Social Index Fund


Financial Highlights


Investor Shares
	Six Months
	Ended
For a Share Outstanding	February 28,				Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$10.28	$8.30	$7.31	$6.27	$6.20	$7.76
Investment Operations
Net Investment Income	.079	.153	.117	.084	.061	.080
Net Realized and Unrealized Gain (Loss)
on Investments	1.630	1.969	.962	1.016	.077	(1.522)
Total from Investment Operations	1.709	2.122	1.079	1.100	.138	(1.442)
Distributions
Dividends from Net Investment Income	(.149)	(.142)	(.089)	(.060)	(.068)	(.118)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(.149)	(.142)	(.089)	(.060)	(.068)	(.118)
Net Asset Value, End of Period	$11.84	$10.28	$8.30	$7.31	$6.27	$6.20

Total Return¹	16.71%	25.90%	14.94%	17.52%	2.18%	-18.11%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$689	$553	$379	$344	$306	$304
Ratio of Total Expenses to
Average Net Assets	0.27%	0.28%	0.29%	0.29%	0.29%	0.29%
Ratio of Net Investment Income to
Average Net Assets	1.54%	1.63%	1.50%	1.10%	0.91%	1.50%
Portfolio Turnover Rate	26%	29%	45%	11%	35%	30%

The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

1 Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees.

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


FTSE Social Index Fund


Financial Highlights


Institutional Shares
	Six Months
	Ended
For a Share Outstanding	February 28,				Year Ended August 31,
Throughout Each Period	2014	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$10.29	$8.31	$7.32	$6.27	$6.20	$7.77
Investment Operations
Net Investment Income	.086	.163	.128	.095	.070	.087
Net Realized and Unrealized Gain (Loss)
on Investments	1.634	1.971	.960	1.025	.075	(1.528)
Total from Investment Operations	1.720	2.134	1.088	1.120	.145	(1.441)
Distributions
Dividends from Net Investment Income	(.160)	(.154)	(.098)	(.070)	(.075)	(.129)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(.160)	(.154)	(.098)	(.070)	(.075)	(.129)
Net Asset Value, End of Period	$11.85	$10.29	$8.31	$7.32	$6.27	$6.20

Total Return	16.81%	26.05%	15.06%	17.84%	2.29%	-18.03%

Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$356	$276	$202	$155	$128	$104
Ratio of Total Expenses to
Average Net Assets	0.16%	0.16%	0.16%	0.16%	0.16%	0.16%
Ratio of Net Investment Income to
Average Net Assets	1.65%	1.75%	1.63%	1.23%	1.04%	1.63%
Portfolio Turnover Rate	26%	29%	45%	11%	35%	30%
The expense ratio, net income ratio, and turnover rate for the current period have been annualized.

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

FTSE Social Index Fund

Notes to Financial Statements

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

2. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (August 31, 2010–2013), and for the period ended February 28, 2014, and has concluded that no provision for federal income tax is required in the fund’s financial statements.

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

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

5. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

FTSE Social Index Fund

B. The Vanguard Group furnishes at cost investment advisory, corporate management, administrative, marketing, and distribution services. The costs of such services are allocated to the fund under methods approved by the board of trustees. The fund has committed to provide up to 0.40% of its net assets in capital contributions to Vanguard. At February 28, 2014, the fund had contributed capital of $110,000 to Vanguard (included in Other Assets), representing 0.01% of the fund’s net assets and 0.04% of Vanguard’s capitalization. The fund’s trustees and officers are also directors and officers of Vanguard.

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

Level 1—Quoted prices in active markets for identical securities.

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).

At February 28, 2014, 100% of the market value of the fund’s investments was determined based on Level 1 inputs.

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

During the six months ended February 28, 2014, the fund realized $29,670,000 of net capital gains resulting from in-kind redemptions—in which shareholders exchanged fund shares for securities held by the fund rather than for cash. Because such gains are not taxable to the fund, and are not distributed to shareholders, they have been reclassified from accumulated net realized losses to paid-in capital.

