Form 497 VANGUARD INDEX FUNDS

Article Stock Quotes (1)

July 25, 2016 8:55 AM EDT

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[MHM Draft (FINAL) : 2016.6.30]

SECURITIES REGISTRATION STATEMENT

VANGUARD INDEX FUNDS

- VANGUARD SMALL-CAP INDEX FUND -

SECURITIES REGISTRATION STATEMENT


To: Director of Kanto Local Finance Bureau

	Filing Date of SRS: June 30, 2016

Name of the Registrant Trust:	VANGUARD INDEX FUNDS


Name of Representative:	F. William McNabb III
	Chairman


Address of Principal Office:	100 Vanguard Boulevard,
	Malvern, Pennsylvania 19355
	U.S.A.


Name and Title of Registration Agent:	Ken Miura
	Attorney-at-Law

Address or Place of Business	Mori Hamada & Matsumoto
	Marunouchi Park Building,
	6-1, Marunouchi 2-chome
	Chiyoda-ku, Tokyo

Name of Liaison Contact:	Ken Miura
	Nobuharu Onishi


Place of Liaison Contact:	Mori Hamada & Matsumoto
	Marunouchi Park Building,
	6-1, Marunouchi 2-chome
	Chiyoda-ku, Tokyo


Phone Number:	03-6212-8316

Offering or Sale for Registration


Name of the Fund Making	VANGUARD INDEX FUNDS
Offering or Sale of Foreign	VANGUARD SMALL-CAP INDEX FUND
Investment Fund Securities:


Aggregate Amount of Foreign	The approximate amount of the limit: U.S. $1.0
Investment Fund Securities to be	billion (approximately ¥109.8 billion)
Offered or Sold:

Note : The Yen amount is translated for convenience at the rate of $1.00 = ¥109.75 (the mean of the exchange rate quotations by The Bank of Tokyo - Mitsubishi UFJ, Ltd. for buying and selling spot dollars by telegraphic transfer against Yen on April 28, 2016). The same applies hereafter.

Places where a copy of this Securities Registration
Statement is available for Public Inspection

Not applicable.

PART I. INFORMATION CONCERNING SECURITIES


1.	NAME OF FUND:	VANGUARD SMALL-CAP INDEX FUND
		(hereinafter referred to as the "Fund")

2.	NATURE OF FOREIGN	Investor Shares (hereinafter referred to as the
	INVESTMENT FUND SECU-	“Shares”)
	RITIES CERTIFICATES:	Registered Shares with par value $0.001 per Share.
		Additional offering type (“Tsuikagata”)
		There are no credit ratings which have been provided or
		made available for inspection by any credit-rating firm
		due to the request from the issuer of the Fund, or which
		are to be provided or made available for inspection by
		any credit-rating firm due to the request from the issuer
		of the Fund.
.
3.	TOTAL AMOUNT OF	The approximate amount of the limit: U.S. $1.0 billion
	OFFERING PRICE:	(approximately ¥109.75 billion)


Note 1:	The Yen amount is translated for convenience at the rate of U.S.$1.00 = ¥109.75 (the
	mean of the exchange rate quotations by The Bank of Tokyo – Mitsubishi UFJ, Ltd. for
	buying and selling spot U.S. Dollars by telegraphic transfer against Yen on April 28,
	2016). The same applies hereafter.

Note 2:	Since Shares are denominated in U.S. Dollars, the amounts appearing hereafter are all
	dollar amounts unless otherwise specifically indicated.

Note 3:	In this document, money amounts and percentages have been rounded. Therefore, there
	are cases in which the amount of the “total column” is not equal to the aggregate amount.
	Also, translation into Yen is made simply by multiplying the corresponding amount by the
	conversion rate specified and rounded up when necessary. As a result, in this document,
	there are cases in which Japanese Yen figures for the same information differ from each
	other.


4.	ISSUE PRICE:	The Net Asset Value per Share to be calculated on a
		Fund Business Day immediately after an application for
		purchase is received by the Fund .
		“Fund Business Day” shall mean a day on which the
		New York Stock Exchange is open for business.

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		The Issue Price is available at the PLACE OF
		SUBSCRIPTION as set forth in “8. PLACE OF
		SUBSCRIPTION” herein below.

5.	SALES CHARGE:	None.
		Account Administration Fee at an annual rate of 0.648%
		(0.60% excluding tax) multiplied by the Shareholder's
		average account balance shall be assessed upon each
		Shareholder quarterly in arrears. For Shareholder
		accounts which are redeemed partially or in full prior to
		the end of the quarter, the Account Administration Fee
		shall be charged in proportion to the period in which
		such shareholder holds the shares and assessed at the
		time of each redemption. Quarterly assessments shall be
		net of any fees charged for partial redemptions during
		the quarter.

6.	MINIMUM AMOUNT OR	Minimum shares shall be integral multiples of five (5)
	NUMBER OF SHARES:	shares.

7.	PERIOD OF	From:	July 1, 2016 (Friday)
	SUBSCRIPTION:	To:	June 30, 2017 (Friday)
		Provided that the subscription is handled only on a Fund
		Business Day when sales handling companies are open
		for business in Japan, with the exception of a day in
		which the next business day is a national holiday in
		Japan.

8.	PLACE OF SUBSCRIPTION:	Monex, Inc.
		4-1, Kojimachi 2-chome, Chiyoda-ku,
		Tokyo 102-0083, Japan
		Homepage address: https://www.monex.co.jp/
		Tel: 0120-846-365 Mobile/PHS: 03-6737-1666)
		(Reception time: 8:00 – 17:00 (Weekdays))

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			(hereinafter referred to as the “Distributor” or a “Sales
			Handling Company”)

	Note:	The subscription will be handled at the head office and the branch offices in Japan of the
		above-mentioned Sales Handling Company in Japan and online.

9.	DATE OF PAYMENT:		Investors shall pay the Offering Price to the
			Distributor in Japan within four (4) business
			days in Japan from and including the day when the
			Distributor in Japan confirm the execution of the
			application (the “Trade Date”).
			The total issue price for each application day for
			subscription will be transferred in U. S. Dollars by the
			Distributor in Japan to the Fund’s custodian within one
			(1) Fund Business Day after the subscription date
			(“Payment Date”).

10.	PLACE OF PAYMENT		The subscription is handled at the head office and the
			branch offices of the Distributor.

11.	TRANSFER AGENT		Not applicable

12.	MISCELLANEOUS
(1)	There is no deposit for Subscription.
(2)	Outline of Underwriting, etc.
	(a)	The Distributor undertakes to sell the Shares in accordance with an agreement with
	The Vanguard Group, Inc. (“Vanguard”) in connection with the sale of the Shares in Japan.
	(b)	During the offering period, the Distributor in Japan will execute or forward the
	purchase orders and repurchase requests of the Shares received directly to the Fund's
	Transfer Agent.

	Note: Sales Handling Company means an intermediary financial instruments firm and/or

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		registration agent financial institution which shall conclude the agreement with a
		distributor concerning agency business of Shares of the Fund, act as agent for a
		distributor for subscription or redemption of Shares of the Fund from investors and
		handle the business, etc. concerning receipt of subscription money from investors or
		payment of redemption proceeds to investors, etc.

	(c) The Fund has appointed Vanguard Investments Japan, Ltd. as the Agent Company in Japan.

	Note	“The Agent Company” shall mean a sales handling company who is a member of the
		Japan Securities Dealers Association (“JSDA”) which, under a contract made with a
		foreign issuer of investment securities, makes public the net asset value per Share and
		submits or forwards the financial reports or other documents to other sales and
		repurchase handling companies rendering such other services.

(3)	Method of Subscription:
		Investors who subscribe for Shares shall enter into an agreement with the Distributor
	or Sales Handling Company concerning the foreign securities transactions. For this
	purpose, the Sales Handling Company shall deliver to investors an Agreement of Foreign
	Securities Transactions Account and investors shall submit to the Sales Handling
	Company an Application for opening of Transactions Account opened in accordance with
	such Agreement.
		The subscription amount shall be paid in Yen in principal and the Yen exchange rate
	shall be the rate to be determined by the Sales Handling Company based on the foreign
	exchange rate of the foreign exchange market in Tokyo on the Trade Date of each
	application.
		No interest accrues on the subscription money.
		The subscription amount shall be paid in U.S. Dollars to the Fund's Custodian by the
	Distributor on the Payment Date.
(4)	Offerings other than in Japan:
		In parallel with the Offering, Investor Shares are offered in the United States of
	America.

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PART II. INFORMATION CONCERNING THE FUND

I.	DESCRIPTION OF THE FUND
1.	NATURE OF THE FUND
(1)	Objects and Basic Nature of the Fund
	VANGUARD SMALL-CAP INDEX FUND (the “Fund”) seeks to track the
	performance of a benchmark index that measures the investment return of
	small-capitalization stocks.
	The Fund is a series (or sub-fund) of Vanguard Index Funds (the “Trust”).
	The Trust was organized as a Pennsylvania business trust in 1975 and was
	reorganized as a Delaware statutory trust in 1998. The Trust is registered with the United
	States Securities and Exchange Commission (the "SEC") under the Investment Company
	Act of 1940 (the “1940 Act”) as an open-end management investment company. All funds
	within the Trust are classified as diversified within the meaning of the 1940 Act. The Trust
	currently offers the following funds in Japan:
	Vanguard Small-Cap Index Fund
	Vanguard Total Stock Market Index Fund
	Each fund offers one class of Shares (Investor Shares) in Japan. The Trust has the
	ability to offer additional funds or classes of Shares. There is no limit on the number of full
	and fractional Shares that may be issued for a single fund or class of shares.

(2)	History of the Fund:

	December 31, 1975:	Execution of the Declaration of Trust
		Established as a Pennsylvania business trust
	January 23, 1998:	Execution of the Agreement and Declaration of Trust
	January 28, 1998:	Reorganized as a Delaware statutory trust
	July 19, 2002	Execution of Amended and Restated Agreement and Declaration of
		Trust
	November 19, 2008	Execution of Amended and Restated Agreement and Declaration of
		Trust
	May 10, 2010	Execution of Amended and Restated Agreement and Declaration of
		Trust

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September 23, 2010	Execution of Amended and Restated Agreement and Declaration of
	Trust

(3) Structure of the Fund

(A) Structure of the Fund:

Names and related businesses of the related companies of the Fund are as follows:

(B) The name, Role in Management of the Fund and Outline of Agreements of

Affiliated Parties of the Management Company and the Fund:


Assignment	Companies	Agreements
1. Investment Manager,	The Vanguard Group,	Investment management and transfer
Transfer and	Inc. (“Vanguard”)	and dividend-paying agency services
Dividend-Paying Agent		are provided to the Fund under the Fifth
		Amended and Restated Funds' Service
		Agreement (Note 1) dated June 8, 2009
		(as amended from time to time).
2. Custodian	JPMorgan Chase Bank	Custody services to the Fund are
		provided under a Global Custody
		Agreement (Note 2) dated June 25,
		2001 (as amended from time to time).
3. AgentCompany	Vanguard Investments	Agent Company Agreement with
	Japan Limited	respect to the sale of the Fund’s Shares
		in Japan under an Agent Company
		Agreement (Note 3) dated September
		26, 2005 (as amended by the Amending
		Agreement as of June 10, 2015).
4. Distributorin Japan	Monex, Inc.	Forwarding the purchase or repurchase
		orders for the Shares in Japan under
		Shares Distribution and Redemption
		Agreement (Note 4) dated May 1, 2005
		(as amended from time to time).


Note 1:	“The Fifth Amended and Restated Funds’ Service Agreement” shall mean the agreement between the
	Trust and Vanguard by which the Trust entrusted the powers in respect of management and
	administration of the Funds, etc. to Vanguard.
Note 2:	“The Global Custody Agreement” shall mean the agreement between the Custodian and the Trust by
	which the Custodian agrees to provide services such as custody of the assets of the Fund.
Note 3:	“The Agent Company Agreement” shall mean the agreement by which the Agent Company in Japan
	which was appointed by the Management Company, agrees to distribute the prospectuses regarding the
	shares of the Fund, publication of the Net Asset Value per Share and the distribution of the documents
	such as the management reports, etc. to be required in accordance with the provisions of the applicable
	laws and regulations of Japan and/or the rules of the Japan Securities Dealers’Association.
Note 4:	“Shares Distribution and Redemption Agreement” shall mean the agreement by which the Distributors
	agree, for the purpose of the offering shares in Japan, to distribute shares provided by the Trust.
	Distribution should be made in the manner consistent with the provisions of the applicable laws and
	regulations of Japan and the Prospectus.

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Trust	Vanguard Index Funds
1. Law of Place of Incorporation	The Trust was organized as a Pennsylvania business trust in
	1975 and was reorganized as a Delaware statutory trust in
	1998. The Trust is registered with the SEC under the 1940
	Act as an open-end management investment company. All
	funds within the Trust are classified as diversified within the
	meaning of the 1940 Act.
2. Purpose of the Company	The Trust was established to conduct, operate, and carry on the
	business of a management investment company registered
	under the 1940 Act through one or more series (or sub-fund)
	investing primarily in securities.
3. Amount of Capital Stock	Not applicable.
4. History of the Company	December 31, 1975	Organization of the Trust as a
		Pennsylvania business trust.
	January 23, 1998	Execution of the Agreement and
		Declaration of Trust
	January 28, 1998	Reorganization as a Delaware
		statutory trust.
	July 19, 2002	Execution of the Amended and Restated
		Agreement and Declaration of Trust
	November 19, 2008	Execution of the Amended and Restated
		Agreement and Declaration of Trust
	May 10, 2010	Execution of the Amended andRestated
		Agreement and Declaration of Trust
	September 23, 2010	Execution of the Amended and Restated
		Agreement and Declaration of Trust

5. Major Shareholders	As of March 31, 2016, the following owned of record 5%or
	more of the outstanding Investor Shares of the Fund:
	National Financial Services LLC, New York, NY (10.04%);

	Charles Schwab & Co., Inc., San Francisco, CA ( 15.79%).
6. Name and Title of	F. William McNabb III, Chairman
Representative


(4)	Outline of Laws Regulating the Fund in the Jurisdiction Where Established:
	The Trust was created under, and is subject to, the General Laws and the common
	law of the State of Delaware. With respect to its operations, the Fund is also subject to the
	1940 Act, the United States Internal Revenue Code of 1986 (the “Code”) and regulations
	promulgated under each statute. With respect to the sale of its Shares, the Fund is subject to
	the Securities Act of 1933 (the “1933 Act”), the Securities Exchange Act of 1934 (the

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“1934 Act”), the "Blue Sky" laws (state securities laws of the various states in the United
States) and the regulations promulgated under such laws.
	The substance of the governing law is as follows:
a.	Delaware Statutory Trust Act (Delaware Code Chapter 38 et seq. ("Treatment of
	Delaware Statutory Trusts") NOTE: This chapter was amended, effective 9/1/2002
	to change the term “business trust” to “statutory trust.”
	Chapter 38 provides as follows:
	Delaware has had in effect since October 1, 1988, the Statutory Trust Act, which
	expressly recognizes the Delaware statutory trust. The principal purpose of the
	Statutory Trust Act is to modernize the common law and provide certainty by
	codifying Delaware law with respect to the use of trusts in business transactions.
	The Statutory Trust Act permits the trust agreement of a statutory trust to establish
	whatever rights and obligations of the trustees and of the beneficial owners as are
	desirable. The voting rights of trustees or beneficial owners, or any class or series
	thereof, may be expanded, limited or eliminated with respect to virtually any matter
	relating to the statutory trust. This flexibility provides an advantage over alternative
	forms of business organizations and common law trusts which often are subject to
	mandatory provisions.
	Under the Statutory Trust Act, the beneficial owners of a Delaware statutory trust
	have the same limitations of personal liability as shareholders of a Delaware
	corporation. Except to the extent otherwise provided in the trust agreement, a
	statutory trust is managed by or under the direction of its trustees, who are not liable
	to the statutory trust or to any beneficial owner for the obligations of the statutory
	trust. The Statutory Trust Act provides that at least one trustee must be a Delaware
	resident. However, a trust that is or will become a registered investment company is
	exempt from this requirement. The duties of the trustees may be specified in the
	trust agreement. Moreover, the trust agreement may provide for the appointment of
	managers, employees or other persons to manage the statutory trust with such rights,
	powers and duties as are set forth herein.
	To the extent that trustees or other persons who are responsible for managing the
	statutory trust have duties (including fiduciary duties) and liabilities relating thereto

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	to the statutory trust or to the beneficial owners, such persons' duties may be
	expanded or restricted by the trust agreement. In addition, such persons shall not be
	liable to the statutory trust, any beneficial owner, or any trustee for their good faith
	reliance on the provisions of the trust agreement.
b.	Delaware Common Law
	Common law is a non-statutory law developed through court decisions. Certain
	legal principles developed through decisions rendered by the courts of the State of
	Delaware are applicable to Delaware Statutory Trusts and trustees of such trusts.
c.	Investment Company Act of 1940
	The 1940 Act requires an investment company to (i) disclose financial information
	and fundamental policies, (ii) submit registration statements to the SEC, and (iii)
	submit and deliver certain reports to the SEC and shareholders. The 1940 Act
	generally prohibits investment companies from changing the nature of their
	business or other fundamental policies without the approval of the shareholders.
	The 1940 Act regulates the custody of a fund's assets and, more generally, a fund's
	business and conduct.
d.	Securities Act of 1933
	The 1933 Act regulates the sales of securities. The 1933 Act requires a company
	seeking to offer securities to the public to disclose information about itself and the
	securities by means of a registration statement, including a prospectus. The 1933
	Act makes any fraudulent statement or act in connection with the issuance or sale of
	securities unlawful.
e.	Securities Exchange Act of 1934
	The 1934 Act regulates the purchase and sale of securities in the secondary market
	and the use of proxy statements. It requires publicly traded companies to make
	periodic reports to the SEC and to shareholders. It prohibits the unlawful use of
	inside information and other fraudulent conduct and includes provisions relating to
	the oversight of securities markets and the regulation of securities brokers and
	dealers.
f.	The Internal Revenue Code of 1986
	The Code contains provisions governing the tax treatment of investment companies.

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(5)	Outline of Disclosure System:
(A)	Disclosure in U.S.A.
	(i)	Disclosure to the SEC
		The Fund has filed a registration statement with the SEC on Form N-1A; the Fund
		updates that registration statement periodically in accordance with the 1933 Act and
		the 1940 Act.
	(ii)	Disclosure to Shareholders
		In accordance with the 1940 Act, the Fund is required to send to its Shareholders
		annual and semi-annual reports containing financial information.
(B)	Disclosure in Japan:
	a.	Disclosure to the Supervisory Authority
	(i)	Disclosure Required under the Financial Instruments and Exchange Law:
		When the Trustees intend to offer the Shares of the Fund amounting to 100 million
		Yen or more in Japan, it shall submit to the Director of Kanto Local Finance Bureau
		of the Ministry of Finance the securities registration statement. The said documents
		are made available for public inspection for the investors on the electronic
		disclosure system (EDINET) concerning the disclosure documents of the Annual
		Securities Report, etc. under the Financial Instruments and Exchange Law of Japan.

		The Sales Handling Companies of the Shares shall deliver to the investors “
		Mandatory Prospectuses” (Kofu-Mokuromisho in Japanese), which should be
		delivered to the investors before or at the same time as their application for
		subscription in accordance with the stipulation of the Financial Instruments and
		Exchange Law of Japan. In addition, if requested from investors, the Distributor
		shall deliver to the investors “Prospectuses on Request” (Seikyu-Mokuromisho in
		Japanese), which should be delivered to the investors, if they request them in
		accordance with the stipulation of the Financial Instruments and Exchange Law of
		Japan. For the purpose of disclosure of the financial conditions, etc., the Trustees
		shall submit to the Director of Kanto Local Finance Bureau of the Ministry of
		Finance securities reports within 6 months of the end of each fiscal year,

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	semi-annual reports within 3 months of the end of each semi-annual period and
	extraordinary reports from time to time when changes occur as to material subjects
	of the Fund. These documents are available for public inspection for the investors
	and any other persons who desire on EDINET, etc.
(ii)	Disclosure under the Law Concerning Investment Trusts and Investment
	Companies
	If the Trust conducts business of offering for sale Shares of the Fund, it must file in
	advance the prescribed matters on the Fund with the Commissioner of Financial
	Services Agency under the Law Concerning Investment Trusts and Investment
	Companies (the Law No.198, 1951) (hereinafter referred to as the “Investment
	Trusts Law”). In addition, if the Trust amends the Amended and Restated
	Agreement and Declaration of Trust or in certain other prescribed cases, it must file
	in advance the contents of such changes and the reasons therefor, etc with the
	Commissioner of Financial Services Agency. Further, the Trustees must prepare
	the the Mandatory Management Report and Full Management Report on the
	prescribed matters concerning the assets of the Fund under the Investment Trusts
	Law immediately after the end of each calculation period of the Fund and must file
	such Report with the Commissioner of Financial Services Agency.
b.	Disclosure to Japanese Shareholders:
	In the case where the Amended and Restated Agreement and Declaration of Trust is
	to be amended and the amendment is significant or in certain other prescribed cases,
	the Trust shall provide in advance a written notice of such amendment and reasons
	therefor, etc. to all Japanese Shareholders known to the Distributor in Japan. The
	Japanese Shareholders will be notified of the material facts, including notices from
	the Management Company, through the Distributor or the Sales Handling
	Companies.
	The Japanese Shareholders will be notified of the material facts and of notices from
	the Trustees, through the Sales Handling Companies.
	The above-described Mandatory Management Report on the Fund will be
	sent to the Shareholders known in Japan . The Full Management Report (including

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		Annual Financial Report) in the electronic form will be available on the website of
		the Agent Company

(6)	Outline of the Supervisory Authority:
		The Fund is subject to supervision by the SEC and the securities authorities of the
	various U.S. states.
	(a)	The SEC
	(i)	Acceptance of Registration Applications
		(Sections 7 and 8 of the 1940 Act)
		An investment company must register with the SEC by filing a notification of
		registration in such form as the SEC shall prescribe. An investment company is
		deemed to have been registered when it has filed such registration notification with
		the SEC. After filing the prescribed notification, an investment company must file a
		registration statement with the SEC.
	(ii)	Suspension or revocation of registration as a registered investment company
		(Section 8 of the 1940 Act)
		An investment company may have its registration suspended or revoked by order of
		the SEC if it fails to submit a registration statement or report or if either is materially
		incomplete or misleading.
	(iii)	Supervision of changes in trustees and officers
		(Section 9(b) of the 1940 Act)
		The SEC can prohibit trustees and officers from serving as such in the event they are
		found to have willfully violated certain U.S. federal securities laws.
	(iv)	Examination of registration statement
		(Sections 5, 8 and 10 of the 1933 Act)
		In order to sell Shares to the public, the Fund must file a registration statement with
		the SEC and such statement must have become effective. The registration statement
		is prepared in accordance with Form N-1A and must include the information
		required by Form N-1A and, more generally, the 1933 Act and rules thereunder.
		The SEC will examine the registration statement and, if it does not comply with the
		requirements of Form N-1A, may order its modification or deny its effectiveness.