The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at August 31, 2013, the fund had available capital losses totaling $8,331,000 to offset future net capital gains through August 31, 2019. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending August 31, 2014; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.

FTSE Social Index Fund

At February 28, 2014, the cost of investment securities for tax purposes was $787,357,000. Net unrealized appreciation of investment securities for tax purposes was $259,929,000, consisting of unrealized gains of $282,405,000 on securities that had risen in value since their purchase and $22,476,000 in unrealized losses on securities that had fallen in value since their purchase.

E. During the six months ended February 28, 2014, the fund purchased $283,935,000 of investment securities and sold $203,255,000 of investment securities, other than temporary cash investments. Purchases and sales include $80,456,000 and $80,094,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.


F. Capital share transactions for each class of shares were:
	Six Months Ended			Year Ended
	February 28, 2014		August 31, 2013
	Amount	Shares	Amount	Shares
	($000)	(000)	($000)	(000)
Investor Shares
Issued	192,126	17,092	167,216	17,268
Issued in Lieu of Cash Distributions	7,650	685	5,980	696
Redeemed	(151,717)	(13,376)	(94,668)	(9,890)
Net Increase (Decrease)—Investor Shares	48,059	4,401	78,528	8,074
Institutional Shares
Issued	74,845	6,596	103,413	10,702
Issued in Lieu of Cash Distributions	4,672	418	2,885	336
Redeemed	(42,759)	(3,794)	(83,083)	(8,450)
Net Increase (Decrease)—Institutional Shares	36,758	3,220	23,215	2,588

G. Management has determined that no material events or transactions occurred subsequent to February 28, 2014, that would require recognition or disclosure in these financial statements.

About Your Fund’s Expenses

The accompanying table illustrates your fund’s costs in two ways:

• Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund‘s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

• Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.


Six Months Ended February 28, 2014
	Beginning	Ending	Expenses
	Account Value	Account Value	Paid During
FTSE Social Index Fund	8/31/2013	2/28/2014	Period
Based on Actual Fund Return
Investor Shares	$1,000.00	$1,167.11	$1.45
Institutional Shares	1,000.00	1,168.10	0.86
Based on Hypothetical 5% Yearly Return
Investor Shares	$1,000.00	$1,023.46	$1.35
Institutional Shares	1,000.00	1,024.00	0.80

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.27% for Investor Shares and 0.16% for Institutional Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period.

Glossary

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

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

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

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

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

Benchmark Information

Spliced Social Index: Calvert Social Index through December 16, 2005; FTSE4Good US Select Index thereafter.

This page intentionally left blank.