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	Parts A and B of the Form N-1A registration statement consist of the investment
	company's prospectus and statement of additional information, respectively.
(v)	Supervision of the business
	(Section 12 of the 1940 Act)
	The SEC regulates the function and activities of investment companies, including
	such matters as the purchase of securities on margin, short sales of securities,
	underwriting commitments, acquisition of securities issued by other investment
	companies, organization of face amount certificate companies, acquisition of voting
	stock of insurance companies and other matters.
(vi)	Acceptance of Periodic reports
	(Section 30 of the 1940 Act)
	The SEC requires all investment companies to submit annual and other reports. The
	SEC regulates the content of these reports, thereby exercising its supervisory
	authority.
(b)	State Securities Supervisory Authorities
(i)	Provisions concerning licenses
	Most states require brokers, dealers, securities salespersons, and certain investment
	advisors either to acquire licenses from the state or, at least, to be registered with a
	state agency.
(ii)	Provisions concerning registration of securities
	Each of the 50 states requires notification of the availability of shares upon
	registration of a fund's shares with the SEC prior to any lawful sale or offer to sell.
(iii)	Provisions concerning prevention of fraud
	In general, the Blue Sky Laws provide various sanctions for fraudulent acts in
	connection with the sale of securities, such as prosecution resulting in a fine and/or
	imprisonment, injunction, an order requiring payment of the deposit, temporary
	suspension or revocation of license or registration, and civil liability for damages.

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2.	INVESTMENT POLICY
(1)	Investment Objective
	INVESTMENT OBJECTIVE
		The Fund seeks to track the performance of a benchmark index that measures the
	investment return of small-capitalization stocks.
	PRINCIPAL INVESTMENT STRATEGIES
		The Fund employs an indexing investment approach designed to track the
	performance of the CRSP US Small Cap Index (the “Index”), a broadly diversified index of
	stocks of small U.S. companies. The Fund attempts to replicate the target index by
	investing all, or substantially all, of its assets in the stocks that make up the Index, holding
	each stock in approximately the same proportion as its weighting in the Index.
	Characteristics of Index Funds
		Index funds typically have the following characteristics:
	-	Variety of Investments. Most Vanguard index funds generally invest in the
	securities of a variety of companies and industries.
	-	Relative performance consistency. Because they seek to track market benchmarks,
	index funds usually do not perform dramatically better or worse than their benchmarks.
	-	Low cost. Index funds are inexpensive to run compared with actively managed
	funds. They have low or no research costs, and typically keep trading activity—and thus
	brokerage commissions and other transaction costs—to a minimum compared with actively
	managed funds.
	Security Selection
		The Fund attempts to track the investment performance of a benchmark index that
	measures the return of a particular market segment. The Fund uses the replication method
	of indexing, meaning that the Fund generally holds the same stocks as its target index, and
	in approximately the same proportions.


	The Fund is subject to stock market risk, which is the chance that stock prices overall will
	decline. Stock markets tend to move in cycles, with periods of rising prices and periods of
	falling prices. The Fund’s target index tracks a subset of the U.S. stock market, which could
	cause the Fund to perform differently from the overall stock market. In addition, the Fund’s

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	target index may, at times, become focused in stocks of a particular market sector, which
	would subject the Fund to proportionately higher exposure to the risks of that sector.
	To illustrate the volatility of stock prices, the following table shows the best, worst,
	and average annual total returns for the U.S. stock market over various periods as measured
	by the Standard & Poor’s 500 Index (“S&P 500 Index”), a widely used barometer of U.S.
	market activity. (Total returns consist of dividend income plus change in market price.)
	Note that the returns shown do not include the costs of buying and selling stocks or other
	expenses that a real-world investment portfolio would incur.


	U.S. Stock Market Returns (1926-2015)
	1 Year	5 Years	10 Years	20 Years
Best	54.2%	28.6%	19.9%	17.8%
Worst	-43.1%	-12.4%	-1.4%	3.1%
Average	11.9%	10.0%	10.4%	11.1%


	All market indexes referenced in this document are the exclusive property of their
	respective owners.
	The table covers all of the rolling 1-, 5-, 10-, and 20-year periods from 1926 through
	2015. Investors can see, for example, that although the average annual return on common
	stocks for all of the 5-year periods was 10%, average annual returns for individual 5-year
	periods ranged from -12.4% (from 1928 through 1932) to 28.6% (from 1995 through 1999).
	These average annual returns reflect past performance of common stocks; investors should
	not regard them as an indication of future performance of either the stock market as a whole
	or the Fund in particular.
	Keep in mind that the S&P 500 Index tracks mainly large-cap stocks. Historically,
	small-cap stocks (such as those held by the Fund) have been more volatile than—and at
	times have performed quite differently from—the large cap stocks of the S&P 500 Index.
	Similarly, indexes that focus on growth stocks or value stocks will not necessarily perform
	in the same way as the broader S&P 500 Index. Both growth and value stocks have the
	potential at times to be more volatile than the broader markets.
	Stocks of publicly traded companies and funds that invest in stocks are often
	classified according to market value, or market capitalization. These classifications

- 19 -


	typically include small-cap, mid-cap, and large-cap. It is important to understand that, for
	both companies and stock funds, market-capitalization ranges change over time. Also,
	interpretations of size vary, and there are no “official” definitions of small-, mid-, and
	large-cap, even among Vanguard fund advisors. The asset weighted median market
	capitalization of the Fund’s stock holdings as of December 31, 2015, was:

Vanguard Fund	Asset Weighted Median
	Market Capitalization

Small-Cap Index Fund	$3.0 billion

	The Fund is also subject to investment style risk, which is the chance that returns from
	small-capitalization stocks will trail returns from the overall stock market. Historically,
	small-cap stocks have been more volatile in price than the large-cap stocks that dominate
	the overall market, and they often perform quite differently. Small companies tend to have
	greater stock volatility because, among other things, these companies are more sensitive to
	changing economic conditions.

	TURNOVER RATE
	Although the Fund generally seeks to invest for the long term, the Fund may sell
	securities regardless of how long they have been held. Generally, an index fund sells
	securities in response to redemption requests from shareholders of conventional (not
	exchange-traded) shares or to changes in the composition of its target index. Turnover rates
	for mid-cap and small-cap stock index funds tend to be higher than for large-cap stock
	index funds (although still relatively low, compared with actively managed stock funds)
	because the indexes they track are more likely to change as a result of companies merging,
	growing, or failing. A turnover rate of 100%, for example, would mean that a Fund had
	sold and replaced securities valued at 100% of its net assets within a one-year period.
	During the most recent fiscal year, the Fund’s portfolio turnover rate was 11% of the
	average value of its portfolio. The average turnover rate for U.S. stock funds was
	approximately 65% as reported by Morningstar, Inc., on December 31, 2015.

	OTHER INVESTMENT POLICIES AND RISKS

- 20 -


	The Fund reserves the right to substitute a different index for the index it currently
	tracks if the current index is discontinued, if the Fund’s agreement with the sponsor of its
	target index is terminated, or for any other reason determined in good faith by the Fund's
	board of trustees. In any such instance, the substitute index would represent the same
	market segment as the current index.
	The Fund may invest in non-U.S. securities to the extent necessary to carry out its
	investment strategy of holding all, or substantially all, of the stocks that make up the index
	it tracks. It is not expected that the Fund will invest more than 5% of its assets in non-U.S.
	securities.
	To track its target index as closely as possible, the Fund attempts to remain fully
	invested in stocks. To help stay fully invested, and to reduce transaction costs, the Fund
	may invest, to a limited extent, in derivatives, including stock futures. The Fund may also
	use derivatives such as total return swaps to obtain exposure to a stock, basket of stocks, or
	an index. Generally speaking, a derivative is a financial contract whose value is based on
	the value of a financial asset (such as a stock, a bond, or currency), a physical asset (such as
	gold, oil, or wheat), a market index (such as the S&P 500 Index), or a reference rate (such
	as LIBOR). Investments in derivatives may subject the Fund to risks different from, and
	possibly greater than, those of investments directly in the underlying securities or assets.
	The Fund will not use derivatives for speculation or for the purpose of leveraging
	(magnifying) investment returns.

	CASH MANAGEMENT
	The Fund’s daily cash balance may be invested in one or more Vanguard CMT
	Funds, which are very low-cost money market funds. When investing in a Vanguard CMT
	Fund, the Fund bears its proportionate share of the at-cost expenses of the CMT Fund in
	which it invests. Vanguard receives no additional revenue from Fund assets invested in a
	Vanguard CMT Fund.

	TEMPORARY INVESTMENT MEASURES
	The Fund may temporarily depart from its normal investment policies and
	strategies when the advisor believes that doing so is in the Fund’s best interest, so long as

- 21 -


	the alternative is consistent with the Fund’s investment objective. For instance, the Fund
	may invest beyond the normal limits in derivatives or exchange-traded funds that are
	consistent with the Fund’s objective when those instruments are more favorably priced or
	provide needed liquidity, as might be the case when the Fund receives large cash flows that
	it cannot prudently invest immediately.

	FREQUENT TRADING OR MARKET TIMING
	Background
	Some investors try to profit from strategies involving frequent trading of mutual
	fund shares, such as market-timing. For funds holding non-U.S. securities, investors may
	try to take advantage of an anticipated difference between the price of the fund’s shares and
	price movements in overseas markets, a practice also known as time-zone arbitrage.
	Investors also may try to engage in frequent trading of funds holding investments such as
	small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a
	shareholder engaging in frequent trading, the fund incurs costs for buying and selling
	securities, resulting in increased brokerage and administrative costs. These costs are borne
	by all fund shareholders, including the long-term investors who do not generate the costs.
	In addition, frequent trading may interfere with an advisor’s ability to efficiently manage
	the fund.

	Policies to Address Frequent Trading.
	The Vanguard funds (other than money market funds and short-term bond funds,
	but including the Vanguard Short-Term Inflation-Protected Securities Index Fund) do not
	knowingly accommodate frequent trading. The board of trustees of each Vanguard fund
	(other than money market funds and short-term bond funds but including the Vanguard
	Short-Term Inflation-Protected Securities Index Fund) has adopted policies and procedures
	reasonably designed to detect and discourage frequent trading and, in some cases, to
	compensate the fund for the costs associated with it. These policies and procedures do not
	apply to Vanguard ETF^®* Shares because frequent trading in ETF Shares generally does
	not disrupt portfolio management or otherwise harm fund shareholders. Although there is
	no assurance that Vanguard will be able to detect or prevent frequent trading or

- 22 -


	market-timing in all circumstances, the following policies have been adopted to address
	these issues:
	• Each Vanguard fund reserves the right to reject any purchase request—including
	exchanges from other Vanguard funds—without notice and regardless of size. For
	example, a purchase request could be rejected because the investor has a history of
	frequent trading or if Vanguard determines that such purchase may negatively affect a
	fund’s operation or performance.
	• Each Vanguard fund (other than money market funds and short-term bond funds
	but including the Vanguard Short-Term Inflation-Protected Securities Index Fund)
	generally prohibits, except for certain cases, an investor’s purchases or exchanges into a
	fund account for 30 calendar days (60 calendar days for participants in
	employer-sponsored defined contribution plans recordkept directly be Vanguard) after the
	investor has redeemed or exchanged out of that fund account.
	• Certain Vanguard funds charge shareholders purchase and/or redemption fees on
	transactions.
	Each Vanguard fund (other than money market funds), in determining its net asset value,
	will use fair-value pricing when appropriate, as described in “Part II 3.(1) Valuation of
	Assets”. Fair-value pricing may reduce or eliminate the profitability of certain
	frequent-trading strategies.

	Do not invest with Vanguard if you are a market-timer.

	*U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573;.8,090,646; and 8,417,623

(2)	Objects of Investment
	The Fund seeks to track the performance of a benchmark index that measures the
	investment return of small-capitalization stocks.
	Some of the investment strategies and policies described on the following pages and
	in the preceding section set forth percentage limitations on the Fund’s investment in, or
	holdings of, certain securities or other assets. Unless otherwise required by law,
	compliance with these strategies and policies will be determined immediately after the
	acquisition of such securities or assets by the Fund. Subsequent changes in values, net

- 23 -


	assets, or other circumstances will not be considered when determining whether the
	investment complies with the Fund’s investment strategies and policies.
	The following investment strategies, risks and policies supplement the Fund’s
	Investment strategies, risks and policies set forth above. With respect to the different
	investments discussed as follows, the Fund may acquire such investments to the extent
	consistent with its investment strategies and policies.

	*Borrowing*. A fund’s ability to borrow money is limited by its investment policies
	and limitations, by the 1940 Act, and by applicable exemptions, no-action letters,
	interpretations, and other pronouncements issued from time to time by the SEC and its staff,
	or any other regulatory authority, with jurisdiction. Under the 1940 Act, a fund is required
	to maintain continuous asset coverage (that is, total assets including borrowings, less
	liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for
	borrowings not in excess of 5% of the fund’s total assets made for temporary or emergency
	purposes. Any borrowings for temporary purposes in excess of 5% of the fund’s total assets
	must maintain continuous asset coverage. If the 300% asset coverage should decline as a
	result of market fluctuations or for other reasons, a fund may be required to sell some of its
	portfolio holdings within three days (excluding Sundays and holidays) to reduce the debt
	and restore the 300% asset coverage, even though it may be disadvantageous from an
	investment standpoint to sell securities at that time.
	Borrowing will tend to exaggerate the effect on net asset value of any increase or
	decrease in the market value of a fund’s portfolio. Money borrowed will be subject to
	interest costs that may or may not be recovered by earnings on the securities purchased with
	the proceeds of such borrowing. A fund also may be required to maintain minimum average
	balances in connection with a borrowing or to pay a commitment or other fee to maintain a
	line of credit; either of these requirements would increase the cost of borrowing over the
	stated interest rate.
	The SEC takes the position that transactions that have a leveraging effect on the
	capital structure of a fund or are economically equivalent to borrowing can be viewed as
	constituting a form of borrowing by the fund for purposes of the 1940 Act. These
	transactions can include entering into reverse repurchase agreements; engaging in

- 24 -


	mortgage-dollar-roll transactions; selling securities short (other than short sales
	“against-the-box”); buying and selling certain derivatives (such as futures contracts);
	selling (or writing) put and call options; engaging in sale-buybacks; entering into
	firm-commitment and standby-commitment agreements; engaging in when-issued,
	delayed-delivery, or forward-commitment transactions; and participating in other similar
	trading practices. (Additional discussion about a number of these transactions can be found
	in the Statement of Additional Information available in English upon request). A borrowing
	transaction will not be considered to constitute the issuance, by a fund, of a “senior
	security” as that term is defined in Section 18(g) of the 1940 Act, and therefore such
	transaction will not be subject to the 300% asset coverage requirement otherwise applicable
	to borrowings by a fund, if the fund maintains an offsetting financial position, segregates
	liquid assets (with such liquidity determined by the advisor in accordance with procedures
	established by the board of trustees) equal (as determined on a daily mark-to-market basis)
	in value to the fund’s potential economic exposure under the borrowing transaction, or
	otherwise “covers” the transaction in accordance with applicable SEC guidance
	(collectively, “covers” the transaction). A fund may have to buy or sell a security at a
	disadvantageous time or price in order to cover a borrowing transaction. In addition,
	segregated assets may not be available to satisfy redemptions or to fulfill other obligations.

	*Common Stock*. Common stock represents an equity or ownership interest in an
	issuer. Common stock typically entitles the owner to vote on the election of directors and
	other important matters as well as to receive dividends on such stock. In the event an issuer
	is liquidated or declares bankruptcy, the claims of owners of bonds, other debt holders, and
	owners of preferred stock take precedence over the claims of those who own common
	stock.

	*Convertible Securities*. Convertible securities are hybrid securities that combine the
	investment characteristics of bonds and common stocks. Convertible securities typically
	consist of debt securities or preferred stock that may be converted (on a voluntary or
	mandatory basis) within a specified period of time (normally for the entire life of the
	security) into a certain amount of common stock or other equity security of the same or a

- 25 -


	different issuer at a predetermined price. Convertible securities also include debt securities
	with warrants or common stock attached and derivatives combining the features of debt
	securities and equity securities. Other convertible securities with features and risks not
	specifically referred to herein may become available in the future. Convertible securities
	involve risks similar to those of both fixed income and equity securities. In a corporation’s
	capital structure, convertible securities are senior to common stock, but are usually
	subordinated to senior debt obligations of the issuer.
	The market value of a convertible security is a function of its “investment value”
	and its “conversion value.” A security’s “investment value” represents the value of the
	security without its conversion feature (i.e., a nonconvertible debt security). The investment
	value may be determined by reference to its credit quality and the current value of its yield
	to maturity or probable call date. At any given time, investment value is dependent upon
	such factors as the general level of interest rates, the yield of similar nonconvertible
	securities, the financial strength of the issuer, and the seniority of the security in the issuer’s
	capital structure. A security’s “conversion value” is determined by multiplying the number
	of shares the holder is entitled to receive upon conversion or exchange by the current price
	of the underlying security. If the conversion value of a convertible security is significantly
	below its investment value, the convertible security will trade like nonconvertible debt or
	preferred stock and its market value will not be influenced greatly by fluctuations in the
	market price of the underlying security. In that circumstance, the convertible security takes
	on the characteristics of a bond, and its price moves in the opposite direction from interest
	rates. Conversely, if the conversion value of a convertible security is near or above its
	investment value, the market value of the convertible security will be more heavily
	influenced by fluctuations in the market price of the underlying security. In that case, the
	convertible security’s price may be as volatile as that of common stock. Because both
	interest rates and market movements can influence its value, a convertible security
	generally is not as sensitive to interest rates as a similar debt security, nor is it as sensitive to
	changes in share price as its underlying equity security. Convertible securities are often
	rated below investment grade or are not rated, and they are generally subject to a high
	degree of credit risk.

- 26 -


	Although all markets are prone to change over time, the generally high rate at which
	convertible securities are retired (through mandatory or scheduled conversions by issuers or
	through voluntary redemptions by holders) and replaced with newly issued convertible
	securities may cause the convertible securities market to change more rapidly than other
	markets. For example, a concentration of available convertible securities in a few economic
	sectors could elevate the sensitivity of the convertible securities market to the volatility of
	the equity markets and to the specific risks of those sectors. Moreover, convertible
	securities with innovative structures, such as mandatory-conversion securities and
	equity-linked securities, have increased the sensitivity of the convertible securities market
	to the volatility of the equity markets and to the special risks of those innovations, which
	may include risks different from, and possibly greater than, those associated with traditional
	convertible securities. A convertible security may be subject to the redemption at the option
	of the issuer at a price set in the governing instrument of the convertible security. If a
	convertible security held by a fund is subject to such redemption option and is called for
	redemption, the fund must allow the issuer to redeem the security, convert into the
	underlying common stock, or sell the security to a third party.

	*Depositary Receipts*. Depositary receipts (also sold as participatory notes) are
	securities that evidence ownership interests in a security or a pool of securities that have
	been deposited with a “depository.” Depositary receipts may be sponsored or unsponsored
	and include American Depositary Receipts (ADRs), European Depositary Receipts (EDRs)
	and Global Depositary Receipts (GDRs). For ADRs, the depository is typically a U.S.
	financial institution and the underlying securities are issued by a non-U.S. issuer. For other
	depositary receipts, the depository may be a non-U.S. or a U.S. entity, and the underlying
	securities may have a non-U.S. or a U.S. issuer. Depositary receipts will not necessarily be
	denominated in the same currency as their underlying securities. Generally, ADRs are
	issued in registered form, denominated in U.S. Dollars, and designed for use in the U.S.
	securities markets. Other depositary receipts, such as GDRs and EDRs, may be issued in
	bearer form and denominated in other currencies, and they are generally designed for use in
	securities markets outside the United States. Although the two types of depositary receipt

- 27 -


	facilities (sponsored and unsponsored) are similar, there are differences regarding a
	holder’s rights and obligations and the practices of market participants.
	A depository may establish an unsponsored facility without participation by (or
	acquiescence of) the underlying issuer; typically, however, the depository requests a letter
	of nonobjection from the underlying issuer prior to establishing the facility. Holders of
	unsponsored depositary receipts generally bear all the costs of the facility. The depository
	usually charges fees upon the deposit and withdrawal of the underlying securities, the
	conversion of dividends into U.S. Dollars or other currency, the disposition of noncash
	distributions, and the performance of other services. The depository of an unsponsored
	facility frequently is under no obligation to distribute shareholder communications received
	from the underlying issuer or to pass through voting rights to depositary receipt holders
	with respect to the underlying securities.
	Sponsored depositary receipt facilities are created in generally the same manner as
	unsponsored facilities, except that sponsored depositary receipt facilities are established
	jointly by a depository and the underlying issuer through a deposit agreement. The deposit
	agreement sets out the rights and responsibilities of the underlying issuer, the depository,
	and the depositary receipt holders. With sponsored facilities, the underlying issuer typically
	bears some of the costs of the depositary receipts (such as dividend payment fees of the
	depository), although most sponsored depositary receipt holders may bear costs such as
	deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to
	distribute notices of shareholder meetings, voting instructions, and other shareholder
	communications and information to the depositary receipt holders at the underlying issuer’s
	request.
	For purposes of a fund’s investment policies, investments in depositary receipts will
	be deemed to be investments in the underlying securities. Thus, a depositary receipt
	representing ownership of common stock will be treated as common stock. Depositary
	receipts do not eliminate all of the risks associated with directly investing in the securities
	of non-U.S. issuers.

	*Derivatives*. A derivative is a financial instrument which has a value based on—or
	“derived from”—the values of other assets, reference rates, or indexes. Derivatives may

- 28 -


	relate to a wide variety of underlying references, such as commodities, stocks, bonds,
	interest rates, currency exchange rates, and related indexes. Derivatives include futures
	contracts and options on futures contracts, certain forward-commitment transactions,
	options on securities, caps, floors, collars, swap agreements, and certain other financial
	instruments. Some derivatives, such as futures contracts and certain options, are traded on
	U.S. commodity and securities exchanges, while other derivatives, such as swap
	agreements, may be privately negotiated and entered into in the over-the-counter market
	(OTC Derivatives) or may be cleared through a clearinghouse (Cleared Derivatives) and
	traded on an exchange or swap execution facility. As a result of the Dodd-Frank Wall Street
	Reform and Consumer Protection Act (the “Dodd-Frank Act”), certain swap agreements,
	such as certain standardized credit default and interest rate swap agreements, must be
	cleared through a clearinghouse and traded on an exchange or swap execution facility. This
	could result in an increase in the overall costs of such transactions. While the intent of
	derivatives regulatory reform is to mitigate risks associated with derivatives markets, the
	new regulation could, among other things, increase liquidity and decrease pricing for more
	standardized products while decreasing liquidity and increasing pricing for less
	standardized products. The risks associated with the use of derivatives are different from,
	and possibly greater than, the risks associated with investing directly in the securities or
	assets on which the derivatives are based.
	Derivatives are used by some investors for speculative purposes. Derivatives also
	may be used for a variety of purposes that do not constitute speculation, such as hedging,
	managing risk, seeking to stay fully invested, seeking to reduce transaction costs, seeking to
	simulate an investment in equity or debt securities or other investments, and seeking to add
	value by using derivatives to more efficiently implement portfolio positions when
	derivatives are favorably priced relative to equity or debt securities or other investments.
	There is no assurance that any derivatives strategy used by a fund’s advisor will succeed.
	The other parties to the funds’ OTC Derivatives contracts (usually referred to as
	“counterparties”) will not be considered the issuers thereof for purposes of certain
	provisions of the 1940 Act and the Internal Revenue Code of 1986 (the “Code”), although
	such OTC Derivatives may qualify as securities or investments under such laws. The

- 29 -


	funds’ advisors, however, will monitor and adjust, as appropriate, the funds’ credit risk
	exposure to OTC Derivatives counterparties.
	Derivative products are highly specialized instruments that require investment
	techniques and risk analyses different from those associated with stocks, bonds, and other
	traditional investments. The use of a derivative requires an understanding not only of the
	underlying instrument but also of the derivative itself, without the benefit of observing the
	performance of the derivative under all possible market conditons.
	When the fund enters into a Cleared Derivative, an initial margin deposit with a
	Futures Commission Merchant (FCM) is required. Initial margin deposits are typically
	calculated as an amount equal to the volatility in market value of a Cleared Derivative over
	a fixed period. If the value of the fund’s Cleared Derivatives declines, the fund will be
	required to make additional “variation margin” payments to the FCM to settle the change in
	value. If the value of the fund’s Cleared Derivatives increases, the FCM will be required to
	make additional “variation margin” payments to the fund to settle the change in value. This
	process is known as “marking-to-market” and is calculated on a daily basis.
	For OTC Derivatives, the fund is subject to the risk that a loss may be sustained as a
	result of the insolvency or bankruptcy of the counterparty or the failure of the counterparty
	to make required payments or otherwise comply with the terms of the contract.
	Additionally, the use of credit derivatives can result in losses if a fund’s advisor does not
	correctly evaluate the creditworthiness of the issuer on which the credit derivative is based.
	Derivatives may be subject to liquidity risk, which exists when a particular
	derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if
	the relevant market is illiquid (as is the case with certain OTC Derivatives), it may not be
	possible to initiate a transaction or liquidate a position at an advantageous time or price.
	Derivatives may be subject to pricing or “basis” risk, which exists when a particular
	derivative becomes extraordinarily expensive relative to historical prices or the prices of
	corresponding cash market instruments. Under certain market conditions, it may not be
	economically feasible to initiate a transaction or liquidate a position in time to avoid a loss
	or take advantage of an opportunity.
	Because certain derivatives have a leverage component, adverse changes in the value
	or level of the underlying asset, reference rate, or index can result in a loss substantially

- 30 -


	greater than the amount invested in the derivative itself. Certain derivatives have the
	potential for unlimited loss, regardless of the size of the initial investment. A derivative
	transaction will not be considered to constitute the issuance, by a fund, of a “senior
	security”, as that term is defined in Section 18(g) of the 1940 Act, and therefore such
	transaction will not be subject to the 300% asset coverage requirement otherwise applicable
	to borrowings by a fund, if the fund covers the transaction in accordance with the
	requirements described under the heading “Borrowing.”
	Like most other investments, derivative instruments are subject to the risk that the
	market value of the instrument will change in a way detrimental to a fund’s interest. A fund
	bears the risk that its advisor will incorrectly forecast future market trends or the values of
	assets, reference rates, indexes, or other financial or economic factors in establishing
	derivative positions for the fund. If the advisor attempts to use a derivative as a hedge
	against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that
	the derivative will have or will develop imperfect or no correlation with the portfolio
	investment. This could cause substantial losses for the fund. Although hedging strategies
	involving derivative instruments can reduce the risk of loss, they can also reduce the
	opportunity for gain or even result in losses by offsetting favorable price movements in
	other fund investments. Many derivatives(in particular OTC Derivatives) are complex and
	often valued subjectively. Improper valuations can result in increased cash payment
	requirements to counterparties or a loss of value to a fund.

	*Exchange-Traded Funds*. A fund may purchase shares of exchange-traded funds
	(ETFs), including ETF shares issued by other Vanguard funds. Typically, a fund would
	purchase ETF shares for the same reason it would purchase (and as an alternative to
	purchasing) futures contracts: to obtain exposure to all or a portion of the stock or bond
	market. ETF shares enjoy several advantages over futures. Depending on the market, the
	holding period, and other factors, ETF shares can be less costly and more tax-efficient than
	futures. In addition, ETF shares can be purchased for smaller sums, offer exposure to
	market sectors and styles for which there is no suitable or liquid futures contract, and do not
	involve leverage.

- 31 -


	An investment in an ETF generally presents the same principal risks as an
	investment in a conventional fund (i.e., one that is not exchange-traded) that has the same
	investment objective, strategies, and policies. The price of an ETF can fluctuate within a
	wide range, and a fund could lose money investing in an ETF if the prices of the securities
	owned by the ETF go down. In addition, ETFs are subject to the following risks that do not
	apply to conventional funds: (1) the market price of an ETF’s shares may trade at a discount
	or a premium to their net asset value; (2) an active trading market for an ETF’s shares may
	not develop or be maintained; and (3) trading of an ETF’s shares may be halted by the
	activation of individual or market-wide trading halts (which halt trading for a specific
	period of time when the price of a particular security or overall market prices decline by a
	specific percentage) Trading of an ETF’s shares may also be halted if the shares are
	delisted from the exchange without first being listed on another exchange, or if the listing
	exchange’s officials determine that such action is appropriate in the interest of a fair and
	orderly market for the protection of investors. .
	Most ETFs are investment companies. Therefore, a fund’s purchases of ETF
	shares generally are subject to the limitations on, and the risks of, a fund’s investments in
	other investment companies, which are described under the heading “Other Investment
	Companies.”
	Vanguard ETF^®Shares are exchange-traded shares that represent an interest in an
	investment portfolio held by Vanguard funds. A fund’s investment in Vanguard ETF
	Shares are also generally subject to the descriptions, limitations, and risks described under
	the heading of “Other Investment Companies,” except as provided by an exemption granted
	by the SEC that permits registered investment companies to invest in a Vanguard fund that
	issues ETF Shares beyond the limits of Section 12(d)(1) of the 1940 Act, subject to certain
	terms and conditions


	*Non-U.S. Securities.* Typically, non-U.S. securities are considered to be equity or
	debt securities issued by entities organized, domiciled, or with a principal executive office
	outside the United States, such as non-U.S. corporations and governments. Securities
	issued by certain companies organized outside the United States may not be deemed to be
	non-U.S. securities if the company’s principal operations are conducted from the United

- 32 -


	States or when the company’s equity securities trade principally on a U.S. stock exchange.
	Non-U.S. securities may trade in U.S. or non-U.S. securities markets. A fund may make
	non-U.S. investments either directly by purchasing non-U.S. securities or indirectly by
	purchasing depositary receipts or depositary shares of similar instruments (depositary
	receipts) for non-U.S. securities. Direct investments in non-U.S. securities may be made
	either on non-U.S. securities exchanges or in the over-the-counter (OTC) markets.
	Investing in non-U.S. securities involves certain special risk considerations that are not
	typically associated with investing in securities of U.S. companies or governments.
	Because non-U.S. issuers are not generally subject to uniform accounting, auditing
	and financial reporting standards and practices comparable to those applicable to U.S.
	issuers, there may be less publicly available information about certain non-U.S. issuers than
	about U.S. issuers. Evidence of securities ownership may be uncertain in many non-U.S.
	countries. As a result, there are multiple risks that could result in a loss to the fund,
	including, but not limited to, the risk that the Fund’s trade details could be incorrectly or
	fraudulently entered at the time of the transaction. Securities of non-U.S. issuers are
	generally more volatile and less liquid than securities of comparable U.S. issuers and
	non-U.S. investments may be effected through structures that may be complex or
	confusing. In certain countries, there is less government supervision and regulation of stock
	exchanges, brokers, and listed companies than in the United States. The risk that securities
	traded on foreign exchanges may be suspended, either by the issuers themselves, by an
	exchange, or by government authorities, is also heightened. In addition, with respect to
	certain non-U.S. countries, there is the possibility of expropriation or confiscatory taxation,
	political or social instability, war, terrorism, nationalization, limitations on the removal of
	funds or other assets, or diplomatic developments that could affect U.S. investments in
	those countries. Additionally, economic or other sanctions imposed on the United States by
	a foreign country, or imposed on a foreign country or issuer by the United States, could
	impair a fund’s ability to buy, sell, hold, receive, deliver, or otherwise transact in certain
	investment securities. Sanctions could also affect the value and/or liquidity of a foreign
	security.
	Although an advisor will endeavor to achieve the most favorable execution costs for the
	Fund’s portfolio transactions in non-U.S. securities under the circumstances, commissions

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	(and other transaction costs) are generally higher than those on U.S. securities. In addition,
	it is expected that the custodian arrangement expenses for a Fund that invests primarily in
	non-U.S. securities will be somewhat greater than the expenses for the Fund that invests
	primarily in U.S. securities. Additionally, bankruptcy laws vary by jurisdiction and cash
	deposits may be subject to a custodian’s creditors. Certain non-U.S. governments levy
	withholding or other taxes against dividend and interest income from capital gains on the
	sale of or transactions in non-U.S. securities. Although in some countries a portion of these
	taxes is recoverable by the Fund, the nonrecovered portion of non-U.S. withholding taxes
	will reduce the income received from such securities making up the Fund.
	The value of the non-U.S. securities held by the fund that are not U.S.
	dollar-denominated may be significantly affected by changes in currency exchange rates.
	The U.S. dollar value of a non-U.S. security generally decreases when the value of the U.S.
	dollar rises against the non-U.S. currency in which the security is denominated and it tends
	to increase when the value of the U.S. dollar falls against such currency (as discussed under
	the heading “Non-U.S. Securities — Non-U.S. Currency Transactions,” a fund may attempt
	to hedge its currency risks). In addition, the value of fund assets may be affected by losses
	and other expenses incurred in converting between various currencies in order to purchase
	and sell non-U.S. securities, as well as by currency restrictions, exchange control
	regulation, currency devaluations, and political and economic developments.

	*Non-U.S. Securities – Non-U.S. Currency Transactions.* The value in U.S.
	Dollars of a fund’s non-dollar-denominated non-U.S. securities may be affected favorably
	or unfavorably by changes in non-U.S. currency exchange rates and exchange control
	regulations, and the fund may incur costs in connection with conversions between various
	currencies. To seek to minimize the impact of such factors on net asset values, a fund may
	engage in non-U.S. currency transactions in connection with its investments in non-U.S.
	securities. A fund will enter into non-U.S. currency transactions only to attempt to “hedge”
	the currency risk associated with investing in non-U.S. securities. Although such
	transactions tend to minimize the risk of loss that would result from a decline in the value of
	the hedged currency, they also may limit any potential gain that might result should the
	value of such currency increase.

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	ate prevailing in Currency exchange transactions may be conducted either on a spot (i.e.,
	cash) basis at the r the currency exchange market, or through forward contracts to purchase
	or sell non-U.S. currencies. A forward currency contract involves an obligation to purchase
	or sell a specific currency at a future date, which may be any fixed number of days from the
	date of the contract agreed upon by the parties, at a price set at the time of the contract.
	These contracts are entered into with large commercial banks or other currency traders who
	are participants in the interbank market. Currency exchange transactions also may be
	effected through the use of swap agreements or other derivatives.
	Currency exchange transactions may be considered borrowings. A currency
	exchange transaction will not be considered to constitute the issuance, by a fund, of a
	“senior security” as that term is defined in Section 18(g) of the 1940 Act, and therefore such
	transaction will not be subject to the 300% asset coverage requirement otherwise applicable
	to borrowings by a fund, if the fund covers the transaction in accordance with the
	requirements described under the heading “Borrowing.”
	By entering into a forward contract for the purchase or sale of non-U.S. currency
	involved in underlying security transactions, a fund may be able to protect itself against part
	or all of the possible loss between trade and settlement dates for that purchase or sale
	resulting from an adverse change in the relationship between the U.S. dollar and such
	non-U.S. currency. This practice is sometimes referred to as “transaction hedging.” In
	addition, when the advisor reasonably believes that a particular non-U.S. currency may
	suffer a substantial decline against the U.S. dollar, a fund may enter into a forward contract
	to sell an amount of non-U.S. currency approximating the value of some or all of its
	portfolio securities denominated in such non-U.S. currency. This practice is sometimes
	referred to as “portfolio hedging.” Similarly, when the advisor reasonably believes that the
	U.S. dollar may suffer a substantial decline against a non-U.S. currency, a fund may enter
	into a forward contract to buy that non-U.S. currency for a fixed dollar amount.
	A fund may also attempt to hedge its non-U.S. currency exchange rate risk by
	engaging in currency futures, options, and “cross-hedge” transactions. In cross-hedge
	transactions, a fund holding securities denominated in one non-U.S. currency will enter into
	a forward currency contract to buy or sell a different non-U.S. currency (one that the advisor
	reasonably believes generally tracks the currency being hedged with regard to price

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	movements). The advisor may select the tracking (or substitute) currency rather than the
	currency in which the security is denominated for various reasons, including in order to take
	advantage of pricing or other opportunities presented by the tracking currency or to take
	advantage of more liquid or more efficient market for the tracking currency. Such
	cross-hedges are expected to help protect a fund against an increase or decrease in the value
	of the U.S. dollar against certain non-U.S. currencies.
	A fund may hold a portion of its assets in bank deposits denominated in non-U.S.
	currencies, so as to facilitate investment in non-U.S. securities as well as protect against
	currency fluctuations and the need to convert such assets into U.S. Dollars (thereby also
	reducing transaction costs). To the extent these assets are converted back into U.S. Dollars,
	the value of the assets so maintained will be affected favorably or unfavorably by changes
	in non-U.S. currency exchange rates and exchange control regulations.
	The forecasting of currency market movement is extremely difficult, and whether
	any hedging strategy will be successful is highly uncertain. Moreover, it is impossible to
	forecast with precision the market value of portfolio securities at the expiration of a forward
	currency contract. Accordingly, a fund may be required to buy or sell additional currency
	on the spot market (and bear the expense of such transaction) if its advisor’s predictions
	regarding the movement of non-U.S. currency or securities markets prove inaccurate. In
	addition, the use of cross-hedging transactions may involve special risks, and may leave a
	fund in a less advantageous position than if such a hedge had not been established. Because
	forward currency contracts are privately negotiated transactions, there can be no assurance
	that a fund will have flexibility to roll-over a forward currency contract upon its expiration
	if it desires to do so. Additionally, there can be no assurance that the other party to the
	contract will perform its services thereunder.

	*Futures Contracts and Options on Futures Contracts.* Futures contracts and
	options on futures contracts are derivatives. A futures contract is a standardized agreement
	between two parties to buy or sell at a specific time in the future a specific quantity of a
	commodity at a specific price. The commodity may consist of an asset, a reference rate, or
	an index. A security futures contract relates to the sale of a specific quantity of shares of a
	single equity security or a narrow-based securities index. The value of a futures contract

- 36 -


	tends to increase and decrease in tandem with the value of the underlying commodity. The
	buyer of a futures contract enters into an agreement to purchase the underlying commodity
	on the settlement date and is said to be “long” the contract. The seller of a futures contract
	enters into an agreement to sell the underlying commodity on the settlement date and is said
	to be “short” the contract. The price at which a futures contract is entered into is established
	either in the electronic marketplace or by open outcry on the floor of an exchange between
	exchange members acting as traders or brokers. Open futures contracts can be liquidated or
	closed out by physical delivery of the underlying commodity or payment of the cash
	settlement amount on the settlement date, depending on the terms of the particular contract.
	Some financial futures contracts (such as security futures) provide for physical settlement at
	maturity. Other financial futures contracts (such as those relating to interest rates, non-U.S.
	currencies and broad-based securities indexes) generally provide for cash settlement at
	maturity. In the case of cash-settled futures contracts, the cash settlement amount is equal
	to the difference between the final settlement or market price for the relevant commodity on
	the last trading day of the contract and the price for the relevant commodity agreed upon at
	the outset of the contract. Most futures contracts, however, are not held until maturity but
	instead are “offset” before the settlement date through the establishment of an opposite and
	equal futures position.
	The purchaser or seller of a futures contract is not required to deliver or pay for the
	underlying commodity unless the contract is held until the settlement date. However, both
	the purchaser and seller are required to deposit “initial margin” with a futures commission
	merchant (FCM) when the futures contract is entered into. Initial margin deposits are
	typically calculated as an amount equal to the volatility in market value of a contract over a
	fixed period. If the value of the fund’s position declines, the fund will be required to make
	additional “variation margin” payments to the FCM to settle the change in value. If the
	value of the fund’s position increases, the FCM will be required to make additional
	“variation margin” payments to the fund to settle the change in value. This process is
	known as “marking-to-market” and is calculated on a daily basis.
	A futures transaction will not be considered to constitute the issuance, by a fund, of
	a “senior security”, as that term is defined in Section 18(g) of the 1940 Act, and therefore,
	such transaction will not be subject to the 300% asset coverage requirement otherwise

- 37 -


	applicable to borrowings by the Fund, if the Fund covers the transaction in accordance with
	certain requirements described under the heading “Borrowing.”
	An option on a futures contract (or futures option) conveys the right, but not the
	obligation, to purchase (in the case of a call option) or sell (in the case of a put option) a
	specific futures contract at a specific price (called the “exercise” or “strike price”) any time
	before the option expires. The seller of an option is called an option writer. The purchase
	price of an option is called the premium. The potential loss to an option buyer is limited to
	the amount of the premium plus transaction costs. This will be the case, for example, if the
	option is held and not exercised prior to its expiration date. Generally, an option writer sells
	options with the goal of obtaining the premium paid by the option buyer. If an option sold
	by an option writer expires without being exercised, the writer retains the full amount of the
	premium. The option writer, however, has unlimited economic risk because its potential
	loss, except to the extent offset by the premium received when the option was written, is
	equal to the amount the option is “in-the-money” at the expiration date. A call option is
	in-the-money if the value of the underlying futures contract exceeds the exercise price of
	the option. A put option is in-the-money if the exercise price of the option exceeds the
	value of the underlying futures contract. Generally, any profit realized by an option buyer
	represents a loss for the option writer.
	A fund that takes the position of a writer of a futures option is required to deposit
	and maintain initial and variation margin with respect to the option, as previously described
	in the case of futures contracts. A futures option transaction will not be considered to
	constitute the issuance, by a fund, of a “senior security”, as the term is defined in Section
	18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset
	coverage requirement otherwise applicable to borrowings by the Fund, if the Fund covers
	the transaction in accordance with the requirements described under the heading
	“Borrowing”.
	The Fund intends to comply with the Rule 4.5 under the Commodity Exchange Act
	(CEA), under which a mutual fund may be excluded from the definition of the term
	Commodity Pool Operator (CPO) if the fund meets certain conditions such as limiting its
	investments in certain CEA-regulated instruments (e.g., futures, options, or swaps) and
	complying with certain marketing restrictions. Accordingly, Vanguard is not subject to the

- 38 -


	registration or regulation as a CPO with respect to the Fund under the CEA. The Fund will
	only enter into futures contracts and futures options that are traded on a U.S. or non-U.S.
	exchange, board of trade, or similar entity, or that are quoted on an automated quotation
	system.

	*Futures Contracts and Options on Futures Contracts – Risks.* The risk of loss
	in trading futures contracts and in writing futures options can be substantial, because of the
	low margin deposits required, the extremely high degree of leverage involved in futures and
	options pricing, and the potential high volatility of the futures markets. As a result, a
	relatively small price movement in a futures position may result in immediate and
	substantial loss (or gain) for the investor. For example, if at the time of purchase, 10% of
	the value of the futures contract is deposited as margin, a subsequent 10% decrease in the
	value of the futures contract would result in a total loss of the margin deposit, before any
	deduction for the transaction costs, if the account were then closed out. A 15% decrease
	would result in a loss equal to 150% of the original margin deposit if the contract were
	closed out. Thus, a purchase or sale of a futures contract, and the writing of a futures option,
	may result in losses in excess of the amount invested in the position. In the event of adverse
	price movements, the Fund would continue to be required to make daily cash payments to
	maintain its required margin. In such situations, if the Fund has insufficient cash, it may
	have to sell portfolio securities to meet daily margin requirements (and segregation
	requirements, if applicable) at a time when it may be disadvantageous to do so. In addition,
	on the settlement date, the Fund may be required to make delivery of the instruments
	underlying the futures positions it holds.
	The Fund could suffer losses if it is unable to close out a futures contract or a
	futures option because of an illiquid secondary market. Futures contracts and futures
	options may be closed out only on an exchange that provides a secondary market for such
	products. However, there can be no assurance that a liquid secondary market will exist for
	any particular futures product at any specific time. Thus, it may not be possible to close a
	futures or option position. Moreover, most futures exchanges limit the amount of
	fluctuation permitted in futures contract prices during a single trading day. The daily limit
	establishes the maximum amount that the price of a futures contract may vary either up or

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	down from the previous day's settlement price at the end of a trading session. Once the
	daily limit has been reached in a particular type of contract, no trades may be made on that
	day at a price beyond that limit. The daily limit governs only price movement during a
	particular trading day and therefore does not limit potential losses, because the limit may
	prevent the liquidation of unfavorable positions. Futures contract prices have occasionally
	moved to the daily limit for several consecutive trading days with little or no trading,
	thereby preventing prompt liquidation of future positions and subjecting some futures
	traders to substantial losses. The inability to close futures and options positions also could
	have an adverse impact on the ability to hedge a portfolio investment or to establish a
	substitute for a portfolio investment. U.S. Treasury futures are generally not subject to such
	daily limits.
	The Fund bears the risk that its advisor will incorrectly predict future market trends.
	If the advisor attempts to use a futures contract or a futures option as a hedge against, or as
	a substitute for, a portfolio investment, the Fund will be exposed to the risk that the futures
	position will have or will develop imperfect or no correlation with the portfolio investment.
	This could cause substantial losses for the Fund. Although hedging strategies involving
	futures products can reduce the risk of loss, they can also reduce the opportunity for gain or
	even result in losses by offsetting favorable price movements in other Fund investments.
	The Fund could lose margin payments it has deposited with its FCM, if, for
	example, the FCM breaches its agreement with the Fund or becomes insolvent or goes into
	bankruptcy. In that event, the Fund may be entitled to return of margin owed to it only in
	proportion to the amount received by the FCM's other customers, potentially resulting in
	losses to the Fund.

	*Interfund Borrowing and Lending.* The SEC has granted an exemption
	permitting the registered open-end Vanguard funds to participate in Vanguard's interfund
	lending program. This program allows the Vanguard funds to borrow money from and lend
	money to each other for temporary or emergency purposes. The program is subject to a
	number of conditions, including, among other things, the requirements that (1) no fund may
	borrow or lend money through the program unless it receives a more favorable interest rate
	than is typically available from a bank for a comparable transaction; (2) no fund may lend

- 40 -


	money if the loan would cause its aggregate outstanding loans through the program to
	exceed 15% of its net assets at the time of the loan; and (3) a fund’s interfund loans to any
	one fund shall not exceed 5% of the lending fund’s net assets. In addition, a Vanguard fund
	may participate in the program only if and to the extent that such participation is consistent
	with the fund’s investment objective and investment policies. The boards of trustees of the
	Vanguard funds are responsible for overseeing the interfund lending program. Any delay in
	prepayment to a lending fund could result in a lost investment opportunity or additional
	borrowing costs.

	*Investing for Control.* Each Vanguard fund invests in securities and other
	instruments for the sole purpose of achieving a specific investment objective. As such, a
	Vanguard fund does not seek to acquire, individually or collectively with any other
	Vanguard fund, enough of a company’s outstanding voting stock to have control over
	management decisions. A Vanguard fund does not invest for the purpose of controlling a
	company’s management.