The People Who Govern Your Fund


InterestedTrustee¹	and Delphi Automotive LLP (automotive components);
	Senior Advisor at New Mountain Capital.
F. William McNabb III
Born 1957. Trustee Since July 2009. Chairman of the	Amy Gutmann
Board. Principal Occupation(s) During the Past Five	Born 1949. Trustee Since June 2006. Principal
Years: Chairman of the Board of The Vanguard Group,	Occupation(s) During the Past Five Years: President of
Inc., and of each of the investment companies served	the University of Pennsylvania; Christopher H. Browne
by The Vanguard Group, since January 2010; Director	Distinguished Professor of Political Science, School of
of The Vanguard Group since 2008; Chief Executive	Arts and Sciences, and Professor of Communication,
Officer and President of The Vanguard Group, and of	Annenberg School for Communication, with secondary
each of the investment companies served by The	faculty appointments in the Department of Philosophy,
Vanguard Group, since 2008; Director of Vanguard	School of Arts and Sciences, and at the Graduate
Marketing Corporation; Managing Director of The	School of Education, University of Pennsylvania;
Vanguard Group (1995–2008).	Trustee of the National Constitution Center; Chair
	of the Presidential Commission for the Study of
	Bioethical Issues.
IndependentTrustees
	JoAnn Heffernan Heisen
Emerson U. Fullwood	Born 1950. Trustee Since July 1998. Principal
Born 1948. Trustee Since January 2008. Principal	Occupation(s) During the Past Five Years: Corporate
Occupation(s) During the Past Five Years: Executive	Vice President and Chief Global Diversity Officer
Chief Staff and Marketing Officer for North America	(retired 2008) and Member of the Executive
and Corporate Vice President (retired 2008) of Xerox	Committee (1997–2008) of Johnson & Johnson
Corporation (document management products and	(pharmaceuticals/medical devices/consumer
services); Executive in Residence and 2010	products); Director of Skytop Lodge Corporation
Distinguished Minett Professor at the Rochester	(hotels), the University Medical Center at Princeton,
Institute of Technology; Director of SPX Corporation	the Robert Wood Johnson Foundation, and the Center
(multi-industry manufacturing), the United Way of	for Talent Innovation; Member of the Advisory Board
Rochester, Amerigroup Corporation (managed health	of the Maxwell School of Citizenship and Public Affairs
care), the University of Rochester Medical Center,	at Syracuse University.
Monroe Community College Foundation, and North
Carolina A&T University.	F. Joseph Loughrey
	Born 1949. Trustee Since October 2009. Principal
Rajiv L. Gupta	Occupation(s) During the Past Five Years: President
Born 1945. Trustee Since December 2001.²	and Chief Operating Officer (retired 2009) of Cummins
Principal Occupation(s) During the Past Five Years:	Inc. (industrial machinery); Chairman of the Board
Chairman and Chief Executive Officer (retired 2009)	of Hillenbrand, Inc. (specialized consumer services),
and President (2006–2008) of Rohm and Haas Co.	and of Oxfam America; Director of SKF AB (industrial
(chemicals); Director of Tyco International, Ltd.	machinery), Hyster-Yale Materials Handling, Inc.
(diversified manufacturing and services), Hewlett-	(forklift trucks), the Lumina Foundation for Education,
Packard Co. (electronic computer manufacturing),


and the V Foundation for Cancer Research; Member	Executive Officers
of the Advisory Council for the College of Arts and
Letters and of the Advisory Board to the Kellogg	Glenn Booraem
Institute for International Studies, both at the	Born 1967. Controller Since July 2010. Principal
University of Notre Dame.	Occupation(s) During the Past Five Years: Principal
	of The Vanguard Group, Inc.; Controller of each of
Mark Loughridge	the investment companies served by The Vanguard
Born 1953. Trustee Since March 2012. Principal	Group; Assistant Controller of each of the investment
Occupation(s) During the Past Five Years: Senior Vice	companies served by The Vanguard Group (2001–2010).
President and Chief Financial Officer (retired 2013)
at IBM (information technology services); Fiduciary	Thomas J. Higgins
Member of IBM’s Retirement Plan Committee (2004–	Born 1957. Chief Financial Officer Since September
2013); Member of the Council on Chicago Booth.	2008. Principal Occupation(s) During the Past Five
	Years: Principal of The Vanguard Group, Inc.; Chief
Scott C. Malpass	Financial Officer of each of the investment companies
Born 1962. Trustee Since March 2012. Principal	served by The Vanguard Group; Treasurer of each of
Occupation(s) During the Past Five Years: Chief	the investment companies served by The Vanguard
Investment Officer and Vice President at the University	Group (1998–2008).
of Notre Dame; Assistant Professor of Finance at the
Mendoza College of Business at Notre Dame; Member	Kathryn J. Hyatt
of the Notre Dame 403(b) Investment Committee;	Born 1955. Treasurer Since November 2008. Principal
Board Member of TIFF Advisory Services, Inc.	Occupation(s) During the Past Five Years: Principal of
(investment advisor); Member of the Investment	The Vanguard Group, Inc.; Treasurer of each of the
Advisory Committees of the Financial Industry	investment companies served by The Vanguard
Regulatory Authority (FINRA) and of Major League	Group; Assistant Treasurer of each of the investment
Baseball.	companies served by The Vanguard Group (1988–2008).