	*Options.* An option is a derivative. An option on a security (or index) is a contract
	that gives the holder of the option, in return for the payment of a “premium,” the right, but
	not the obligation, to buy from (in the case of a call option) or sell to (in the case of a put
	option) the writer of the option the security underlying the option (or the cash value of the
	index) at a specified exercise price prior to the expiration date of the option. The writer of
	an option on a security has the obligation upon exercise of the option to deliver the
	underlying security upon payment of the exercise price (in the case of a call option) or to
	pay the exercise price upon delivery of the underlying security (in the case of a put option).
	The writer of an option on an index has the obligation upon exercise of the option to pay an
	amount equal to the cash value of the index minus the exercise price, multiplied by the
	specified multiplier for the index option. The multiplier for an index option determines the
	size of the investment position the option represents. Unlike exchange-traded options,
	which are standardized with respect to the underlying instrument, expiration date, contract
	size, and strike price, the terms of over-the-counter (OTC) options (options not traded on
	exchanges) generally are established through negotiation with the other party to the option

- 41 -


	contract. Although this type of arrangement allows the purchaser or writer greater
	flexibility to tailor an option to its needs, OTC options generally involve greater credit risk
	than exchange-traded options, which are guaranteed by the clearing organization of the
	exchanges where they are traded.
	The buyer (or holder) of an option is said to be “long” the option, while the seller
	(or writer) of an option is said to be “short” the option. A call option grants to the holder the
	right to buy (and obligates the writer to sell) the underlying security at the strike price,
	which is the predetermined price at which the option may be exercised. A put option grants
	to the holder the right to sell (and obligates the writer to buy) the underlying security at the
	strike price. The purchase price of an option is called the “premium.” The potential loss to
	an option buyer is limited to the amount of the premium plus transaction costs. This will be
	the case if the option is held and not exercised prior to its expiration date. Generally, an
	option writer sells options with the goal of obtaining the premium paid by the option buyer,
	but that person could also seek to profit from an anticipated rise or decline in option prices.
	If an option sold by an option writer expires without being exercised, the writer retains the
	full amount of the premium. The option writer, however, has unlimited economic risk
	because its potential loss, except to the extent offset by the premium received when the
	option was written, is equal to the amount the option is “in-the-money” at the expiration
	date. A call option is in-the-money if the value of the underlying position exceeds the
	exercise price of the option. A put option is in-the-money if the exercise price of the option
	exceeds the value of the underlying position. Generally, any profit realized by an option
	buyer represents a loss for the option writer. The writing of an option will not be considered
	to constitute the issuance, by a fund, of a “senior security” as that term is defined in Section
	18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset
	coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the
	transaction in accordance with the requirements described under the heading “Borrowing.”
	If a trading market in particular options were to become unavailable, investors in
	those options (such as the funds) would be unable to close out their positions until trading
	resumes, and they may be faced with substantial losses if the value of the underlying
	instrument moves adversely during that time. Even if the market were to remain available,
	there may be times when options prices will not maintain their customary or anticipated

- 42 -


	relationships to the prices of the underlying instruments and related instruments. Lack of
	investor interest, changes in volatility, or other factors or conditions might adversely affect
	the liquidity, efficiency, continuity, or even the orderliness of the market for particular
	options.
	A fund bears the risk that its advisor will not accurately predict future market
	trends. If the advisor attempts to use an option as a hedge against, or as a substitute for, a
	portfolio investment, the fund will be exposed to the risk that the option will have or will
	develop imperfect or no correlation with the portfolio investment, which could cause
	substantial losses for the fund. Although hedging strategies involving options can reduce
	the risk of loss, they can also reduce the opportunity for gain or even result in losses by
	offsetting favorable price movements in other fund investments. Many options, in
	particular OTC options, are complex and often valued based on subjective factors.
	Improper valuations can result in increased cash payment requirements to counterparties or
	a loss of value to a fund.

	*OTC Swap Agreements.* An over-the-counter (OTC) swap agreement, which is a
	type of derivative, is an agreement between two parties (counterparties) to exchange
	payments at specified dates (periodic payment dates) on the basis of a specified amount
	(notional amount) with the payments calculated with reference to a specified asset,
	reference rate, or index.
	Examples of OTC swap agreements include, but are not limited to, interest rate
	swaps, credit default swaps, equity swaps, commodity swaps, non-U.S. currency swaps,
	index swaps, excess return swaps, and total return swaps. Most OTC swap agreements
	provide that when the periodic payment dates for both parties are the same, payments are
	netted, and only the net amount is paid to the counterparty entitled to receive the net
	payment. Consequently, a fund’s current obligations (or rights) under an OTC swap
	agreement will generally be equal only to the net amount to be paid or received under the
	agreement, based on the relative values of the positions held by each counterparty. OTC
	swap agreements allow for a wide variety of transactions. For example, fixed rate payments
	may be exchanged for floating rate payments; U.S. dollar-denominated payments may be
	exchanged for payments denominated in a different currency; and payments tied to the

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	price of one asset, reference rate, or index may be exchanged for payments tied to the price
	of another asset, reference rate, or index.
	An OTC option on an OTC swap agreement, also called a “swaption,” is an option
	that gives the buyer the right, but not the obligation, to enter into a swap on a future date in
	exchange for paying a market-based “premium.” A receiver swaption gives the owner the
	right to receive the total return of a specified asset, reference rate, or index. A payer
	swaption gives the owner the right to pay the total return of a specified asset, reference rate,
	or index. Swaptions also include options that allow an existing swap to be terminated or
	extended by one of the counterparties.
	The use of OTC swap agreements by a fund entails certain risks, which may be
	different from, or possibly greater than, the risks associated with investing directly in the
	securities and other investments that are the referenced asset for the swap agreement. OTC
	swaps are highly specialized instruments that require investment techniques, risk analyses,
	and tax planning different from those associated with stocks, bonds, and other traditional
	investments. The use of an OTC swap requires an understanding not only of the referenced
	asset, reference rate, or index but also of the swap itself, without the benefit of observing the
	performance of the swap under all possible market conditions.
	OTC swap agreements may be subject to liquidity risk, which exists when a
	particular swap is difficult to purchase or sell. If an OTC swap transaction is particularly
	large or if the relevant market is illiquid (as is the case with many OTC swaps), it may not
	be possible to initiate a transaction or liquidate a position at an advantageous time or price,
	which may result in significant losses. In addition, OTC swap transactions may be subject
	to a fund’s limitation on investments in illiquid securities.
	OTC swap agreements may be subject to pricing risk, which exists when a
	particular swap becomes extraordinarily expensive or inexpensive relative to historical
	prices or the prices of corresponding cash market instruments. Under certain market
	conditions, it may not be economically feasible to initiate a transaction or liquidate a
	position in time to avoid a loss or take advantage of an opportunity or to realize the intrinsic
	value of the OTC swap agreement.
	Because certain OTC swap agreements have a leverage component, adverse
	changes in the value or level of the underlying asset, reference rate or index can result in a

- 44 -


	loss substantially greater than the amount invested in the swap itself. Certain OTC swaps
	have the potential for unlimited loss, regardless of the size of the initial investment. A
	leveraged swap transaction will not be considered to constitute the issuance, by a fund, of a
	“senior security” as that term is defined in Section 18(g) of the 1940 Act, and therefore
	such transaction will not be subject to the 300% asset coverage requirement otherwise
	applicable to borrowings by a fund, if the fund covers the transaction in accordance with the
	requirements described under the heading “Borrowing.”
	Like most other investments, OTC swap agreements are subject to the risk that the
	market value of the instrument will change in a way detrimental to a fund’s interest. A fund
	bears the risk that its advisor will not accurately forecast future market trends or the values
	of assets, reference rates, indexes, or other economic factors in establishing OTC swap
	positions for the fund. If the advisor attempts to use an OTC swap as a hedge against, or as
	a substitute for, a portfolio investment, the fund will be exposed to the risk that the OTC
	swap will have or will develop imperfect or no correlation with the portfolio investment.
	This could cause substantial losses for the fund. Although hedging strategies involving
	swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain
	or even result in losses by offsetting favorable price movements in other fund investments.
	Many OTC swaps are complex and often valued subjectively. Improper valuations can
	result in increased cash payment requirements to counterparties or a loss of value to a fund.
	The use of an OTC swap agreement also involves the risk that a loss may be
	sustained as a result of the insolvency or bankruptcy of the counterparty or the failure of the
	counterparty to make required payments or otherwise comply with the terms of the
	agreement. Additionally, the use of credit default swaps can result in losses if a fund’s
	advisor does not correctly evaluate the creditworthiness of the issuer on which the credit
	swap is based.
	The market for OTC swaps and swaptions is a relatively new market. It is possible
	that developments in the swaps market could adversely affect a fund, including its ability to
	terminate existing OTC swap agreements or to realize amounts to be received under such
	agreements. As previously noted, under the Dodd-Frank Act, certain swaps that may be
	used by a fund may be cleared through a clearinghouse and traded on an exchange or swap
	execution facility.

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	*Non-U.S. Securities – Non-U.S. Investment Companies.* Some of the countries in
	which a fund may invest may not permit, or may place economic restrictions on, direct
	investment by outside investors. Fund investments in such countries may be permitted only
	through non-U.S. government-approved or authorized investment vehicles, which may
	include other investment companies. Such investments may be made through registered or
	unregistered closed-end investment companies that invest in non-U.S. securities. Investing
	through such vehicles may involve layered fees or expenses and may also be subject to the
	limitations on, and the risks of, a fund’s investments in other investment companies, which
	are described under the heading “Other Investment Companies.”

	*Other Investment Companies*. A fund may invest in other investment companies
	to the extent permitted by applicable law or SEC exemption. Under section 12(d)(1) of the
	1940 Act, a fund generally may invest up to 10% of its assets in shares of investment
	companies and up to 5% of its assets in any one investment company, as long as no
	investment represents more than 3% of the voting stock of an acquired investment
	company. In addition, no funds for which Vanguard acts as an advisor may, in the
	aggregate, own more than 10% of the voting stock of a closed-end investment company.
	The 1940 Act and related rules provide certain exemptions from these restrictions, for
	example, funds that invest in other funds within the same group of investment companies. If
	a fund invests in other investment companies, shareholders will bear not only their
	proportionate share of the fund’s expenses (including operating expenses and the fees of the
	advisor), but they also may indirectly bear the similar expenses of the underlying
	investment companies. Certain investment companies, such as business development
	companies (BDCs), are more akin to operating companies and, as such, their expenses are
	not direct expenses paid by fund shareholders and are not used to calculate the fund’s net
	asset value. SEC rules nevertheless require that any expenses incurred by a BDC be
	included in a fund’s expense ratio as “Acquired Fund Fees and Expenses.” The expense
	ratio of a fund that holds a BDC will thus overstate what the fund actually spends on
	portfolio management, administrative services, and other shareholder services by an
	amount equal to these Acquired fund Fees and Expenses. The Acquired fund Fees and

- 46 -


	Expenses are not included in a fund’s financial statements, which provide a clearer picture
	of a fund’s actual operating expenses. Shareholders would also be exposed to the risks
	associated not only with the investments of the fund, but also with the portfolio
	investments of the underlying investment companies. Certain types of investment
	companies, such as closed- end investment companies, issue a fixed number of shares that
	typically trade on a stock exchange or over-the-counter at a premium or discount to their net
	asset value. Others are continuously offered at net asset value but also may be traded on the
	secondary market.

	*Preferred Stock.* Preferred stock represents an equity or ownership interest in an
	issuer. Preferred stock normally pays dividends at a specified rate and has precedence over
	common stock in the event the issuer is liquidated or declares bankruptcy. However, in the
	event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take
	precedence over the claims of those who own preferred and common stock. Preferred stock,
	unlike common stock, often has a stated dividend rate payable from the corporation’s
	earnings. Preferred stock dividends may be cumulative or noncumulative, participating, or
	auction rate. “Cumulative” dividend provisions require all or a portion of prior unpaid
	dividends to be paid before dividends can be paid to the issuer’s common stock.
	“Participating” preferred stock may be entitled to a dividend exceeding the stated dividend
	in certain cases. If interest rates rise, the fixed dividend on preferred stocks may be less
	attractive, causing the price of such stocks to decline. Preferred stock may have mandatory
	sinking fund provisions, as well as provisions allowing the stock to be called or redeemed,
	which can limit the benefit of a decline in interest rates. Preferred stock is subject to many
	of the risks to which common stock and debt securities are subject. In addition, preferred
	stock may be subject to more abrupt or erratic price movements than common stock or debt
	securities due to the fact that preferred stock may trade less frequently and in more limited
	volume.
	*Real Estate Investment Trusts (REITs).* An equity REIT owns real estate
	properties directly and generates income from rental and lease payments. Equity REITs
	also have the potential to generate capital gains as properties are sold at a profit. A mortgage
	REIT makes construction, development, and long-term mortgage loans to commercial real

- 47 -


	estate developers and earns interest income on these loans. A hybrid REIT holds both
	properties and mortgages. To avoid taxation at the corporate level, REITs must distribute
	most of their earnings to shareholders.
	Investments in REITs are subject to many of the same risks as direct investments
	in real estate. In general, real estate values can be affected by a variety of factors, including,
	but not limited to, supply and demand for properties, general or local economic conditions,
	and the strength of specific industries that rent properties. Ultimately, a REIT’s
	performance depends on the types and locations of the properties it owns and on how well
	the REIT manages its properties. For example, rental income could decline because of
	extended vacancies, increased competition from nearby properties, tenants’ failure to pay
	rent, regulatory limitations on rents, fluctuations in rental income, variations in market
	rental rates, or incompetent management. Property values could decrease because of
	overbuilding in the area, environmental liabilities, uninsured damages caused by natural
	disasters, a general decline in the neighborhood, losses because of casualty or
	condemnation, increases in property taxes, or changes in zoning laws. The value of a REIT
	may also be affected by changes in interest rates. Rising interest rates generally increase the
	cost of financing for real estate projects, which could cause the value of an equity REIT to
	decline. During periods of declining interest rates, mortgagors may elect to prepay
	mortgages held by mortgage REITs, which could lower or diminish the yield on the REIT.
	REITs are also subject to heavy cash-flow dependency, default by borrowers, and changes
	in tax and regulatory requirements. In addition, a REIT may fail to qualify for tax-exempt
	status under the IRC and/or fail to maintain exemption from the 1940 Act.
	*Repurchase Agreements.* A repurchase agreement is an agreement under which
	the Fund acquires a debt security (generally a security issued by the U.S. government or an
	agency thereof, a banker's acceptance or a certificate of deposit) from a bank, a broker, or a
	dealer, and simultaneously agrees to resell such security to the seller at an agreed upon price
	and date (normally, the next business day). Because the security purchased constitutes
	collateral for the repurchase obligation, a repurchase agreement may be considered a loan
	that is collateralized by the security purchased. The resale price reflects an agreed upon
	interest rate effective for the period the instrument is held by the Fund and is unrelated to
	the interest rate on the underlying instrument. In these transactions, the securities acquired

- 48 -


	by the Fund (including accrued interest earned thereon) must have a total value in excess of
	the value of the repurchase agreement and be held by a custodian bank until repurchased. In
	addition, the investment advisor will monitor the Fund’s repurchase agreement transactions
	generally and will evaluate the creditworthiness of any bank, broker, or dealer party to a
	repurchase agreement relating the Fund. The aggregate amount of any such agreements is
	not limited, except to the extent required by the law.
	The use of repurchase agreements involves certain risks. One risk is the seller’s
	ability to pay the agreed-upon repurchase price on the repurchase date. If the seller
	defaults, the Fund may incur costs in disposing of the collateral, which would reduce the
	amount realized thereon. If the seller seeks relief under the bankruptcy laws, the
	disposition of the collateral may be delayed or limited. For example, if the other party to the
	agreement becomes insolvent and subject to liquidation or reorganization under the
	bankruptcy or other laws, a court may determine that the underlying security is collateral
	for a loan by the Fund not within its control and therefore the realization by the Fund on
	such collateral may be automatically stayed. Finally, it is possible that the Fund may not be
	able to substantiate its interest in the underlying security and may be deemed an unsecured
	creditor of the other party to the agreement.

	*Restricted and Illiquid Securities.* Illiquid securities are securities that cannot be
	sold or disposed of within seven days in the ordinary course of business at approximately
	the value at which they are being carried on the Fund's books. The SEC generally limits
	aggregate holdings of illiquid securities by a mutual fund to 15% of its net assets (5% for
	money market funds). A fund may experience difficulty valuing and selling illiquid
	securities and in some cases, may be unable to value or sell certain illiquid securities for an
	indefinite period of time. Illiquid securities may include a wide variety of investments, such
	as (1) repurchase agreements maturing in more than seven days (unless the agreements
	have demand/redemption features); (2) OTC options contracts and certain other derivatives
	(including certain swap agreements); (3) fixed time deposits that are not subject to
	prepayment or do not provide for withdrawal penalties upon prepayment (other than
	overnight deposits); (4) certain loan interests and other direct debit instruments; (5) certain
	municipal lease obligations; (6) private equity investments; (7) commercial paper issued

- 49 -


	pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “1933 Act”); and (7)
	securities whose disposition is restricted under the federal securities laws. Illiquid
	securities include restricted, privately placed securities that, under the federal securities
	laws, generally may be resold only to qualified institutional buyers. If a substantial market
	develops for a restricted security held by the Fund, it may be treated as a liquid security, in
	accordance with procedures and guidelines approved by the Fund’s board of trustees. This
	generally includes securities that are unregistered that can be sold to qualified institutional
	buyers in accordance with Rule 144A under the 1933 Act or that are exempt from
	registration under the 1933 Act, such as commercial paper. Although the Fund’s advisor
	monitors the liquidity of restricted securities, the Fund's board of trustees oversees and
	retains ultimate responsibility for the advisor’s liquidity determinations. Several factors
	that the trustees consider in monitoring these decisions include the valuation of a security,
	the availability of qualified institutional buyers, brokers and dealers that trade in the
	security, and the availability of information about the security’s issuer.

	*Reverse Repurchase Agreements.* In a reverse repurchase agreement, a fund sells
	a security to another party, such as a bank or broker-dealer, in return for cash and agrees to
	repurchase that security at an agreed-upon price and time. Under a reverse repurchase
	agreement, the fund continues to receive any principal and interest payments on the
	underlying security during the term of the agreement. Reverse repurchase agreements
	involve the risk that the market value of securities retained by the fund may decline below
	the repurchase price of the securities sold by the fund that it is obligated to repurchase. In
	addition to the risk of such a loss, fees charged to the fund may exceed the return the fund
	earns from investing the proceeds received from the reverse repurchase agreement
	ransaction. A reverse repurchase agreement may be considered a borrowing transaction for
	purposes of the 1940 Act. A reverse repurchase agreement transaction will not be
	considered to constitute the issuance of a “senior security” as that term is defined in Section
	18(g) of the 1940 Act, and therefore, such transaction will not be subject to the 300% asset
	coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the
	transaction in accordance with the requirements described under the heading “Borrowing.”
	A fund will enter into reverse repurchase agreements only with parties whose

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	creditworthiness has been reviewed and found satisfactory by the advisor. If the buyer in a
	reverse repurchase agreement becomes insolvent or files for bankruptcy, a fund’s use of
	proceeds from the sale may be restricted while the other party or its trustee or receiver
	determines if it will honor the fund’s right to repurchase the securities. If a fund is unable to
	recover the securities it sold in a reverse repurchase agreement, it would realize a loss equal
	to the difference between the value of the securities and the payment it received for them.

	*Securities Lending.* The Fund may lend its investment securities to qualified
	institutional investors (typically brokers, dealers, banks, or other financial institutions) who
	may need to borrow securities in order to complete certain transactions, such as covering
	short sales, avoiding failures to deliver securities or completing arbitrage operations. By
	lending its investment securities, the Fund attempts to increase its net investment income
	through the receipt of interest on the securities lent. Any gain or loss in the market price of
	the securities lent that might occur during the term of the loan would be for the account of
	the Fund. If the borrower defaults on its obligation to return the securities lent because of
	insolvency or other reasons, the Fund could experience delays and costs in recovering the
	securities lent or in gaining access to the collateral. These delays and costs could be greater
	for non-U.S. securities. If a fund is not able to recover the securities lent, the Fund may sell
	the collateral and purchase a replacement investment in the market. The value of the
	collateral could decrease below the value of the replacement investment by the time the
	replacement investment is purchased. Cash received as collateral through loan transactions
	may be invested in other eligible securities. Investing this cash subjects that investment to
	market appreciation or depreciation. Currently, Vanguard funds that lend securities invest
	the cash collateral received in one or more Vanguard CMT Funds, which are very low-cost
	money market funds.
	The terms and the structure of the loan arrangements, as well as the aggregate
	amount of securities loans must be consistent with the 1940 Act, and the rules or
	interpretations of the SEC thereunder. These provisions limit the amount of securities the
	Fund may lend to 33 1/3% of the Fund's total assets, and require that (1) the borrower
	pledge and maintain with a fund collateral consisting of cash, an irrevocable letter of credit,
	or securities issued or guaranteed by the United States government having at all times not

- 51 -


	less than 100% of the value of the securities lent, (2) the borrower add to such collateral
	whenever the price of the securities lent rises (i.e., the borrower “marks-to-market" on a
	daily basis), (3) the loan be made subject to termination by the Fund at any time, and (4)the
	Fund receives reasonable interest on the loan (which may include the Fund’s investing any
	cash collateral in interest-bearing short-term investments), any distribution on the lent
	securities, and any increase in their market value. Loan arrangements made by the Fund
	will comply with all other applicable regulatory requirements, including the rules of the
	New York Stock Exchange, which presently require the borrower, after notice, to redeliver
	the securities within the normal settlement time of three business days. The investment
	advisor will consider the creditworthiness of the borrower, among other things, in making
	decisions with respect to the lending of securities, subject to oversight by the board of
	trustees. At the present time, the SEC does not object if an investment company pays
	reasonable negotiated fees in connection with lent securities, so long as such fees are set
	forth in a written contract and approved by the investment company's trustees. In addition,
	voting rights pass with the lent securities, however if a fund has knowledge that a material
	event will occur affecting securities on loan, and in respect to which the holder of the
	securities will be entitled to vote or consent, the lender must be entitled to call the loaned
	securities in time to vote or consent. A fund bears the risk that there may be a delay in the
	return of the securities, which may impair the fund’s ability to vote on such a matter.
	Pursuant to Vanguard’s securities lending policy, Vanguard’s fixed income and
	money market funds are not permitted to, and do not, lend their investment securities.

	*Tax Matters—U.S. Federal Tax Treatment of Derivatives, Hedging, and Related*
	*Transactions.* A fund’s transactions in derivative instruments (including, but not limited to,
	options, futures, forward contracts, and swap agreements), as well as any of the fund’s
	hedging, short sale, securities loan, or similar transactions, may be subject to one or more
	special tax rules that accelerate income to the fund, defer losses to the fund, cause
	adjustments in the holding periods of the fund’s securities, convert long-term capital gains
	into short-term capital gains, or convert short-term capital losses into long-term capital
	losses. These rules could therefore affect the amount, timing and character of distributions to
	shareholders.

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	Because these and other tax rules applicable to these types of transactions are in some
	cases uncertain under current law, an adverse determination or future guidance by the IRS with
	respect to these rules (which determination or guidance could be retroactive) may affect whether a
	fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to
	maintain its qualification as a regulated investment company and avoid a fund-level tax.

	*Warrants.* Warrants are instruments that give the holder the right, but not the obligation, to buy an
	equity security at a specific price for a specific period of time. Changes in the value of a warrant do
	not necessarily correspond to changes in the value of its underlying security. The price of a warrant
	may be more volatile than the price of its underlying security, and a warrant may offer greater
	potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to
	dividends or voting rights with respect to the underlying security and do not represent any rights in
	the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its
	expiration date. These factors can make warrants more speculative than other types of investments.

	*When-Issued, Delayed-Delivery, and Forward-Commitment Transactions.* When-issued,
	delayed-delivery, and forward-commitment transactions involve a commitment to purchase or sell
	specific securities at a predetermined price or yield in which payment and delivery take place after
	the customary settlement period for that type of security. Typically, no interest accrues to the
	purchaser until the security is delivered. When purchasing securities pursuant to one of these
	transactions, payment for the securities is not required until the delivery date. However, the
	purchaser assumes the rights and risks of ownership, including the risks of price and yield
	fluctuations and the risk that the security will not be issued as anticipated. When a fund has sold a
	security pursuant to one of these transactions, the fund does not participate in further gains or losses
	with respect to the security. If the other party to a delayed-delivery transaction fails to deliver or
	pay for the securities, the fund could miss a favorable price or yield opportunity or suffer a loss. A
	fund may renegotiate a when issued or forward-commitment transaction and may sell the
	underlying securities before delivery, which may result in capital gains or losses for the fund.
	When-issued, delayed-delivery, and forward-commitment transactions will not be considered to
	constitute the issuance, by a fund, of a “senior security”, as that term is defined in Section 18(g) of
	the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage

- 53 -


requirement otherwise applicable to borrowings by the fund, if the fund covers the transaction in
accordance with the requirements described under the heading “Borrowing.”

(3)	Structure of the Management
	(i)	Structure of the Investment Management
		Vanguard serves as investment advisor to the Fund through its Equity Index Group
	(“EIG”). As of April 30, 2016, Vanguard served as advisor for approximately $2.7 trillion
	in assets. Vanguard provides investment advisory services to the Fund on an at-cost basis,
	subject to the supervision and oversight of the trustees and officers of the Fund.
		The manager primarily responsible for the day-to-day management of the Fund is
	listed in section (3)(iii).
	(ii)	Decision-Making Process of the Investment Management Policy
		The Fund has an investment objective as well as principal investment strategies and
	policies that it uses in pursuit of its objective. The Fund’s board of trustees, which oversees
	the Fund’s management, may change investment strategies or policies in the interest of
	shareholders without a shareholder vote, unless those strategies or policies are designated
	as fundamental. Under normal circumstances, the Fund will invest at least 80% of its assets
	in the stocks that make up its target index. The Fund may change its 80% policy only upon
	60 days’ notice to shareholders.
		The Fund attempts to track the investment performance of a benchmark index that
	measures the return of a particular market segment. The Fund uses the replication method
	of indexing, meaning that the Fund generally holds the same stocks as its target index, and
	in approximately the same proportions.
	(iii) Duties and Powers
		As stated above, Vanguard, through EIG, serves as investment advisor to the Fund.
	The managers primarily responsible for the day-to-day management of the Fund are:
		Gerard C. O’Reilly, Principal of Vanguard. He has co-managed the Fund since
	2016.
		William Coleman, Portfolio Manager at Vanguard. He has co-managed the Fund
	since 2016.

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		As stated above, the Fund’s officers and board of trustees oversee the Fund’s
	management.

(4)	Distribution Policy:
		The Fund distributes to Shareholders virtually all of its net income (interest and
	dividends, less expenses) as well as any net short-term or long term capital gains realized
	from the sale of its holdings. Income dividends generally are distributed quarterly in
	March, June, September, and December; capital gains distributions, if any, generally occur
	annually in December. In addition, the Fund may occasionally make supplemental
	distributions at some other time during the year.
		Investors in Japan will receive distributions of income or capital gains in cash.
		The above sentence does not guarantee the future payment of dividends nor their
	amounts.

(5)	Investment Limitations:
		The Fund is subject to the following fundamental investment policies, which cannot
	be changed in any material way without the approval of the holders of a majority of the
	Fund’s shares. For these purposes, a “majority” of shares means shares representing the
	lesser of (1) 67% or more of the Fund’s net assets voted, so long as shares representing
	more than 50% of the Fund’s net assets are present or represented by proxy; or (2) more
	than 50% of the Fund’s net assets.
	(1)	Borrowing. The Fund may borrow money only as permitted by the 1940 Act or
	other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency
	with authority over the Fund.
	(2)	Commodities. The Fund may invest in commodities only as permitted by the 1940
	Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory
	agency with authority over the Fund.
	(3)	Diversification. With respect to 75% of its total assets, the Fund may not: (1)
	purchase more than 10% of the outstanding voting securities of any one issuer; or (2)
	purchase securities of any issuer if, as a result, more than 5% of the Fund’s total assets

- 55 -


would be invested in that issuer’s securities. This limitation does not apply to obligations of
the United States Government or its agencies or instrumentalities.
(4)	Industry Concentration. The Fund will not concentrate its investments in the
securities of issuers whose principal business activities are in the same industry, except as
may be necessary to approximate the composition of its target index.
(5)	Investment Objective. The investment objective of the Fund may not be
materially changed without a shareholder vote.
(6)	Loans. The Fund may make loans to another person only as permitted by the 1940
Act or other governing statute, by the Rule thereunder, or by the SEC or other regulatory
agency with authority over the Fund.
(7)	Real Estate. The Fund may not invest directly in real estate unless it is acquired as
a result of ownership of securities or other instruments. This restriction shall not prevent the
Fund from investing in securities or other instruments (1) issued by companies that invest,
deal, or otherwise engage in transactions in real estate, or (2) backed or secured real estate
or interests in real estate.
(8)	Senior Securities. The Fund may not issue senior securities, except as permitted
by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other
regulatory agency with authority over the Fund.
(9)	Underwriting. The Fund may not act as an underwriter of another issuer’s
securities, except to the extent that the Fund may be deemed to be an underwriter within the
meaning of the 1933 Act, in connection with the purchase and sale of portfolio securities.
	Compliance with the fundamental policies previously described is generally
measured at the time the securities are purchased. Unless otherwise required by the 1940
Act (as is the case with borrowing), if a percentage restriction is adhered to at the time the
investment is made, a later change in percentage resulting from a change in the market
value of assets will not constitute a violation of such restriction. All fundamental policies
must comply with applicable regulatory requirements. For more details see “Objects of
Investment.”
	None of these policies prevents the Fund from having an ownership interest in
Vanguard. As a part of owner of Vanguard, the Fund may own securities issued by

- 56 -


	Vanguard, make loans to Vanguard, and contribute to Vanguard’s costs or other financial
	requirements.
		*Sale of Investor Shares of the Fund in Japan.* In connection with the offering of its
	Investor Shares in Japan, the Fund has undertaken to the Japanese Securities Dealers
	Association that it may not:
	(1)	Borrow money, except for temporary or emergency purposes in an amount not
	exceeding 10% of the Fund’s net assets;
	(2)	Together with other mutual funds managed by Vanguard, acquire more than 50%
	of the outstanding voting securities of any issuer;
	(3)	Invest more than 15% of its net assets in illiquid securities (which include securities
	restricted as to resale unless they are determined to be readily marketable in accordance
	with procedures established by the board of trustees); and
	(4)	Sell securities short at any time in excess of its net asset value.
		If the undertaking is violated, the Fund will, promptly after discovery, take such
	action as may be necessary to cause the violation to cease, which shall be the only
	obligation of the Fund and the only remedy in respect of the violation. This undertaking
	will remain in effect as long as (i) shares of the Fund are qualified for offer or sale in Japan
	and (ii) the undertaking is required by the “Standards of Selection of Foreign Investment
	Fund Securities” established under the Rules of Foreign Securities Transactions by the
	Japanese Securities Dealers Association.

3.	INVESTMENT RISKS
(1)	Principal Risks
		An investment in the Fund could lose money over short or even long periods.
	Investors should expect the Fund’s share price and total return to fluctuate within a wide
	range, like the fluctuations of the overall stock market. The Fund’s performance could be
	hurt by:
	-	Stock market risk, which is the chance that stock prices overall will decline. Stock
	markets tend to move in cycles, with periods of rising prices and periods of falling prices.
	The Fund’s target index tracks a subset of the U.S. stock market, which could cause the
	Fund to perform differently from the overall stock market. In addition, the Fund’s target

- 57 -


	index may, at times, become focused in stocks of a particular market sector, which would
	subject the Fund to proportionately higher exposure to the risks of that sector.
	-	Investment style risk, which is the chance that returns from
	small-capitalization stocks will trail returns from the overall stock market. Historically,
	small-cap stocks have been more volatile in price than the large-cap stocks that dominate
	the overall stock market, and they often perform quite differently. Small companies tend
	to have greater stock volatility because, among other things, these companies are more
	sensitive to changing economic conditions.

	Refer to Part II, 2. (2), Objects of Investment for further information on principal risks.

		U.S. Federal Tax Treatment of Futures Contracts. For U.S. federal income tax
	purposes, the Fund generally must recognize, as of the end of each taxable year, its net
	unrealized gains and losses on certain futures contracts as of the end of the year as well as
	those actually realized during the year. In these cases, any gain or loss recognized with
	respect to a futures contract is considered to be 60% long-term capital gain or loss and 40%
	short-term capital gain or loss, without regard to the holding period of the contract. Gains
	and losses on certain other futures contracts (primarily non-U.S. futures contracts) are not
	recognized until the contracts are closed and are treated as long-term or short-term,
	depending on the holding period of the contract. Sales of futures contracts which are
	intended to hedge against a change in the value of securities held by the Fund may affect the
	holding period of such securities and, consequently, the nature of the gain or loss on such
	securities upon disposition. The Fund may be required to defer the recognition of losses on
	one position, such as futures contracts, to the extent of any unrecognized gains on a related
	offsetting position held by the Fund.
		The Fund will distribute to Shareholders annually any net capital gains that have
	been recognized for U.S. federal income tax purposes on futures transactions. Such
	distributions will be combined with distributions of capital gains realized on the Fund's
	other investments and Shareholders will be advised on the nature of the distributions.

		U.S. Federal Tax Treatment of Non-U.S. Currency Transactions.

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	Special rules generally govern the U.S. federal income tax treatment of a fund’s
	transactions in the following: non-U.S. currencies; non-U.S. currency-denominated debt
	obligations; and certain non-U.S. currency options, futures contracts, , and similar
	instruments. Accordingly, if a fund engages in these types of transactions, it may have
	ordinary income or loss to the extent such income or loss results from fluctuations in the
	value of the non-U.S. currency concerned. Such ordinary income could accelerate fund
	distributions to shareholders and increase the distributions taxed to shareholders as ordinary
	income. Any ordinary loss so created will generally reduce ordinary income distributions
	and, in some cases, could require the recharacterization of prior ordinary income
	distributions. Net ordinary losses cannot be carried forward by the fund to offset income or
	gains realized in subsequent taxable years.

	Any gain or loss attributable to the non-U.S. currency component of a transaction
	engaged in by a fund that is not subject to these special currency rules (such as foreign
	equity investments other than certain preferred stocks) will generally be treated as a capital
	gain or loss and will not be segregated from the gain or loss on the underlying transaction.

	y.
	To the extent the Fund engages in non-U.S. currency hedging, the Fund may elect or
	be required to apply other rules that could affect the character and timing of the fund’s gains
	and losses.

	U.S. Federal Tax Treatment for Non-U.S. Investors. U.S. withholding and estate
	taxes and certain U.S. tax reporting requirements may apply to any investment made by
	non-U.S. investors in Vanguard funds.

(2)	Management Structure for the Risks
	The Fund’s Investment Manager, Vanguard, regularly reviews the Fund’s
	investments and operations to determine that the Fund remains in compliance with all
	applicable regulatory requirements.

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		The Fund uses derivative transactions, etc. for hedging purposes and/or
	non-hedging purposes as set forth herein. As for the said derivatives, the Fund implements
	the risk management methods based on compliance with the EU Directive concerning
	UCITS applicable to the Fund.


(3)	Reference Information on the Risk

	*[Graphs etc. required under the laws of Japan will be inserted here (English translation*
		*is to be omitted).]*


4.	FEES AND TAX
(1)	Sales Charge
	(a)	Sales charge in overseas markets:
		No sales charge will be charged in overseas markets.
	(b)	Sales charge in Japan:
		No sales charge will be charged in Japan.
(2)	Repurchase Charge
	(a)	Repurchase charge in overseas markets:
		No repurchase charge will be charged in overseas markets.
	(b)	Repurchase charge in Japan:
		No repurchase charge will be charged in Japan.
(3)	Management Fee, etc.:
	Trustee Fees
		The same individuals serve as trustees of all U.S. registered Vanguard funds, and
	each fund pays a proportionate share of the trustees’ compensation. The funds also employ
	their officers on a shared basis; however, officers are compensated by Vanguard, not the
	funds.
		Independent Trustees. The funds compensate their independent trustees (i.e., the
	ones who are not also officers of the funds) in three ways.

- 60 -

* The independent trustees receive an annual fee for their service to the funds,

which is subject to reduction based on absences from scheduled board meetings.

* The independent trustees are reimbursed for the travel and other expenses that

they incur in attending board meetings.

* Upon retirement (after attaining age 65 and completing five years of service), the

independent trustees who began their service prior to January 1, 2001, receive a

retirement benefit under a separate account arrangement. As of January 1, 2001, the

opening balance of each eligible trustee’s separate account was generally equal to

the net present value of the benefits he or she had accrued under the trustees’ former

retirement plan. Each eligible trustee’s separate account will be credited annually

with interest at a rate of 7.5% until the trustee receives his or her final distribution.

Those independent trustees who began their service on or after January 1, 2001, are

not eligible to participate in the plan.

“Interested” Trustee. Mr. McNabb serves as trustee, but is not paid in this

capacity. He is, however, paid in his role as an officer of Vanguard.

Compensation Table. The following table provides compensation details for each

of the trustees. We list the amounts paid as compensation and accrued as retirement

benefits by the Vanguard Index Funds for each trustee. In addition, the table shows the total

amount of benefits that we expect each trustee to receive from all Vanguard funds upon

retirement, and the total amount of compensation paid to each trustee by all Vanguard

funds.


VANGUARD INDEX FUNDS TRUSTEES’ COMPENSATION TABLE

Name of	Aggregate	Pension or	Accrued Annual	Total
Trustee	Compensation	Retirement	Retirement	Compensation
	from the Funds	Benefits Accrued	Benefit at	from All
	(1)	as Part of the	January 1,	Vanguard Funds
		Funds’ Expenses	2016(2)	Paid to Trustees
		(1)		(3)
F. William	N/A	N/A	N/A	N/A
McNabb III

- 61 -


Emerson U.		N/A	N/A
Fullwood	$58,932			$230,000

Rajiv L. Gupta	$58,932	N/A	N/A	$223,500

Amy Gutmann	$58,932	N/A	N/A	$230,000

JoAnn Heffernan				$230,000
Heisen	$58,932	$1,102	$6,985

F. Joseph	$58,932	N/A	N/A	$230,000
Loughrey

MarkLoughridge	$65,868	N/A	N/A	$260,000

Scott C. Malpass	$58,932	N/A	N/A	$223,500

André F. Perold	$ 58,932	N/A	N/A	$230,000

Alfred M.
Rankin, Jr.(4)	$ 5,445	$167

Peter Volanakis	58,932	N/A	N/A	$230,000

(1) The amounts shown in this column are based on the Trust’s fiscal year ended December 31,

2015. Each Fund within the Trust is responsible for a proportionate share of these amounts

(2) Each trustee is eligible to receive retirement benefits only after completing at least 5 years (60

consecutive months) of service as a trustee for the Vanguard funds. The annual retirement benefit

will be paid in monthly installments, beginning with the month following the trustee’s retirement

from service, and will cease after 10 years of payments (120 monthly installments). Trustees who

began their service on or after January 1, 2001, are not eligible to participate in the retirement

benefit plan.

(3) The amounts reported in this column reflect the total compensation paid to each Trustee for his

or her service as trustee of [194] Vanguard funds for the 2015 calendar year


(4) Mr. Rankin retired from the Fund’s board of trustees effective December 31, 2014.

	Management Expenses
	The Fund’s total annual operating expenses for Investor Shares as of December 31,2015,
were 0.20% of net assets.
	At December 31,2015, the Fund had contributed 0.01% of its net assets to Vanguard for
office space, facilities, and equipment to allow Vanguard to supply the Fund with investment
advisory, corporate management, administrative, marketing and distribution services.
	The Fund incurred $ 3,698,000 as the consideration for in investment advisory services, to
the Investment Advisor expenses for the period ended on December 31, 2015.

(4)	Other Expenses
	Account Administration Fee
	In Japan, an Account Administration Fee at the rate of 0.648% (0.60 excluding tax)
	multiplied by the Shareholder's average account balance shall be assessed upon each
	Shareholder quarterly in arrears. For Shareholder accounts which are redeemed partially or
	in full prior to the end of each quarter, the Account Administration Fee shall be charged in
	proportion to the period in which the Shareholder holds the Shares and assessed at the time
	of redemption. Quarterly assessments shall be net of any fees charged for partial
	redemptions during the quarter.
	The Account Administration Fee shall be calculated and collected from each
	Shareholder in the following manner.
	1.	At the end of each calendar quarter, the Shareholder's average daily account
		balance will be calculated in respect of the Fund. This initial calculation is
		in Yen.
	2.	A fee of one quarter of the 0.648% (0.60% excluding tax)annual fee will be
		calculated based on the average account balance so calculated. (Note that in
		the case of Shareholder accounts which are partially or fully redeemed prior
		to the end of each calendar quarter, the fee shall be charged in proportion to
		the period in which such shareholder holds the shares and assessed at the

- 62 -

- 63 -


			time of each redemption. Quarterly assessments shall be net of any fees
			charged for partial redemptions during the quarter.)
		3.	Please confirm with the Agent Company or the Distributor as to the method
			of collecting the Account Administration Fee.


(5)	Tax Treatment of Shareholders in Japan (copied from Wellesley Income SRS.)
As of the date hereof, tax Treatment of Shareholder in Japan will be as follows:
I	Funds classified under Japanese tax law as publicly offered, foreign, public and corporate
	bond investment trusts



	(1)	Units may be handled in a specified account of a financial instruments business firm
		which handles a specified account.

	(2)	Where received payment via a person in charge of handling payment in Japan,
		distributions to be made by funds will be treated as ordinary distributions made by
		publicly offered, domestic public and corporate bond investment trusts.

	(3)	Where received payment via a person in charge of handling payment in Japan,
		distributions of funds to be paid to Japanese individual unitholders are subject to
		withholding of income tax in Japan at 20.315% (15.315% income tax and 5%
		residential tax) (20% (15% income tax and 5% residential tax) on and after 1 January,
		2038).

		Japanese individual unitholders, in principle, will file a tax declaration because
		self-assessed separate taxation treatment is applied, however, no additional tax will be
		levied in addition to withholding tax where non tax declaration treatment is selected.

		Where non tax declaration treatment is not selected, distributions may be set off against
		transfer losses (including carried over losses) from certain Listed Shares, etc. (meaning
		the Listed Shares, etc. prescribed in the Act on Special Measures concerning Taxation.
		The same shall apply hereinafter.)

	(4)	As for distributions (including profits, in terms of the fund's denominated currency,
		between the repurchase amount and the amount equal to the capital of the fund) to be
		made by the fund to Japanese corporate unitholders, where received payment via a
		person in charge of handling payment in Japan, are subject to withholding tax at
		15.315% in Japan (income tax only) (excluding certain public corporations, etc.
		(meaning Domestic Corporation listed in Appended Table 1 of Income Tax Act. The
		same shall apply hereinafter.) and financial institutions, etc.), in certain cases, a report
		concerning payments will be filed with the chief of the tax office (the taxation rate will
		be 15% on and after 1 January, 2038).

- 64 -


	(5)	Where Japanese individual unitholders transfer their units by requesting repurchase or
		other method (including the case of switching from one class to another class),the
		transfer profits are subject to tax concerning transfer profits from the listed shares, etc.,
		and the transfer profits or losses of units, which is the amount (in yen) of the transfer
		price of the units minus the unitholder's acquisition cost (in yen) (hereinafter the same),
		will be subject to withholding of income tax in Japan at 20.315% (15.315% income tax
		and 5% residential tax) (20% (15% income tax and 5% residential tax) on and after 1
		January, 2038). Transfer profits or losses of units may be treated in self-assessed
		separate taxation treatment and the same taxation rate as the withholding taxation rate
		will apply. Where non tax declaration treatment is selected, no additional tax is levied
		in addition to withholding tax.

		Transfer profits or losses may be set off against transfer profits or losses from certain
		other listed shares, etc. and distribution income, etc. from certain listed shares, etc.
		Where tax return is carried out, certain transfer losses may be carried over for three
		years from the following year.

	(6)	Where individual unitholders receive repurchase of the fund, as it is deemed to be a
		transfer concerning the repurchase of the fund, the same tax treatment as (5) will apply.

	(7)	A report of payments, in certain cases, will be filed with the chief of the tax office with
		respect to distributions and to transfer and repurchase payments to Japanese individual
		unitholders.

	Note: Unitholders in Japan, whether corporations or individuals, who do not have or have not formerly
		had their residences, their registered office or permanent entity in the State of Delaware, U.S.A., are
		not subject to any tax to be imposed by the State of Delaware, U.S.A. tax authority in connection
		with their investment in Units.

II	Funds classified under Japanese tax law as publicly offered, foreign share investment trusts

	(1)	Units may be handled in a specified account of a financial instruments business firm
		which handles a specified account.

	(2)	Where received payment via a person in charge of handling payment in Japan,
		distributions to be made by funds will be treated as ordinary distributions made by
		publicly offered, domestic, share investment trusts.

	(3)	Where received payment via a person in charge of handling payment in Japan,
		distributions of funds to be paid to Japanese individual unitholders are subject to
		withholding tax at 20.315% (15.315% income tax and 5% residential tax) (20% (15%
		income tax and 5% residential tax) on and after January 1, 2038).

		Although Japanese individual unitholders may file a tax declaration by selecting either
		consolidated tax treatment or self-assessed separate taxation treatment, no additional
		tax will be levied in addition to withholding tax when non tax declaration treatment is

- 65 -


	selected.

	When self-assessed separate taxation treatment is selected, distributions may be set off
	against transfer losses from (including carried over losses) certain Listed Shares etc.

(4)	Distributions (including profits between the redemption amount and the amount equal
	to the capital of the fund on a certain reference currency basis) to be made by the fund
	to Japanese corporate unitholders, where received payment via a person in charge of
	handling payment in Japan, are subject to withholding tax at 15.315% in Japan (income
	tax only) (excluding certain public corporations, etc.). In certain cases, a report
	concerning payments will be filed with the chief of the tax office (15% on and after
	January 1, 2038). The provisions of Japanese tax laws allowing to make certain
	deductions from taxable income do not apply.