André F. Perold	Heidi Stam
Born 1952. Trustee Since December 2004. Principal	Born 1956. Secretary Since July 2005. Principal
Occupation(s) During the Past Five Years: George	Occupation(s) During the Past Five Years: Managing
Gund Professor of Finance and Banking, Emeritus	Director of The Vanguard Group, Inc.; General Counsel
at the Harvard Business School (retired 2011);	of The Vanguard Group; Secretary of The Vanguard
Chief Investment Officer and Managing Partner of	Group and of each of the investment companies
HighVista Strategies LLC (private investment firm);	served by The Vanguard Group; Director and Senior
Director of Rand Merchant Bank; Overseer of the	Vice President of Vanguard Marketing Corporation.
Museum of Fine Arts Boston.
	Vanguard Senior ManagementTeam
Alfred M. Rankin, Jr.
Born 1941. Trustee Since January 1993. Principal	Mortimer J. Buckley	Chris D. McIsaac
Occupation(s) During the Past Five Years: Chairman,	Kathleen C. Gubanich	Michael S. Miller
President, and Chief Executive Officer of NACCO	Paul A. Heller	James M. Norris
Industries, Inc. (housewares/lignite), and of Hyster-	Martha G. King	Glenn W. Reed
Yale Materials Handling, Inc. (forklift trucks); Chairman	John T. Marcante
of the Board of University Hospitals of Cleveland.

Peter F. Volanakis	Chairman Emeritus and Senior Advisor
Born 1955. Trustee Since July 2009. Principal
Occupation(s) During the Past Five Years: President	John J. Brennan
and Chief Operating Officer (retired 2010) of Corning	Chairman, 1996–2009
Incorporated (communications equipment); Trustee of	Chief Executive Officer and President, 1996–2008
Colby-Sawyer College; Member of the Advisory Board
of the Norris Cotton Cancer Center and of the Advisory	Founder
Board of the Parthenon Group (strategy consulting).
	John C. Bogle
	Chairman and Chief Executive Officer, 1974–1996


	P.O. Box 2600
	Valley Forge, PA 19482-2600

Connect with Vanguard® > vanguard.com


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the fund’s current prospectus.	the Product. FTSE makes no claim, prediction, warranty
All comparative mutual fund data are from Lipper, a	or representation either as to the results to be obtained
Thomson Reuters Company, or Morningstar, Inc., unless	from the Product or the suitability of the Index for the
otherwise noted.	purpose to which it is being put by Vanguard.

You can obtain a free copy of Vanguard’s proxy voting
guidelines by visiting vanguard.com/proxyreporting or by
calling Vanguard at 800-662-2739. The guidelines are
also available from the SEC’s website, sec.gov. In
addition, you may obtain a free report on how your fund
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You can review and copy information about your fund at
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copies of this information, for a fee, by sending a
request in either of two ways: via e-mail addressed to
publicinfo@sec.gov or via regular mail addressed to the
Public Reference Section, Securities and Exchange
Commission, Washington, DC 20549-1520.

	© 2014 The Vanguard Group, Inc.
	All rights reserved.
	Vanguard Marketing Corporation, Distributor.

	Q2132 042014

Semiannual Report | February 28, 2014

Vanguard U.S. Sector Index Funds

Vanguard’s Principles for Investing Success

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

Goals. Create clear, appropriate investment goals.

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

Discipline. Maintain perspective and long-term discipline.

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

We believe there is no wiser course for any investor.


Contents

Your Fund’s Total Returns	1
Chairman’s Letter	2
Consumer Discretionary Index Fund	6
Consumer Staples Index Fund	16
Energy Index Fund	25
Financials Index Fund	34
Health Care Index Fund	45
Industrials Index Fund	56
Information Technology Index Fund	66
Materials Index Fund	77
Telecommunication Services Index Fund	86
Utilities Index Fund	95
About Your Fund’s Expenses	103
Glossary	105

See the Glossary for definitions of investment terms used in this report.

About the cover: The ship’s wheel represents leadership and guidance, essential qualities in navigating difficult seas. This one is a replica based on an 18th-century British vessel.