(5)	Distributions of net investment returns such as interest, etc. and distributions of
	short-term net realized capital gains will be, in principle, subject to withholding of U.S.
	federal income tax currently at the rate of 10% and the amount obtained after such
	deduction will be paid in Japan. Distributions of long-term net realized capital gain will
	not be subject to withholding of U.S. federal income tax and the full amount thereof
	will be paid in Japan. The amount withheld as U.S. federal income tax may be applied
	for foreign tax credit in Japan.
	The Japanese withholding tax imposed on distributions as referred to in (3) and (4)
	above will be collected by way of the so-called “balance collection method,” so that
	only the amount equivalent to 10% of the distribution before U.S. withholding tax less
	the amount of U.S. withholding tax withheld will be collected in Japan.

(6)	When Japanese individual unitholders transfer their units by requesting repurchase or
	other method (including where the units have been converted to units of other class),
	the transfer profits are subject to tax concerning transfer profits from the Listed Shares
	etc., and the transfer profits or losses of units will be subject to, in withholding tax
	selected account, withholding tax at 20.315% (15.315% income tax and 5% residential
	tax) (20% (15% income tax and 5% residential tax) on and after January 1, 2038).
	Transfer profits or losses of units may be treated in separate taxation in which the same
	taxation rate as the withholding taxation rate will apply. When non tax declaration
	treatment is selected, no additional tax is levied in addition to withholding tax.

	Transfer profits or losses may be set off against transfer profits or losses from certain
	other listed shares, etc. and distribution income, etc. from certain listed shares, etc.
	When self-assessed separate taxation treatment is selected, losses may be carried over
	for three years from the following year.

(7)	When Japanese individual unitholders receive redemption of the fund, the same tax
	treatment as (6) will apply.

(8)	In certain cases, a report of payments will be filed with the chief of the tax office with
	respect to distributions and to transfer and repurchase payments to Japanese individual
	unitholders.

- 66 -


		Note: Japanese unitholders, whether corporations or individuals, who do not have or have not
		formerly had their residences, their registered office or permanent entity in the State of Delaware,
		U.S.A. are not subject to any tax to be imposed by the tax authority of the State of Delaware, U.S.A.
		in connection with their investment in Units.

III	This Fund will be treated as a public, offered, foreign, share fund under the tax law.
	However, there is a possibility that taxes described above may be treated differently in future
	as a result of judgments of tax authorities.

IV	The treatment of taxes as set out in I through III above may change as a result of changes in
	tax regimes, etc. Investors should consult their professional tax advisers etc. on details of tax
	treatment of unitholders.


5.	STATUS OF INVESTMENT FUND
(1)	Diversification of Investment Portfolio
	VANGUARD SMALL-CAP INDEX FUND (Includes All Share Classes)
	[See the attached worksheet.]

(2)	Investment Assets
	(A)	Names of Major Portfolio Equity Shares
	[See the attached worksheet.]
	(B)	Investment Properties
	Not Applicable.
	(C)	Other major Investment Assets
	Not Applicable.

(3)	Results of Past Operations
	(A)	Record of Changes in Net Assets
	[See the attached worksheet.]
	[Graph of “Changes in Total NAV and NAV per Unit” is inserted as the reference
	information. Please refer to the PDF.]
	(B)	Record of Distributions Paid
	[See the attached worksheet.]

- 67 -


(C)	Record of Changes in Annual Return
[See the attached worksheet.]
(Note) Annual Return (%) = 100 x (a – b) / b
	a =	Net Asset Value per share at the end of the fiscal year including total
	amount of distributions made during such fiscal year.
	b =	Net Asset Value per share after distribution at the end of the previous
	fiscal year.
(D)	Miscellaneous (Investor Shares)
(i)	Total Return
	Total Return reflects the past performance and cannot be used to predict the future
returns that may be achieved by the Fund. Note, too, that both share price and return can
fluctuate widely. An investor’s shares, when redeemed, could be worth more or less than
their original cost. The annual average return includes the fluctuation of the price of the
shares, distribution and capital gains.


				(as of the end of April 2016)
past 1 month	past 1 year	past 3 years	past 5 years	past 10 years	since the
					establishment*

1.72%	-4.03%	8.93%	8.39%	6.86%	10.51%
* The date of the establishment is October 3, 1960.

- 68 -


(ii) Annual performance
Year	Capital Return	Income Return	Total Return
2015	-5.07%	1.29%	-3.78%
2014	6.02%	1.35%	7.37%
2013	36.01%	1.61 %	37.62 %
2012	16.06 %	1.99 %	18.04 %
2011	-3.94%	1.14%	-2.80%
2010	26.41%	1.31%	27.72%
2009	34.76%	1.36%	36.12%
2008	-37.38%	1.31%	-36.07%
2007	-0.12%	1.28%	1.16%
2006	14.38%	1.26%	15.64%
2005	6.30%	1.06%	7.36%
2004	18.72%	1.18%	19.90%
2003	44.32%	1.31%	45.63%
2002	-20.99%	0.97%	-20.02%
2001	1.95%	1.15%	3.10%
2000	-3.88%	1.21%	-2.67%
1999	21.79%	1.34%	23.13%
1998	-3.97%	1.36%	-2.61%
1997	23.18%	1.41%	24.59%
1996	16.63%	1.48%	18.12%
1995	27.19%	1.55%	28.74%
1994	-1.94%	1.43%	-0.51%
1993	17.38%	1.32%	18.70%
1992	16.69%	1.51%	18.20%
1991	43.04%	2.22%	45.26%
1990	-19.77%	1.64%	-18.13%
1989	9.43%	1.11%	10.54%
1988	24.04%	0.59%	24.63%
1987	-6.98%	0.00%	-6.98%
1986	0.19%	0.00%	0.19%
1985	21.47%	1.56%	23.03%
1984	-25.17%	0.00%	-25.17%
1983	18.17%	0.00%	18.17%
1982	43.48%	2.97%	46.45%
1981	-2.88%	0.00%	-2.88%

- 69 -


(iii) Monthly performance

	NAV		NAV		NAV		NAV
	in		in		in		in
	$ (%)		$ (%)		$ (%)		$ (%)
June, 1990	0.27	April, 1992	-3.04	February, 1994	-0.37	December, 1995	2.81
July, 1990	-4.27	May, 1992	1.18	March, 1994	-5.07	January, 1996	0.16
August, 1990	-12.91	June, 1992	-4.80	April, 1994	0.72	February, 1996	3.43
September, 1990	-8.85	July, 1992	3.58	May, 1994	-0.84	March, 1996	1.87
October, 1990	-5.96	August, 1992	-2.44	June, 1994	-3.26	April, 1996	5.59
November, 1990	7.84	September, 1992	1.69	July, 1994	1.75	May, 1996	3.93
December, 1990	4.54	October, 1992	3.17	August, 1994	5.50	June, 1996	-3.79
January, 1991	8.58	November, 1992	6.98	September, 1994	-0.31	July, 1996	-8.45
February, 1991	11.38	December, 1992	3.36	October, 1994	-0.38	August, 1996	5.94
March, 1991	6.91	January, 1993	3.77	November, 1994	-3.92	September, 1996	3.76
April, 1991	-0.44	February, 1993	-1.85	December, 1994	2.57	October, 1996	-1.45
May, 1991	4.36	March, 1993	3.07	January, 1995	-1.00	November, 1996	4.36
June, 1991	-5.45	April, 1993	-2.84	February, 1995	3.64	December, 1996	2.41
July, 1991	3.69	May, 1993	4.25	March, 1995	2.15	January, 1997	2.27
August, 1991	4.08	June, 1993	0.27	April, 1995	2.23	February, 1997	-2.46
September, 1991	0.42	July, 1993	0.93	May, 1995	1.87	March, 1997	-4.74
October, 1991	2.74	August, 1993	4.23	June, 1995	4.95	April, 1997	0.37
November, 1991	-4.94	September, 1993	2.85	July, 1995	5.82	May, 1997	11.08
December, 1991	8.05	October, 1993	2.59	August, 1995	2.15	June, 1997	5.24
January, 1992	7.96	November, 1993	-2.88	September, 1995	1.72	July, 1997	5.43
February, 1992	3.50	December, 1993	3.29	October, 1995	-4.34	August, 1997	2.24
March, 1992	-3.38	January, 1994	3.64	November, 1995	3.93	September, 1997	7.26


	NAV		NAV		NAV		NAV
	in		in		in		in
	$ (%)		$ (%)		$ (%)		$ (%)
October, 1997	-4.42	August, 1999	-3.79	June, 2001	4.19	April, 2003	9.36
November, 1997	-0.52	September,	-0.14	July, 2001	-5.31	May, 2003	9.54
		1999
December, 1997	1.66	October, 1999	0.37	August, 2001	-3.23	June, 2003	2.01
January, 1998	-1.60	November, 1999	5.98	September,	-13.47	July, 2003	5.36
				2001
February, 1998	7.49	December, 1999	11.46	October, 2001	5.79	August, 2003	4.83
March, 1998	4.15	January, 2000	-1.69	November, 200	17.75	September, 2003	-1.64
April, 1998	0.50	February, 2000	16.51	December, 2001	6.05	October, 2003	8.11
May, 1998	-5.36	March, 2000	-6.69	January, 2002	-1.06	November, 2003	3.77
June, 1998	-0.16	April, 2000	-5.96	February, 2002	-2.70	December, 2003	2.40
July, 1998	-7.98	May, 2000	-5.78	March, 2002	8.02	January, 2004	3.94
August, 1998	-19.29	June, 2000	9.29	April, 2002	0.92	February, 2004	1.36
September, 1998	7.53	July, 2000	-3.38	May, 2002	-4.33	March, 2004	1.18
October, 1998	4.21	August, 2000	7.60	June, 2002	-4.52	April, 2004	-4.77
November, 1998	5.31	September,	-2.98	July, 2002	-15.05	May, 2004	1.92
		2000
December, 1998	6.23	October, 2000	-4.34	August, 2002	-0.25	June, 2004	4.06
January, 1999	1.23	November, 2000	-10.27	September,	-7.20	July, 2004	-5.88
				2002
February, 1999	-8.11	December, 2000	8.61	October, 2002	3.21	August, 2004	-0.35

- 70 -


March, 1999	1.48	January, 2001	5.25	November, 2002	8.88	September, 2004	4.21
April, 1999	8.87	February, 2001	-6.60	December, 2002	-5.59	October, 2004	2.23
May, 1999	1.67	March, 2001	-4.87	January, 2003	-2.75	November, 2004	7.57
June, 1999	5.83	April, 2001	7.76	February, 2003	-3.02	December, 2004	3.62
July, 1999	-2.24	May, 2001	2.45	March, 2003	1.22

	NAV		NAV		NAV		NAV
	in		in		in		in
	$ (%)		$ (%)		$ (%)		$ (%)
January, 2005	-3.58	January, 2006	7.85	January, 2007	2.39	January, 2008	-6.23
February, 2005	2.09	February, 2006	-0.16	February, 2007	-0.12	February, 2008	-2.65
March, 2005	-2.26	March, 2006	4.18	March, 2007	1.22	March, 2008	-0.50
April, 2005	-4.61	April, 2006	0.03	April, 2007	2.67	April, 2008	5.48
May, 2005	6.17	May, 2006	-4.94	May, 2007	4.41	May, 2008	5.16
June, 2005	3.52	June, 2006	0.20	June, 2007	-1.60	June, 2008	-8.90
July, 2005	6.25	July, 2006	-3.31	July, 2007	-5.76	July, 2008	1.67
August, 2005	-1.67	August, 2006	2.27	August, 2007	-1.34	August, 2008	3.13
September, 2005	0.71	September, 2006	0.86	September, 2007	2.15	September, 2008	-9.41
October, 2005	-3.23	October, 2006	5.20	October, 2007	2.62	October, 2008	-21.56
November, 2005	4.61	November, 2006	3.10	November, 2007	-6.79	November, 2008	-11.45
December, 2005	-0.06	December, 2006	0.01	December, 2007	-0.72	December, 2008	5.58

	NAV		NAV		NAV		NAV
	in		in		in		in
	$ (%)		$ (%)		$ (%)		$ (%)
January, 2009	-10.25	January, 2010	-3.35	January, 2011	0.86	January, 2012	6.95
February, 2009	-11.96	February, 2010	4.97	February, 2011	5.34	February, 2012	3.19
March, 2009	-9.48	March, 2010	8.08	March, 2011	2.42	March, 2012	2.30
April, 2009	18.25	April, 2010	5.54	April, 2011	2.94	April, 2012	-0.93
May, 2009	3.74	May, 2010	-7.80	May, 2011		May, 2012	-6.78
					-2.03
June, 2009	1.16	June, 2010	-7.57			June, 2012	4.51
				June, 2011	-1.99
July, 2009	9.68	July, 2010	7.16			July, 2012	-0.82
				July, 2011	-3.72
August, 2009	4.46	August, 2010	-6.61			August, 2012	3.47
				August, 2011	-8.31
September, 2009	6.34	September, 2010	11.98			September, 2012	2.73
				September, 2011	-11.00
October, 2009	-6.64	October, 2010	4.08			October, 2012	-1.46
				October, 2011	15.26
November, 2009	3.33	November, 2010	3.07			November, 2012	1.16
				November, 2011	-0.41
December, 2009	7.88	December, 2010	7.72			December, 2012	3.07
				December, 2011	0.22


	NAV		NAV		NAV		NAV
	in		in		in		in
	$ (%)		$ (%)		$ (%)		$ (%)
January, 2013	6.35	January, 2014	-2.07	January, 2015	-2.17	January,	-7.66
						2016
February, 2013	1.33	February,	5.06	February,	5.82	February,	0.92
		2014		2015		2016
March, 2013	4.69	March, 2014	-0.31	March, 2015	1.18	March,	8.35
						2016
April, 2013	0.14	April, 2014	-2.33	April, 2015	-1.69	April,	1.72
						2015
May, 2013	3.61	May, 2014	1.17	May, 2015	2.00
June, 2013	-0.99	June, 2014	4.96	June, 2015	-0.87
July, 2013	6.66	July, 2014	-4.94	July, 2015	-0.29
August, 2013	-3.17	August, 2014	4.97	August, 2015	-5.85
		September,	-5.31	September,	-4.50
September, 2013	5.69	2014		2015
October, 2013	3. 27	October, 2014	4.48	October, 2015	5.68
November, 2013	2.71	November,	0.98	November,	1.81
		2014		2015
		December,	1.25	December,	-4.21
December, 2013	2.57	2014		2015


(iv) The contents of the portfolio (as of the end of April 2016)

Fund Asset Allocation
Cash 0.44%
Shares 99.56%

Characteristics of Shares

The number of the shares	1484
Median Market Capitalization	3.2 billion dollars
PER	30.3x
PBR	2.2x
ROE	11.4%
The rate of gain	9.8%
The fluctuation of sell and purchase (as of	10.7%
fiscal year end December 31, 2015)
Cash ratio	0.1%

(v) Risk analysis (as of the end of April 2016)


R Squared	1.00

- 72 -


Beta	1.00


Note 1	R Squared and Beta are calculated from trailing 36-month fund returns relative to
	the Spliced Small-Cap Index. The Spliced Small-Cap Index reflects performance of
	the Russell 2000 Index through May 16, 2003, performance of the MSCI US Small
	Cap 1750 Index through January 30, 2013, and performance of the CRSP US
	Small-Cap Index thereafter.

Note 2	“R Squared” is 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 the fund’s target index
	benchmark and by an overall market 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 with the index’s returns, its R-Squared would be 0.

Note 3	“Beta” is a measure of the magnitude of a fund’s past share-price fluctuations in
	relation to the ups and downs of the fund’s target index benchmark and an overall
	market index. Each index is assigned a Beta of 1.00. Compared with a given index,
	a fund with a Beta of 1.20 would have seen its share price rise or fall by 12% when
	the index rose or fell by 10%. However, a fund’s beta should be reviewed in
	conjunction with its R-squared. The lower the R-squared, the less correlation there
	is between the fund and the benchmark, and the less reliable the beta is as an
	indicator of volatility.
(4)	Record of Sales and Repurchase
	Record of sales and repurchase as of the end of each fiscal year and number of outstanding
	Share of the Fund as of the end of each fiscal year are as follows.

[See the attached worksheet.]

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II.	MANAGEMENT AND ADMINISTRATION
1.	PROCEDURES FOR SUBSCRIPTION (SALES)
	(a)	Procedures for Subscriptions in the United States
		Investors buy Shares at the Fund's NAV determined as of their “Trade Date”. For
		all Vanguard funds, purchase requests received at Vanguard before the close of
		regular trading on the New York Stock Exchange (generally 4 p.m., U.S. Eastern
		time), receive a Trade Date of the same day, and purchase requests received after
		that time will receive a Trade Date of the first business day following the date of
		receipt.
	(b)	Procedures for Subscriptions in Japan
		In Japan, Shares of the Fund are offered on any Fund Business Day (i.e., any day on
		which the New York Stock Exchange is open for trading) when sales handling
		companies are open for business in Japan (with the exception of a day in which the
		next business day is a national holiday in Japan) during the subscription period
		mentioned in “7. Period of Subscription, Part I Information Concerning Securities”
		of the securities registration statement. A Sales Handling Company shall provide to
		the investors a Contract Concerning a Foreign Securities Transactions Account (the
		“Contract”) and receive from such investors an application for requesting the
		opening of a transactions account under the Contract. The minimum shares to open
		an account shall be five shares.
		The issue price for Shares during the subscription period shall be, in principal, the
		NAV per Share next calculated after the Fund has received such application. The
		Trade Date in Japan is the day when the Sales Handling Company accepts the order.
		The payment and delivery shall be made in Yen on the fourth business day from and
		including the Trade Date. No sales charge is added in Japan, provided, however,
		that an Account Administration Fee at an annual rate of 0.648% (0.60% excluding
		tax) multiplied by the Shareholder's average account balance shall be assessed upon
		each Shareholder quarterly in arrears. For Shareholder accounts which are
		redeemed partially or in full prior to the end of each quarter, the Account
		Administration Fee shall be charged in proportion to the period in which such
		shareholder holds the shares and assessed at the time of each redemption. Quarterly

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		assessments shall be net of any fees charged for partial redemptions during the
		quarter.
		Shareholders will receive from the Sales Handling Company a certificate of safe
		keeping in exchange for the purchase price. In such case payment shall be made in
		Yen in principal and the applicable exchange rate shall be the exchange rate which
		shall be based on the foreign exchange rate quoted in the Tokyo Foreign Exchange
		Market on the Trade Date and which shall be determined by the Sales Handling
		Company. The payment by the investor to the Distributor may be made in U.S.
		Dollars to the extent that the Sales Handling Companies can agree.
		In addition, the Sales Handling Companies in Japan who are members of the JSDA
		cannot continue sales of the Shares in Japan when the net assets of the Fund are less
		than ¥100,000,000 or the Shares otherwise cease to comply with the “Standards of
		Selection of Foreign Investment Fund Securities” established under the Rules of
		Foreign Securities Transactions by the Japanese Securities Dealers Association.

2.	PROCEDURES FOR REPURCHASE OF SHARES
	(a)	Repurchase in the United States
		Investors can request a redemption of Shares at any time from their Fund account in
		any one of three ways: online, by telephone, or by mail. Shares are redeemed at the
		Fund's next-determined NAV after Vanguard receives the redemption request,
		including any special documentation required under the circumstances. As long as
		the request is received in good order before the close of regular trading on the New
		York Stock Exchange (generally 4 p.m., U.S. Eastern time), shares are redeemed at
		that day’s NAV. This is known as the investor’s Trade Date. No charge is made by
		the Fund for redemptions. The proceeds of a redemption may be worth more or less
		than the Shareholder’s cost, depending on the market value of the securities held by
		the Fund.
	(b)	Repurchase in Japan
		Shareholders in Japan may at any time request repurchase of their Shares.
		Repurchase requests in Japan may be made to the Sales Handling Company on a
		Fund Business Day that is also a business day of the Sales Handling Companies in

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		Japan (with the exception of a day in which the next business day is a national
		holiday in Japan). The Sales Handling Company shall send such requests to
		Vanguard. One share is acceptable as the minimum redemption amount.
		The price a Shareholder in Japan will receive is the NAV next calculated after the
		Fund receives the repurchase request from the Sales Handling Company. The
		payment of the price shall be made in Yen through the Sales Handling Companies
		pursuant to the Contracts or, if the Sales Handling Companies agree, in U.S.
		Dollars. The payment for repurchase proceeds shall be made on the fourth business
		day of the Sales Handling Companies in Japan from and including the Trade Date.
		As to the Account Administration Fee, the Distributor shall have the right to redeem
		shares from the Fund in respect of which the Account Administration Fee is
		collected. Please refer to the Distributor for details of procedures of redemption of
		the shares.
	(c)	Suspension of Repurchase
		The Fund may suspend redemption privileges or postpone the date of payment for
		redeemed shares can postpone payment of redemption proceeds for up to seven
		calendar days. In addition, the Fund can suspend redemptions and/or postpone
		payments of redemption proceeds beyond seven calendar days (i) during any period
		that the New York Stock Exchange is closed or trading on the Exchange is restricted
		as determined by the SEC, (ii) during any period when an emergency exists, as
		defined by the SEC, as a result of which it is not reasonably practicable for the Fund
		to dispose of securities it owns or to fairly determine the value of its assets, or (iii)
		for such other periods as the SEC may permit.
		The Trust has filed an election with the SEC to pay in cash all redemptions
		requested by any shareholder of record limited in amount during any 90-day period
		to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such
		period.

3.	OUTLINE OF MANAGEMENT OF ASSETS, ETC.
(1)	Valuation of Assets

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	Share price, also known as net asset value (NAV), is calculated each business day as
	of the close of regular trading on the New York Stock Exchange (NYSE), generally 4 p.m.,
	U.S. Eastern time. Each share class has its own NAV, which is computed by dividing the
	total assets, minus liabilities, allocated to each share class by the number of Fund shares
	outstanding for that class. On U.S. holidays or other days when the NYSE is closed, the
	NAV is not calculated, and the Fund does not sell or redeem shares. However, on those
	days the value of the Fund’s assets may be affected to the extent that the Fund holds
	securities that change in value on those days (such as non-U.S. securities that trade on
	non-U.S. markets that are open).
	Stocks held by a Vanguard fund are valued at their “market value” when reliable
	market quotations are readily available from the principal exchange or market on which
	they are traded. Such securities are generally valued at their official closing price, the last
	reported sales price, or if there were no sales that day, the mean between the closing bid and
	asking prices. Certain short-term debt instruments used to manage a fund’s cash may be
	valued at amortized cost when it approximates fair value. The values of any non-U.S.
	securities held by a fund are converted into U.S. Dollars using an exchange rate obtained
	from an independent third party as of the close of regular trading on the NYSE. The values
	of any mutual fund shares held by a fund are based on the NAVs of the shares. The values
	of any ETF or closed-end fund shares held by a fund are based on the market value of the
	shares.
	When a fund determines that pricing service information or reliable market
	quotations either are not readily available or do not accurately reflect the value of a security,
	the security is priced at its “fair-value” (the amount that the owner might reasonably expect
	to receive upon the current sale of the security). A fund also will use fair-value pricing if
	the value of a security it holds has been materially affected by events occurring before the
	fund’s pricing time but after the close of the principal exchange or market on which the
	security is traded. This most commonly occurs with non-U.S. securities, which may trade
	on non-U.S. exchanges that close many hours before the fund’s pricing time. Intervening
	events might be company-specific (e.g., earnings report, merger announcement); or
	country-specific or regional/global (e.g., natural disaster, economic or political news, act of
	terrorism, interest rate change). Intervening events include price movements in U.S.

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	markets that exceed a specified threshold or that are otherwise deemed to affect the value of
	non-U.S. securities. Fair-value pricing may be used for domestic securities—for example,
	if (1) trading in a security is halted and does not resume before the fund’s pricing time if a
	security does not trade in the course of a day, and (2) the fund holds enough of the security
	that its price could affect the Fund’s NAV.
		Fair-value prices are determined by Vanguard according to procedures adopted by
	the board of trustees. When fair-value pricing is employed, the prices of securities used by
	a fund to calculate its NAV may differ from quoted or published prices for the same
	securities.
(2)	Conversion of Shares
		In Japan, Shares cannot be converted to securities of other classes or series of the
		Trust.
(3)	Custody of Shares:
		To eliminate the need for safekeeping, the Fund will not issue certificates for
		Shares.
(4)	Duration Period:
		Unless terminated as provided in the Agreement and Declaration of the Trust, the
		Trust shall continue without limitation of time.
(5)	Fiscal Year:
		The accounts of the Fund will be closed each year on December 31.
(6)	Miscellaneous:
	(a)	Dissolution of Fund
		The Trust may be terminated at any time by the trustees upon 60 days prior written
		notice to the Shareholders. Any series may be terminated at any time by the trustees
		upon 60 days prior written notice to the Shareholders of that series.
	(b)	Procedures Concerning the Changes of Agreements between the Related
		Companies
		(i)	Agreement and Declaration of Trust:
			Originals or copies of the Agreement and Declaration of Trust, as amended,
		are maintained in the office of the Trust and are made available for public inspection
		for the Shareholders. Copies of the Agreement and Declaration of Trust, as

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	amended, are on file in the United States with the U.S Securities and Exchange
	Commission (“SEC”). The Agreement and Declaration of Trust may be restated
	and/or amended at any time by an instrument in writing signed by a majority of the
	trustees then holding office. Any such restatement and/or amendment thereto shall
	be effective immediately upon execution and approval. The Certificate of Trust of
	the Trust may be restated and/or amended by a similar procedure, and any such
	restatement and/or amendment shall be effective immediately upon filing with the
	Office of the Secretary of State of Delaware or upon such future date as may be
	stated therein.
		In Japan, material changes in the Agreement and Declaration of Trust shall
	be published or notice thereof shall be sent to the Japanese Shareholders.
	(ii)	Agent Company Agreement
		Agent Company Agreement shall be effective until terminated upon three
	(3) months’ prior written notice to the other party to the agreement. The Agreement
	shall be governed by and construed in accordance with the laws of Japan.
	(iii)	Shares Distribution and Redemption Agreement
		Shares Distribution and Redemption Agreement shall continue in effect
	until terminated upon three (3) months’ prior notice in writing to the other party to
	the agreement. The Agreement shall be governed by and construed in accordance
	with the laws of Japan. Any action brought under the agreement for indemnification
	or otherwise shall be brought in the Tokyo District Court and Vanguard submits to
	jurisdiction of the Tokyo District.
	(iv)	Global Custody Agreement
		Either party may terminate Global Custody Agreement by notice in writing,
	delivered or dispatched by registered mail to the other party hereto, not less than
	sixty (60) days prior to the date upon which such termination becomes effective.
	The Agreement shall be subject to and construed in accordance with law of New
	York State.
	(v)	Funds' Service Agreement
		The Fifth Amended and Restated Funds' Service Agreement shall continue
	in full force and effect as to all parties to the Agreement until terminated or amended

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			by mutual agreement of all parties to the Agreement. The Fund may elect to
			withdraw from the Agreement effective at the end of any monthly period by giving
			at least 90 day’s prior written notice to each of the parties to the Agreement.


4.		INFORMATION CONCERNING THE EXERCISE OF RIGHTS BY
		SHAREHOLDERS, ETC.
	(1)	Rights of Shareholders and Procedures for Their Exercise:
			Shareholders in Japan must generally register their Shares in their own name in
		order to exercise directly their rights as Shareholders. Therefore, the Shareholders in Japan
		who entrust the custody of their Shares to the Sales Handling Company cannot exercise
		directly their Shareholder rights, because their Shares are registered in the name of the Sales
		Handling Company. Shareholders in Japan may have the Sales Handling Companies
		exercise their rights on their behalf in accordance with the Contract with the Sales Handling
		Companies.
			Shareholders in Japan who do not entrust the custody of their Shares to the Sales
		Handling Companies may exercise their rights in accordance with their own arrangement
		under their own responsibility.
			The major rights enjoyed by Shareholders are as follows:
		(i)	Voting rights
			Shareholders of the Fund are entitled to vote on a matter if (i) the matter concerns an
			amendment to the Agreement and Declaration of Trust that would adversely affect
			to a material degree the rights and preferences of the Shares of the Fund or any
			class; (ii) the trustees determine that it is necessary or desirable to obtain a
			Shareholder vote; or (iii) a merger or consolidation, share conversion, share
			exchange, or sale of assets is proposed and a shareholder vote is required by the
			1940 Act to approve the transaction; or (4) a shareholder vote is required under the
			1940 Act. The 1940 Act requires a Shareholder vote under various circumstances,
			including to elect or remove trustees upon the written request of Shareholders
			representing 10% or more of the Fund's net assets, to change any fundamental
			policy of the Fund and to enter into certain merger transactions. Unless otherwise

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	required by applicable law, Shareholders of the Fund receive one vote for each U.S.
	dollar of net asset value owned on the record date, and a fractional vote for each
	fractional dollar of net asset value owned on the record date. However, only the
	Shares of the Fund or class affected by a particular matter are entitled to vote on that
	matter. In addition, each class has exclusive voting rights on any matter submitted
	to shareholders that relates solely to that class, and each class has separate voting
	rights on any matter submitted to shareholders in which the interests of one class
	differ from the interests of another. Voting rights are non-cumulative and cannot be
	modified without a majority vote by the shareholders.
	Shareholders in Japan are entitled to receive from the Sales Handling Companies
	pursuant to the Account Agreement to be entered between a Sales Handling
	Company and a Shareholder notices of the Fund, whereby Shareholders have the
	Sales Handling Company exercise their voting rights.
(ii)	Repurchase rights
	Shareholders are entitled to request repurchase of Shares at the Shares' Net Asset
	Value.
(iii)	Rights to receive dividends
	The Shareholders of the Fund are entitled to receive any dividends or other
	distributions declared by the Fund for each such class. No Shares of the Fund have
	priority or preference over any other Shares of the Fund with respect to
	distributions. Distributions will be made from the assets of the Fund and will be
	paid ratably to all Shareholders of a particular class according to the number of
	Shares of the class held by Shareholders on the record date. The amount of
	dividends per share may vary between separate share classes of the Fund based
	upon differences in the net asset values of the different classes and differences in the
	way that expenses are allocated between share classes pursuant to a multiple class
	plan.
(iv)	Right to receive distributions upon dissolution
	In the event that the Fund is liquidated, shareholders will be entitled to receive a pro
	rata share of the Fund’s net assets. In the event that a class of shares is liquidated,
	shareholders of that class will be entitled to receive a pro rata share of the Fund’s net

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		assets that are allocated to that class. Shareholders may receive cash, securities, or a
		combination of the two.
	(v)	Right to inspect accounting books and the like:
		Shareholders are entitled to inspect the Agreement and Declaration of Trust, and at
the discretion of the Court, the accounting books and the minutes of any
		Shareholders' meetings.
	(vi)	Right to Transfer Shares
		Shares are transferable within Japan to Japanese investors without restriction except as
		limited by applicable law.
(2)	Foreign Exchange Control:
		In the United States, there are no foreign exchange control restrictions on remittance
	of dividends, repurchase money, etc. of the Shares to Japanese Shareholders.
(3)	Agent in Japan:
		Mori Hamada & Matsumoto
		Marunouchi Park Building
		6-1, Marunouchi 2-chome
		Chiyoda-ku, Tokyo
		The foregoing law firm is the true and lawful agent of the Fund to represent and act
	for the Fund in Japan for the purposes of:
	(i)	the receipt of any and all communications, claims, actions, proceedings and
		processes as to matters involving problems under the laws and the rules and
		regulations of the JSDA, and
	(ii)	representation in and out of court in connection with any and all disputes,
		controversies or differences regarding the transactions relating to the public
		offering, sale and repurchase in Japan of the Shares of the Fund.
		The agent for the registration with the Director of Kanto Local Finance Bureau of
	the Ministry of Finance of Japan of the public offering concerned as well as for the
	continuous disclosure and filing the notification with the Commissioner of the Financial
	Services Agency is the following person:
		Ken Miura
		Attorney-at-law
		Mori Hamada & Matsumoto
		Marunouchi Park Building

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	6-1, Marunouchi 2-chome
	Chiyoda-ku, Tokyo

(4)	Jurisdiction:
	The Fund acknowledges that the following court shall have jurisdiction over
	litigations related to transactions in the Units of the Fund acquired by Japanese investors.
	Tokyo District Court
	1-4, Kasumigaseki 1-chome
	Chiyoda-ku, Tokyo
	Enforcement proceedings of a final and definitive judgment on such litigation will
	be conducted in accordance with the applicable laws of the relevant jurisdiction.

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III. FINANCIAL CONDITIONS OF THE FUND
1.	FINANCIAL STATEMENTS
	[Omitted]

2.	CONDITION OF THE FUND:
(a)	Statement of Net Assets (All Share Classes)
	[See the attached worksheet.]

IV.	SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT
	FUND SECURITIES

1.	Transfer of the Shares
	The transfer agent for the Shares is Vanguard, whose mailing address is P.O. Box
	2600, Valley Forge, Pennsylvania 19482.
	The Japanese investors who entrust the custody of their Shares to a Sales Handling
	Company shall have their Shares transferred under the responsibility of such company, and
	the other investors shall make their own arrangements.
	No fee is chargeable for the transfer of Shares.
2.	There are no annual Shareholders' meetings. Special Shareholders' meetings may be held
	from time to time as required by the Agreement and Declaration of Trust and the 1940 Act.
3.	No special privilege is granted to Shareholders.
	The acquisition of Shares by any person may be restricted.

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PART III.		SPECIAL INFORMATION

I.	OUTLINE OF THE TRUST
1.	Outline of the Trust
(1)	Amount of Capital Stock
		Not applicable.
(2)	Structure of the Management of the Trust
		The trustees have exclusive and absolute control over the Trust Property and over
	the business of the Trust to the same extent as if the trustees were the sole owners of the
	Trust Property and business in their own right, but with such powers of delegation as may
	be permitted by the Amended and Restated Agreement and Declaration of Trust. The
	Amended and Restated Agreement and Declaration of Trust provides that the trustees have
	the power to do all things and execute all instruments as the trustees deem necessary, proper
	or desirable in order to promote the interests of the Trust.
		The number of trustees shall be fixed from time to time by a majority of trustees,
	provided, however, that the number of trustees shall at all times be at least (1) If any
	vacancies shall exist, the remaining trustees shall fill such vacancy by appointing such other
	individual as they in their discretion shall see fit. A Trustee may be removed at any meeting
	of Shareholders by a vote of two-thirds of the outstanding Shares of each series. The
	trustees shall hold office during the lifetime of this Trust and until its termination or until he
	or she resigns, is removed or dies.
		The trustees of the Trust are authorized by the Amended and Restated Agreement
	and Declaration of Trust to issue Shares and to authorize the division of Shares into one or
	more series. The assets of each series shall irrevocably belong to that series for all
	purposes. The variations in the relative rights, privileges and preferences as between the
	different series shall be fixed and determined by the trustees. The trustees may authorize
	the division of Shares of any series into Shares of one or more classes of such series, with
	such variations between classes as may be approved by the board of trustees.
		Under the Amended and Restated Agreement and Declaration of Trust, the
	Shareholders have the power, as and to the extent provided therein, to vote only (i) for the
	election or removal of trustees as provided in Article IV, Section 1 of the Amended and

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	Restated Agreement and Declaration of Trust, and (ii) with respect to such additional
	matters relating to the Trust as may be required by the applicable provisions of the 1940
	Act, including Section 16(a) thereof, and (iii) on such other matters as the trustees may
	consider necessary or desirable unless otherwise required by law, each Shareholder shall
	have one vote for each U.S. dollar (and a fractional vote for each fractional dollar) of the net
	asset value of each Share (including fractional Shares) held by such Shareholder on the
	record date on each matter submitted to a vote at a meeting of Shareholders. There shall be
	no cumulative voting in the election of trustees. Votes may be made in person or by proxy.
	A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid
	unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on
	the challenger.
	Meetings of the Shareholders may be called by the trustees. A meeting of
	Shareholders may be held at any place designated by the trustees. Written notice of any
	meeting of Shareholders shall be given or caused to be given by the trustees by delivering
	personally or mailing such notice not more than ninety (90), nor less than ten (10) days
	before such meeting, postage prepaid, stating the time and place of the meeting, to each
	Shareholder at the Shareholder's address as it appears on the records of the Trust.
	Except as otherwise provided by the 1940 Act or in the Amended and Restated
	Agreement and Declaration of Trust, at any meeting of Shareholders, the presence in person
	or by proxy of the holders of record of Shares issued and outstanding and entitled to vote
	representing more than fifty percent of the total combined net asset value of all Shares
	issued and outstanding and entitled to vote shall constitute a quorum for the transaction of
	any business at the meeting. Any meeting of Shareholders may be adjourned from time to
	time by a majority of the votes properly cast upon the question of adjourning a meeting to
	another date and time, whether or not a quorum is present, and the meeting may be held as
	adjourned within a reasonable time after the date set for the original meeting without further
	notice.
	The trustees are authorized by the Amended and Restated Agreement and
	Declaration of Trust to adopt By-Laws not inconsistent with the Amended and Restated
	Agreement and Declaration of Trust to provide for the conduct of the business of the Trust.
	The By-Laws contemplate that the trustees shall elect a Chairman, a President, a Treasurer

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	and a Secretary. The trustees may elect or appoint such other officers or agents as the
	business of the Trust may require. The trustees may delegate to any officer or committee
	the power to appoint any subordinate officers or agent. The trustees may amend or repeal
	the By-Laws of the Trust to the extent such power is not reserved to the Shareholders.
	The trustees may in their discretion provide for regular or stated meetings of the
	Trustees. Notice of regular or stated meetings need not be given. Meetings of the trustees
	other than regular or stated meetings shall be held whenever called by the Chairman or by
	any trustee. Notice of the time and place of each meeting other than regular or stated
	meetings shall be mailed to each trustee at least two days before the meeting, or shall be
	telegraphed, cabled, or wirelessed to each trustee, or personally delivered to him at least one
	day before the meeting.
	A majority of the trustees present in person at any regular or special meeting of the
	trustees shall constitute a quorum for the transaction of business at such meeting. Except as
	otherwise required by law, the Amended and Restated Agreement and Declaration of Trust
	or the Trust's By-Laws, any action to be taken by the trustees may be taken by a majority of
	the trustees present at a meeting at which a quorum is present, or by written consent of all of
	the trustees.
	The Amended and Restated Agreement and Declaration of Trust contains
	provisions for the indemnification of trustees, officers and Shareholders of the Trust under
	the circumstances and on the terms specified therein.

2.	Description of Business and Outline of Operation
	The Trust may carry out any administrative and managerial acts, including the
	purchase, sale, subscription and exchange of any securities, and the exercise of all rights
	directly or indirectly pertaining to the Fund’s assets. The Trust has retained Vanguard, as
	Investment Management Company and Transfer and Dividend Paying Agent; and
	JPMorgan Chase Bank, as Custodian, to hold the assets of the Fund in custody.
3.	Financial Conditions of the Management Company
	Not Applicable.

4.	Restrictions on Transactions with Interested Parties:

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		The Fund may not sell, purchase or loan securities (excluding Shares in the Fund) or
	grant or receive a loan or loans to or from the Investment Advisor, corporate and
	domiciliary agent, or paying agent, the distributors and the authorized agents or any of their
	directors, officers or employees or any of their major Shareholders (meaning a Shareholder
	who holds, in his own or other name (as well as a nominee's name), more than 10% of the
	total issued and outstanding Shares of stock of such company) acting as principal, or for
	their own account, unless the transaction is made within the other restrictions set forth
	above and either (a) at a price determined by current publicly available quotations, or (b) at
	competitive prices or interest rates prevailing from time to time on internationally
	recognized securities markets or internationally recognized money markets.
5.	Miscellaneous
	(1)	Changes of Trustees and Officers
		Trustees may be removed by, among other things, a vote representing two-thirds of
		the total net asset value of all shares of the Fund. In the event of vacancy, the
		remaining trustees may fill such vacancy by appointing such other person as they in
		their discretion shall see fit. The trustees may add to their number as they consider
		appropriate. The trustees may elect and remove officers as they consider
		appropriate.
	(2)	Amendment to the Agreement and Declaration of Trust
		The Amended and Restated Agreement and Declaration of Trust may be restated or
		amended at any time by an instrument in writing signed by a majority of the trustees
		then holding office.
	(3)	Litigation and Other Significant Events
		Nothing which has or which would have a material adverse effect on the Fund has
		occurred which has not been disclosed. The fiscal year end of the Fund is December
		31.

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II.	OUTLINE OF THE OTHER RELATED COMPANIES
1.	NAME, AMOUNT OF CAPITAL AND DESCRIPTION OF BUSINESS
(A)	Vanguard (the “Investment Manager" and the "Transfer and Dividend-Paying Agent”)
	(1)	Amount of Capital as of the end of April, 2016
		$250,032,582.00 (approx. ¥ billion)
	(2)	Description of Business
		Vanguard was established in 1974 under the laws of Pennsylvania and is registered
		as an investment advisor under the Investment Advisers Act of 1940. Vanguard was
		established and operates under an Amended and Restated Funds' Service
		Agreement. The Fifth Amended and Restated Funds’ Service Agreement provides
		that each Vanguard fund may be called upon to invest up to 0.40% of its current net
		assets in Vanguard as contributions to Vanguard’s capitalization, and that there is
		no other limitation on the U.S. Dollar amount that each Vanguard fund may
		contribute to Vanguard’s capitalization. The amounts which each of the funds have
		invested are adjusted from time to time in order to maintain the proportionate
		relationship between each fund’s relative net assets and its contribution to
		Vanguard’s capital.
		At December 31,2015, the Fund had contributed capital of $[4,862,000] to
		Vanguard, representing [0.01]% of the Fund’s net assets, and [1.94]% of
		Vanguard’s capitalization.

(B)	JPMorgan Chase Bank (the “Custodian”)
	(1)	Amount of Capital as of the end of December, 2015
		Approximately $243.2 billion (unaudited) (approximately ¥ billion)
	(2)	Description of Business
		JPMorgan Chase Bank engages in business as a financial institution.

(C)	Vanguard Investments Japan, Ltd. (the "Agent Company”)
	(1)	Amount of Capital:
		¥ 443.5 million as of the end of April, 2016
	(2)	Description of Business:

- 89 -


		Vanguard Investments Japan, Ltd., performs first financial instruments business in
	Japan.

(D)	Monex, Inc. (the “Distributor”)
	(1)	Amount of Capital:
		Approximately ¥12.2 billion as of the end of March, 2015
	(2)	Description of Business:
		Monex, Inc. engages in business as a financial instruments firm in Japan.

2.	OUTLINE OF BUSINESS RELATIONSHIP WITH THE FUND
(A)	Vanguard (the “Investment Manager" and the "Transfer and Dividend-Paying Agent”)
		Vanguard acts as investment manager and transfer and dividend-paying agent to the
	Fund.
(B)	JPMorgan Chase Bank (the “Custodian”)
		JPMorgan Chase Bank serves as the Fund’s custodian. The custodian is responsible
	for maintaining the Fund’s assets, keeping all necessary accounts and records of Fund
	assets, and appointing any non-U.S. sub-custodians or non-U.S. securities depositories.
(C)	Vanguard Investments Japan, Ltd. (the "Agent Company")
Vanguard Investments Japan. acts as the Agent Company in Japan.
(D)	Monex, Inc. (the “Distributor”)
		Monex, Inc. acts as the Distributor in Japan.

3.	CAPITAL RELATIONSHIPS
		The Fund contributed 1.94% of the capitalization of Vanguard as of the end of
	December 2015.

- 90 -


III.	OUTLINE OF THE SYSTEM OF INVESTMENT TRUSTS
copiedfrom Wellesley Income.

A.	Outline of the Investment Trusts in Delaware

	Delaware statutory trusts are governed by Chapter 38 of Title 12 of the Delaware
Code. See “PART II. INFORMATION CONCERNING THE FUND – I.1 (4) Outline of
Laws Regulating the Fund in the Jurisdiction Where Established” for a summary of the
provisions contained in Chapter 38. To form a trust, a governing instrument is entered into
and a certificate of trust is filed with the Secretary of State of the State of Delaware.
Delaware statutory trusts are a common organizational form for U.S. registered
management investment companies, commonly called "mutual funds".

B.	The System of Mutual Funds created as Delaware Statutory Trusts in Delaware

	A Delaware statutory trust is in the widest sense a business organization like a
corporation or partnership. It can issue shares (beneficial interests) which may be freely
transferred; the holders of such shares may receive dividends out of the income of the trust;
and the management is separate from the ownership of each organization. Except to the
extent otherwise provided in the governing instrument of a Delaware statutory trust, the
business and affairs of a Delaware statutory trust shall be managed by or under the direction
of its trustees. See section 3806 of the Delaware Statutory Trust Act.

	Additionally, as a registered investment company (mutual fund), a Delaware
statutory trust is regulated by the 1940 Act and other related U.S. federal and state laws. As
long as a Delaware statutory trust operates as a registered mutual fund, the shareholders of
the trust derive certain rights and protections under the U.S. federal securities laws. Such
federal laws prohibit all false and misleading statements or omissions of material facts from
the contents of the mutual fund's registration statement filed with the SEC. Further, various
securities laws contain similar prohibitions in connection with the offer, sale and
advertising of mutual funds.

(1)	Formation of a Delaware Statutory Trust

	A Delaware statutory trust is formed by a governing instrument ("Agreement and
Declaration of Trust") and the filing of a certificate of trust ("Certificate of Trust") pursuant
to section 3810 of the Delaware Statutory Trust Act. Property of the trust is transferred to
the trustees in accordance with the Agreement and Declaration of Trust, and the trustees
manage and operate the trust for the benefit of the beneficial shareholders, whose shares
may be freely transferred.

	The Agreement and Declaration of Trust generally contains such matters as the
name of the trust, purpose, compensation to be paid to the trustees, powers and
responsibilities of the trustees, shareholder meetings, rights of shareholders, payment of
dividends, redemption of shares, period and termination of the trust, and the governing law
of the trust.

	To become a registered mutual fund, a registration statement must be filed with the
SEC under the 1933 Act and an election made under the 1940 Act.