The HMS Vanguard, another ship of that era, served as the flagship for British Admiral Horatio Nelson when he defeated a French fleet at the Battle of the Nile.

Your Fund’s Total Returns

Six Months Ended February 28, 2014


Admiral™ Shares¹and ETF Shares²

	Total
	Returns
Vanguard Consumer Discretionary
Index Fund	17.18%
Vanguard Consumer Discretionary ETF
Market Price	17.15
Net Asset Value	17.15
MSCI US IMI/Consumer Discretionary 25/50	17.23
Consumer Services Funds Average³	16.12

Vanguard Consumer Staples Index Fund	8.59%
Vanguard Consumer Staples ETF
Market Price	8.59
Net Asset Value	8.58
MSCI US IMI/Consumer Staples 25/50	8.66
Consumer Goods Funds Average³	11.64

Vanguard Energy Index Fund	9.46%
Vanguard Energy ETF
Market Price	9.45
Net Asset Value	9.45
MSCI US IMI/Energy 25/50	9.51
Natural Resources Funds Average³	11.16

Vanguard Financials Index Fund	13.03%
Vanguard Financials ETF
Market Price	13.11
Net Asset Value	13.04
MSCI US IMI/Financials 25/50	13.12
Financial Services Funds Average³	13.68

Vanguard Health Care Index Fund	22.75%
Vanguard Health Care ETF
Market Price	22.81
Net Asset Value	22.73
MSCI US IMI/Health Care 25/50	22.80
Health/Biotechnology Funds Average³	28.25

Vanguard Industrials Index Fund	20.02%
Vanguard Industrials ETF
Market Price	20.03
Net Asset Value	19.99
MSCI US IMI/Industrials 25/50	20.09
Industrials Funds Average³	19.54


	Total
	Returns
Vanguard Information Technology
Index Fund	19.49%
Vanguard Information Technology ETF
Market Price	19.40
Net Asset Value	19.48
MSCI US IMI/Information Technology 20/50	19.55
Science and Technology Funds Average³	22.88

Vanguard Materials Index Fund	18.10%
Vanguard Materials ETF
Market Price	18.08
Net Asset Value	18.10
MSCI US IMI/Materials 25/50	18.18
Basic Materials Funds Average³	13.64

Vanguard Telecommunication Services
Index Fund	7.02%
Vanguard Telecommunication Services ETF
Market Price	6.98
Net Asset Value	6.98
MSCI US IMI/Telecommunication
Services 25/50	7.05
Telecommunication Funds Average³	14.22

Vanguard Utilities Index Fund	10.84%
Vanguard Utilities ETF
Market Price	10.84
Net Asset Value	10.82
MSCI US IMI/Utilities 25/50	10.92
Utility Funds Funds Average³	12.18

MSCI US IMI/2500	15.91%

1 Admiral Shares carry lower expenses and are available to investors who meet certain account-balance requirements.

2 The Vanguard ETF^®Shares shown are traded on the NYSE Arca exchange and are available only through brokers. The table provides ETF returns based on both the NYSE Arca market price and the net asset value for a share. U.S. Pat. Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

3 Derived from data provided by Lipper, a Thomson Reuters Company.

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares’ market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares’ market price was above or below the NAV.

Note: MSCI US IMI/2500 is the MSCI^®US Investable Market 2500 Index.

Chairman’s Letter

Dear Shareholder,

Stocks across all ten sectors of the U.S. economy participated in the market’s gains over the six months ended February 28, 2014, albeit to varying degrees. Returns from the ten Vanguard U.S. Sector Index Funds ranged from about 7% to nearly 23%.

Five of the funds outperformed the broad market, while the other five lagged. The Health Care and Industrials Index Funds were the top performers, with returns above 20%. The Energy, Consumer Staples, and Telecommunication Services Index Funds posted the lowest returns, all below 10%. Importantly, all ten funds met their objective of closely tracking their MSCI index benchmarks.

A set of positive factors lifted the U.S. stock market
Favorable corporate earnings, generally positive economic news, improved investor sentiment, and the Federal Reserve’s accommodative bond-buying program—all of these factors helped the broad U.S. stock market post a strong six-month return of about 16%.

International stocks, in aggregate, returned about 12%. Most of the strength came from the developed markets of Europe; those in the Pacific region managed single-digit returns for the period, as did emerging markets. Emerging markets in particular have experienced volatility amid concerns about China’s slowing economy and the potential effect of higher interest rates as the Fed winds down its stimulus.

Bonds staged a rebound after last year’s swoon
Bonds, which had slumped notably in 2013 as investors worried over the future of the Fed’s bond-buying program, delivered solid results for the six months. Even as the Fed began trimming its purchases in January, bonds seemed to regain their appeal for investors.

The broad U.S. taxable bond market returned 2.84% for the half year. The yield of the 10-year Treasury note finished the six months at 2.64%, down a bit from 2.76% at the end of August. (Bond prices and yields move in opposite directions.)

Municipal bonds, which had declined sharply in the fiscal year ended August 31, regained some ground, returning 5.71%. The market was roiled last summer by headlines about Detroit’s bankruptcy and Puerto Rico’s fiscal woes, but as the headlines receded, investors seemed to take a more comprehensive view of state and local finances. Our chief investment


Market Barometer
			Total Returns
		Periods Ended February 28, 2014
	Six	One	Five Years
	Months	Year	(Annualized)
Stocks
Russell 1000 Index (Large-caps)	15.67%	26.34%	23.63%
Russell 2000 Index (Small-caps)	17.75	31.56	26.63
Russell 3000 Index (Broad U.S. market)	15.83	26.74	23.86
FTSE All-World ex US Index (International)	12.20	12.19	17.71

Bonds
Barclays U.S. Aggregate Bond Index (Broad taxable market)	2.84%	0.15%	5.13%
Barclays Municipal Bond Index (Broad tax-exempt market)	5.71	–0.21	5.68
Citigroup Three-Month U.S. Treasury Bill Index	0.00	0.05	0.08

CPI
Consumer Price Index	0.39%	1.13%	2.04%

officer, Tim Buckley, noted recently that, on the whole, “municipalities out there are actually doing a lot better than they were a few years ago.”

Money market and savings account returns remained capped by the Fed’s target of 0%–0.25% for short-term interest rates.

International bond markets (as measured by the Barclays Global Aggregate Index ex USD) returned 4.93%.

Health care and industrial stocks performed best, followed by IT Seven of the ten funds enjoyed double-digit gains amid the stock market’s broad-based climb. Leading the pack were health care stocks, which returned almost 23%. Pharmaceutical giants continue to benefit from diverse business lines, international expansion, and strategic acquisitions. And positive rulings from the Food and Drug Administration have resulted in a more favorable business climate.

Conglomerates led the way in the industrial sector, which returned about 20% overall. Aerospace and defense stocks also did well; technological improvements and cost management have helped some of these companies to offset cuts in government spending. The information technology sector returned nearly as much, with high-profile internet companies boosted by the ongoing migration of consumers—and thus advertisers—from traditional to online outlets. Some of the largest software corporations benefited from industry consolidation, attractive pricing models, and cloud computing offerings.

Materials stocks also outperformed the broad market with an aggregate return close to 18%, as strength among the big chemical businesses easily offset weakness in stocks of firms focused on mining and metals. Within the consumer discretionary sector, broadcasting and entertainment corporations and specialty retailers profited from improvements in the economy and in consumers’ confidence, helping the sector to return about 17%.

Five sectors advanced but trailed the overall market

Financials returned about 13%, a bit less than the overall market. The biggest banks continue to benefit from stronger balance sheets, and consumer finance companies were helped by improved lending conditions. Diversified financial services giants, asset managers, and insurance firms also flourished in the favorable investing climate.

The utilities sector returned close to 11%. Many power companies recently have found themselves in a bind: Having converted production from coal to natural gas to achieve long-term savings, they now confront gyrating natural gas prices that rose more than 30% during the six-month period. Energy-related companies were similarly affected by


Expense Ratios
Your Fund Compared With Its Peer Group

	Admiral	ETF	Peer Group
	Shares	Shares	Average
Consumer Discretionary Index Fund	0.14%	0.14%	1.04%
Consumer Staples Index Fund	0.14	0.14	1.14
Energy Index Fund	0.14	0.14	1.32
Financials Index Fund	0.19	0.19	1.29
Health Care Index Fund	0.14	0.14	1.30
Industrials Index Fund	0.14	0.14	0.99
Information Technology Index Fund	0.14	0.14	1.47
Materials Index Fund	0.14	0.14	0.88
Telecommunication Services Index Fund	0.14	0.14	1.30
Utilities Index Fund	0.14	0.14	1.13

The fund expense ratios shown are from the prospectus dated December 23, 2013, and represent estimated costs for the current fiscal year. For the six months ended February 28, 2014, the fund’s annualized expense ratios were: for the Consumer Discretionary Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Consumer Staples Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Energy Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Financials Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Health Care Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Industrials Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Information Technology Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Materials Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Telecommunication Services Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares; for the Utilities Index Fund, 0.13% for Admiral Shares and 0.13% for ETF Shares.

Peer groups are: for the Consumer Discretionary Index Fund, Consumer Services Funds; for the Consumer Staples Index Fund, Consumer Goods Funds; for the Energy Index Fund, National Resources Funds; for the Financials Index Fund, Financial Services Funds; for the Health Care Index Fund, Health/Biotechnology Funds; for the Industrials Index Fund, Industrials Funds; for the Information Technology Index Fund, Science and Technology Funds; for the Materials Index Fund, Basic Materials Funds; for the Telecommunication Services Index Fund, Telecommunication Funds; for the Utilities Index Fund, Utility Funds. Peer-group expense ratios are derived from data provided by Lipper, a Thomson Reuters Company, and capture information through year-end 2013.

A note on expense ratios

This table and the Fund Profiles that

follow this letter display fund expense

ratios from the most recent prospectus.

These figures include the funds’ actual

operating expenses. The figures for the

Financials Index Fund also include

“acquired fund fees and expenses,”

which result from the fund’s holdings in

business development companies

(BDCs).

Although the Securities and Exchange

Commission requires that BDC costs be

included in a fund’s expense ratio, these

fees are not incurred by the fund. They

have no impact on a fund’s total return or

on its tracking error relative to an index.

Footnotes here and on the Fund Profile

page report the fund’s actual expenses

for the period, a more relevant tally of

operating costs incurred by shareholders.

both positive and negative forces: The rising natural gas prices helped profit margins, but oil prices simultaneously drifted downward. The net result for the energy sector was a return of about 9.5%.

The consumer staples sector is typically an underperformer during bull markets, as it is home to companies whose growth prospects are usually viewed as less robust than those of more glamorous businesses. The sector performed accordingly, with a return between 8% and 9%. Telecommunications stocks returned about 7%, with the stocks of the largest cellular network providers outpaced by shares of smaller competitors.

Taking only a slice of the market can add risk to your portfolio

Vanguard’s U.S. Sector Index Funds offer a low-cost, transparent way to gain exposure to any of the industry sectors in the U.S. economy. These funds can be useful for filling in a gap in a portfolio or for emphasizing a certain sector to suit a specific investment goal.

But keep in mind that by choosing just a portion of the market, you’re also choosing to take on additional risk. Investors who depart from a market-proportional approach by overweighting a certain segment of the market can expose themselves to more volatility by reducing their portfolio’s diversification.

Diversification is, of course, a powerful strategy for managing risk. Vanguard generally counsels that investors get exposure to stocks across the entire market spectrum, because this approach helps ensure that they stay diversified.

You can achieve a broad diversification through a total stock market fund, or you can assemble segment-specific funds in a way that mirrors the overall market. Either way, maintaining appropriate diversification is crucial for long-term investors.

As always, thank you for investing with Vanguard.

Sincerely,

F. William McNabb III
Chairman and Chief Executive Officer
March 17, 2014