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	(2)	Issuance of Shares

		In order to issue mutual fund shares, a fund must have a prospectus which contains
	various items of disclosure relating to the fund and its shares, such as: the fees associated
	with a purchase of the fund's shares, financial information about the fund for the past five
	years (or for the length of time the fund has been in operation), the fund's objectives and
	policies, any investment restrictions, the price at which shares may be purchased, the
	method by which shareholders may purchase and redeem shares, dividend and tax
	information relating to the ownership of shares, descriptions of the fund's management and
	expenses paid by the fund, a description of the fund's shares and any other information the
	fund desires to provide potential shareholders. The regulations regarding the issuance of a
	mutual fund's shares are the U.S. federal securities laws, Blue Sky laws and various sections
	of the United States Internal Revenue Code of 1986 (“Code”). The shares may not be
	issued unless the fund has an effective registration statement on file with the SEC. Further,
	each share of stock issued by a mutual fund must be a voting share and have equal voting
	rights with all other outstanding voting shares.

	(3)	Management and Operation of a Mutual Fund

		Management and operation of a mutual fund is generally conducted by having an
	investment advisory agreement with an investment advisor. The requirements for
	becoming an investment advisor for a mutual fund are that the advisor must be a registered
	investment advisor under the Investment Advisers Act of 1940, and must have been
	approved by the board of trustees/directors of a fund and its shareholders. The investment
	advisor discloses certain information to the competent supervisory authorities and the
	fund's shareholders, in accordance with the investment advisory agreement, with respect to
	the management and operation of the fund's assets.

		An advisory fee calculated in accordance with the net asset value of the fund is paid
	to the investment advisor. An investment advisor generally executes an investment
	advisory agreement with a fund relating to the investment and reinvestment of the fund's
	assets. Such investment and reinvestment must be conducted subject to the investment
	objectives and restrictions provided for in the prospectus and other governing instruments.

a.	Valuation of Assets

		The fund's net asset value per share is calculated each business day as of the close of
		regular trading on the New York Stock Exchange (the Exchange). The total net
		asset value of the fund is determined by subtracting the fund's (share class’s) total
		liabilities from its total assets. The net asset value per share of the fund (share class)
		is determined by dividing the fund's (share class’s) net assets, minus liabilities, by
		the total number of shares outstanding at the time of calculation.

b.	Sale, Redemption and Custody of Shares

	(i)	The purchase price of a fund's shares will be the net asset value per share next
		computed after receipt of the sales order by the fund plus the sales charge, if
		applicable. Such purchase price is set forth in the prospectus.

	(ii)	Redemption of shares shall be made for one share or its multiple, and the
		redemption price per share shall be the net asset value per share next computed after
		receipt by the fund of the order and share certificate if share certificates have been
		issued. Subject to certain rules of the SEC, the fund may suspend the right of

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		redemption temporarily. The principal underwriter may charge fees upon such
		redemption.

	(iii)	Custody of Shares

		Investors' shares are usually held in book entry form by the fund's transfer agent.
		Certificates for shares are no longer issued for the Fund The transfer agent will
		furnish such shareholders with detailed statements of their accounts.

c.	Outline of Disclosure Requirements

	(i)	Disclosure to shareholders

		In accordance with the 1940 Act, a fund sends to its shareholders annual and
		semi-annual reports relating to its operations that contain financial information.

	(ii)	Disclosure to the SEC

		Pursuant to the 1940 Act, a fund reports details of its financial condition and
		business operations to the SEC by annual and semi-annual reports.

d.	Shareholders' Rights and Procedures for the Exercise Thereof

		Shareholders must be registered with a fund in order to exercise shareholders' rights
		directly against the fund. The representative right afforded to shareholders is the
		voting right. Other rights include the right to receive dividends, the right to receive
		distributions upon dissolution, the right to inspect accounting books and the like, the
		right to transfer shares, and other rights with respect to the U.S. registration
		statement (including the prospectus).

	(i)	Voting rights

		Shareholders are entitled to one vote for each dollar of net asset value (determined
		as of the applicable record date) and a proportionate fractional vote for each
		fractional dollar amount owned with respect to any matter Shareholders are entitled
		to vote under the fund's Declaration of Trust, By-laws or any applicable law.
		Voting rights shall be exercised at a shareholders meeting, or without a meeting if a
		consent in writing setting forth such action is signed by the shareholders entitled to
		vote on a subject matter thereof holding a majority of the shares entitled to vote
		thereon. Shareholders' meetings shall be convened by the trustees or such other
		persons as specified in the fund's By-laws, and the meeting shall be held at the head
		office of the fund or such other place as the trustees may designate. Shareholders
		representing more than 50% of the outstanding shares entitled to vote being present
		(including those present by proxy) shall constitute a quorum unless otherwise
		provided for in any applicable statutes, rules and regulations, and, except as
		otherwise provided by law, the fund's Declaration of Trust, or By-laws, approval of
		a matter is given by vote (including vote by proxy) of a majority of the shares
		present and entitled to vote.

	(ii)	Redemption rights

		Shareholders are entitled to request redemption of shares at their net asset value at
		any time, provided that the fund may suspend the right of redemption temporarily
		during the periods subject to the rules of the SEC under the 1940 Act.

- 93 -


	(iii)	Right to receive dividends

		Shareholders are entitled to receive any declared distributions for each share held by
		them. Record dates are designated for the payment of distributions and payments
		are usually made during the months in which the record date falls or in the following
		month.

	(iv)	Right to receive distributions upon dissolution

		Shareholders of a fund are entitled to receive distributions upon dissolution in
		proportion to the number of shares then held by them.

	(v)	Right to inspect accounting books and the like

		Shareholders are entitled to inspect the Agreement and Declaration of Trust and,
		subject to the discretion of the court, the fund's accounting books and minutes of
		shareholders' meetings.

	(vi)	Right to transfer shares

		Shares are transferable without restriction.

	(vii)	Rights with respect to the U.S. registration statement

		The 1933 Act provides that if any effective part of the registration statement
		contains an untrue statement of material fact or omits to state a material fact
		required to be stated therein or necessary to make the statement therein not
		misleading, any person acquiring such security may sue every person who signed
		the registration statement, every person who was a trustee (or person performing
		similar functions) of the issuer at the time of filing of the registration statement,
		certain other persons who prepared any part of the registration statement and every
		underwriter with respect to such security.

e.	Related Company and Others

	(i)	Investment management company

		The investment management company shall manage and operate the assets of a fund
		subject to the terms of the investment advisory agreement and the fund's investment
		objectives and restrictions. The requirements for becoming an investment
		management company are that the manager must be a registered investment advisor
		under the Investment Advisers Act of 1940 and must have been approved by the
		board of trustees/directors of a fund and its shareholders.

	(ii)	Investment advisor

		The investment advisor is usually the investment management company which
		ordinarily sponsors or organizes the mutual fund. The duties of the investment
		advisor are similar to those of the investment management company and include the
		management of the fund's investments and performance of certain administrative,
		clerical, bookkeeping and accounting services as set forth in the investment
		advisory agreement.

- 94 -


	(iii)	Underwriter-distributor

		The underwriter-distributor is usually connected with the investment advisor, but
		this is not always the case. The underwriter-distributor must register as a
		broker-dealer with the SEC and must join the Financial Industry Regulatory
		Authority (FINRA).

	(iv)	Custodian

		The mutual fund usually appoints a bank to hold its securities and other assets as
		custodian. The requirements for becoming a custodian of a mutual fund are that the
		entity be either a bank having aggregate capital, surplus and undivided profits of not
		less than U.S.$500,000, be a member of a national securities exchange, or be a
		central certificate depositary established by a national securities exchange or a
		registered national securities association. A mutual fund may act as its own
		custodian under certain circumstances.

f.	Governing Laws and Competent Authorities

	(i)	Governing laws regarding the creation and operation of a mutual fund created as a
		Delaware statutory trust

		A Delaware statutory trust is created under the laws of the State of Delaware and is
		subject to the laws of that state. With respect to its operation as a mutual fund, it is
		also subject to the 1940 Act, the Code, and regulations promulgated under each
		statute. With respect to the sale of its shares, the fund is subject to the 1933 Act, the
		1934 Act, the Blue Sky laws (state securities laws of the various states in the U.S.)
		and the regulations promulgated under said law. In addition, a Delaware statutory
		trust and its trustees may be subject to common law principles established through
		judicial decisions.

	The substance of the governing law is as follows:


		Delaware Statutory Trust Act (Delaware Code Chapter 38 et seq.("Treatment of
		Delaware Statutory Trusts"))
		Chapter 38 provides as follows:
		Delaware has had in effect since October 1, 1988, the Statutory Trust Act which
		expressly recognizes the Delaware statutory trust. The principal purpose of the
		Statutory Trust Act is to modernize the common law and provide certainty by
		codifying Delaware law with respect to the use of trusts in business transactions.
		The Statutory Trust Act permits the trust agreement of a statutory trust to establish
		whatever rights and obligations of the trustees and of the beneficial owners as are
		desirable. The voting rights of trustees or beneficial owners, or any class or series
		thereof, may be expanded, limited or eliminated with respect to virtually any matter
		relating to the statutory trust. This flexibility provides an advantage over alternative
		forms of business organizations and common law trusts which often are subject to
		mandatory provisions.

		Under the Statutory Trust Act, the beneficial owners of a Delaware statutory trust
		have the same limitations of personal liability as shareholders of a Delaware
		corporation. Except to the extent otherwise provided in the trust agreement, a
		statutory trust is managed by or under the direction of its trustees, who are not liable
		for the obligations of the statutory trust. The Statutory Trust Act provides that at

- 95 -


	least one trustee must be a Delaware resident. However, a trust that is or will
	become a registered investment company is exempt from this requirement. The
	duties of the trustees may be specified in the trust agreement. Moreover, the trust
	agreement may provide for the appointment of managers, employees or other
	persons to manage the statutory trust with such rights, powers and duties as are set
	forth herein.
	To the extent that trustees or other persons who are responsible for managing the
	statutory trust have duties (including fiduciary duties) and liabilities relating thereto
	to the statutory trust or the beneficial owners, such persons duties may be expanded
	or restricted by the trust agreement. In addition, such persons shall not be liable for
	their good faith reliance on the provision of the trust agreement.

Common Law

	Common law is non-statutory law developed through court decisions. Certain legal
	principles developed through decisions rendered by the courts of the State of
	Delaware may be applicable to Delaware statutory trusts and trustees of such trusts.

Investment Company Act of 1940

	The 1940 Act requires an investment company to (i) disclose financial information
	and fundamental policies, (ii) submit registration statements to the SEC, and (iii)
	submit and deliver certain reports to the SEC and shareholders. The 1940 Act
	generally prohibits investment companies from changing the nature of their
	business or other fundamental policies without the approval of the shareholders.
	The 1940 Act regulates the custody of a fund's assets and, more generally, a fund's
	business and conduct.

Securities Act of 1933

	The 1933 Act regulates the sales of securities. The 1933 Act requires a company
	seeking to offer securities to the public to disclose information about itself and the
	securities by means of a registration statement, including a prospectus. The 1933
	Act makes any fraudulent statement or act in connection with the issuance or sale of
	securities unlawful.

Securities Exchange Act of 1934

	The 1934 Act regulates the purchase and sale of securities in the secondary market
	and the use of proxy statements. It requires publicly traded companies to make
	periodic reports to the SEC and to shareholders. It prohibits the unlawful use of
	inside information and other fraudulent conduct and includes provisions relating to
	the oversight of securities markets and the regulation of securities brokers and
	dealers.

The Internal Revenue Code of 1986

	The Code contains provisions governing the tax treatment of investment companies.


(ii)	Outline of the Supervisory Authorities

- 96 -


	A Delaware statutory trust which operates as a registered investment company is
	subject to supervision by the SEC and the securities authorities of the various U.S.
	states.

	The SEC

(a)	Registration

	(Sections 8(a) and (b) of the 1940 Act)

	An investment company must register with the SEC by filing a notification of
	registration. In order to sell Shares to the public, the Fund must file a registration
	statement with the SEC and such statement must have become effective. The
	registration statement is prepared in accordance with Form N-1A and must include
	the information required by Form N-1A and, more generally, the 1933 Act and rules
	thereunder. The SEC will examine the registration statement and, if it does not
	comply with the requirements of Form N-1A, may order its modification or deny its
	effectiveness. The Form N-1A registration statement consists of the investment
	company's prospectus (Part A), statement of additional information (Part B) and
	exhibits (Part C).

(b)	Suspension or revocation of registration as a registered investment company

	(Section 8(e) of the 1940 Act)

	An investment company may have its registration suspended or revoked by order of
	the SEC if it fails to submit a registration statement or report or if either is materially
	in complete or misleading.

(c)	Supervision of changes in trustees and officers

	(Section 9(b) of the 1940 Act)

	The SEC can prohibit trustees and officers from serving as such in the event they are
	found to have willfully violated certain federal securities laws.


(d)	Supervision of the business

	(Multiple Sections of the 1940 Act)

	The SEC comprehensively regulates the function and activities of investment
	companies, including such matters as the distribution and redemption of shares,
	transactions with affiliates, relationships with investment advisors, holdings of
	other investment companies, capital structure, issuance of senior securities,
	borrowing and lending, custody of assets, fidelity bonding, etc.


(e)	Periodic reports

	(Section 30 of the 1940 Act)

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		The SEC requires all investment companies to submit annual and other reports. The
		SEC regulates the content of these reports, thereby exercising its supervisory
		authority.

	State Securities Supervisory Authorities

(a)	Provisions concerning licenses

		Most states require brokers, dealers, securities salespersons, and investment
		advisors either to acquire licenses from the state or, at least, to be registered with a
		state agency.

(b)	Provisions concerning registration of securities

		Each of the 50 states requires notification of the availability of shares upon
		registration of a fund's shares with the SEC prior to any lawful sale or offer to sell.

(c)	Provisions concerning prevention of fraud

		In general, the Blue Sky Laws provide various sanctions for fraudulent acts in
		connection with the sale of securities, such as prosecution resulting in fine and/or
		imprisonment, injunction, an order requiring payment of the deposit, temporary
		suspension or revocation of license or registration, and civil liability for damages.

g.	Dissolution, Termination, etc.

	(i)	Dissolution and termination

		Under the Delaware Statutory Trust Act, the dissolution and termination of a
		statutory trust are governed by the Agreement and Declaration of Trust. Subject to
		the terms of the Agreement and Declaration of Trust and applicable securities laws,
		dissolution and termination may require approval of the trust's board of trustees,
		notification of shareholders and the filing of appropriate documents with the SEC.
		To liquidate a trust, all of the assets of the trust must be distributed to its creditors
		and shareholders in accordance with applicable law.

	(ii)	Amendments to the trust agreements

		Amendments to the Agreement and Declaration of Trust of a statutory trust are
		governed by the terms of the Agreement and Declaration of Trust and applicable
		securities laws and, subject to the terms of the applicable Agreement and
		Declaration of Trust and securities laws, may be made by vote or with the written
		consent of the trustees and, as to some matters which might have detrimental effects
		upon the shareholders or as may be required by the 1940 Act, by approval of the
		holders of a majority of the outstanding shares.

h.	Taxation of the Delaware statutory trust

		If a fund complies with the conditions contained in Section 851 of the Code, the
		fund will qualify as a regulated investment company. If a fund distributes all of its
		net investment income and net capital gains, if any, to shareholders annually, it will
		be relieved of any federal income tax liability. Income dividends and net short-term
		gains distributions received by shareholders are taxable as ordinary income. Net

- 98 -


	long-term gains distributions received by shareholders are taxable as long-term
	capital gains regardless of how long the shareholder has held the shares of the fund.


V.	MISCELLANEOUS

(1)	With respect to "Part II. Information concerning the Fund -1. Description of the Fund - 5.
	Status of Investment Portfolio” and “3 Financial Conditions of the Fund”, the latest data
	after the filing date of the Securities Registration Statements which becomes available from
	time to time may be attached to the Prospectuses using charts or graphs. In addition, the
	foreign exchange which is relevant to the Fund may be included.
(2)	There are cases where the Fund obtains evaluation or rating from the rating agencies, etc.
	and uses such evaluation or rating.
(3)	Logo marks of the distributors and/or the Fund may be indicated and the ornamental
	designs may be used on the cover page and the back cover page of the Japanese Prospectus.
	Also explanations of the logo marks may be indicated.
(4)	In the Mandatory Prospectus, the following sentences will be described:
	"The Explanatory Brochure (Mandatory Prospectus) is a prospectus prepared pursuant to
	the provisions of Article 13 of the Financial Instruments and Exchange Law (Law No. 25 of
	1948, as amended)".
	"If investors require more detailed information about the Fund, the Prospectus on Request
	is to be delivered to them by Distributor in Japan if requested by the investors. Please note
	that when an investor requests the Prospectus on Request, he/she needs to record the fact of
	his/her requesting by him/herself."
(5)	On the cover page of the Prospectus on Request, the following sentence will be described:
	"The Prospectus on Request is the one which will be delivered upon a request from an
	investor under Paragraph 3 of Article 15 of the Financial Instruments and Exchange Law
	and an investor needs to record the fact of requesting it when he/she requests."
(6)	The followings may be described in the Japanese Prospectus:
	(i)	Investors should read carefully the Prospectus before investing in the Fund.
	(ii)	As material items, outlines of market risks, credit risks, foreign exchange risks, and
		the possibility that investors will incur losses of their principal invested as the
		principal is not guaranteed and a net asset value per unit will be depreciated.
	(iii)	It is necessary to open the Foreign Securities Transactions Account.

- 100 -


	(iv)	A statement to the effect that “The provisions of Article 37-6 of the Financial
		Instruments and Exchange Law (the so-called “cooling-off” requirement) do not
		apply to transactions made in relation to the Fund.”
	(v)	The funds are different from deposit or saving.

(7)	The most recent record of the performance of the Fund may be set forth in the Mandatory
	Prospectus.

(8)	No Share certificates of the Fund shall be issued.


(3)	Reference Information on the Risk


<<Changes and annual up/down ratio of NAV per Unit including		<<Comparison of annual up/down ratio between the Fund and
	reinvestment of dividends>>	major indices>>

The following chart shows the changes of NAV per share including		The chart shows the comparison of highest/lowest point and
	reinvestment of dividends (as of each month-end) and annual	average of annual up/down ratio (as of each month-end), for the
up/down ratio (as of each month-end), for 5 years from May 2011 to		same period of the left chart, between the Fund and other major
	April 2016, of the Fund.	indices.

(Note)

·	NAV per Unit including reinvestment is calculated, deeming that dividends (before tax) are reinvested in the Fund upon each time of distribution.

·	The annual up/down ratio of the Fund (as of each month end) is calculated by comparing NAV including reinvestment as of each month end and NAV including reinvestment as of the corresponding date in the preceding year (in case where the month end is not a business day, the business day immediately before the said date is regarded as the month end date.).
·	The annual up/down ratio of the Fund is calculated in the denominated currency and not exchanged into Japanese Yen. Therefore, in case where it is exchanged into Japanese Yen, the up/down ratio differs from the above.
·	The annual up/down ratio of major asset class (as of each month end) is calculated by comparing data of the following indices between each month end and the corresponding date in the preceding year (in case where the month end is a holiday, the business day immediately before the said date is regarded as the month end date.).
·	Comparison of annual up/down ratio between the Fund and other major asset class is made, using annual up/down ratio (as of each month end) for the above 5 years, by graphs of highest/lowest and average of the said ratio.
·	NAV including reinvestment and annual up/down ratio may differ from the actual NAV and annual up/down ration calculated based on that NAV.
·	The Fund does not invest in all of the major asset classes.
·	Indices representing major asset classes


Japan Stock	TOPIX TOTAL RETURN INDEX

Developed Country Stock	Russell Developed ex-Japan Large Cap

Emerging Country Stock	S&P Emerging BMI Index

Japan Governmental Bond	Bloomberg/EFFAS Bond Indices Japan. Government All

Developed Country Bond	Citi World Government Bond Index, ex Japan, JPY base

Emerging Country Bond	Citi Emerging Markets Government Bond Index, JPY base

*Russell Developed ex-Japan Large Cap and S&P Emerging BMI Index is converted into Japanese Yen by Bloomberg L.P.

- The TOPIX (Tokyo Stock Price Index) is the intellectual property owned by the Tokyo Stock Exchange Group, Inc. (the “Tokyo Stock Exchange”) and the Tokyo Stock Exchange owns any and all rights in connection with the said TOPIX, including but not limited to,

calculating the indices, publishing the indices points and using them. Please note that The Fund is not offered, guaranteed or distributed by
the Tokyo Stock Exchange and the Tokyo Stock Exchange shall not be liable for any damages arising out of the issuance, sale or purchase of
the Units of the Fund.

- Russell Investments is the owner of the trademarks, service marks, copyrights and any and all intellectual property rights related to its respective Russell Indexes and all rights to calculate/publish/use index points and any other rights related to its respective Russell Indexes. The index is unmanaged and can not be invested directly in itself.

- Citi World Government Bond Index and Citi Emerging Markets Government Bond Index is a bond index developed, calculated and published by Citigroup Index LLC and copyrights belongs to Citigroup Index LLC.

(Reference Information to (3)(a) “Record of Changes in Net Assets”)

·	Changes in Total NAV and NAV per Unit


	(from the end of May 2006 to the end of April 2016)


(V22) Vanguard Index Funds - Vanguard Small-cap Index Fund
(A) Record of Changes in Net Assets	USD= 109.75

VANGUARD SMALL CAP INDEX FUND – INVESTOR SHARES


		Total Net Asset Value		Net Asset Value per Share
		US$	Yen
		(millions)	(millions)	US$	Yen
The 45th Fiscal Year Ended
on December 31, 2005		5,902	647,745	28.52	3,130
The 46th Fiscal Year Ended
on December 31, 2006		6,808	747,178	32.62	3,580
The 47th Fiscal Year Ended
on December 31, 2007		6,214	681,987	32.58	3,576
The 48th Fiscal Year Ended
on December 31, 2008		4,050	444,488	20.40	2,239
The 49th Fiscal Year Ended
on December 31, 2009		5,913	648,952	27.49	3,017
The 50th Fiscal Year Ended
on December 31, 2010		5,270	578,383	34.75	3,814
The 51st Fiscal Year Ended
on December 31, 2011		3,925	430,769	33.38	3,663
The 52st Fiscal Year Ended
on December 31, 2012		3,813	418,477	38.74	4,252
The 53rd Fiscal Year Ended
on December 31, 2013		5,041	553,250	52.69	5,783
The 54th Fiscal Year Ended
on December 31, 2014		4,606	505,509	55.86	6,130
The 55th Fiscal Year Ended
on December 31, 2015		4,058	445,366	53.03	5,820
2015 End of	January	4,519	495,960	54.65	5,998
	February	4,792	525,922	57.83	6,347
	March	4,810	527,898	58.49	6,419
	April	4,677	513,301	57.50	6,311
	May	4,757	522,081	58.65	6,437
	June	4,600	504,850	58.14	6,381
	July	4,547	499,033	57.97	6,362
	August	4,231	464,352	54.58	5,990
	September	4,012	440,317	51.73	5,677
	October	4,217	462,816	54.67	6,000
	November	4,262	467,755	55.66	6,109
	December	4,058	445,366	53.03	5,820
2016 End of	January	3,720	408,270	48.97	5,374
	February	3,740	410,465	49.42	5,424
	March	4,043	443,719	53.41	5,862
	April	4,099	449,865	54.33	5,963

(B) Record of Distributions Paid

VANGUARD SMALL CAP INDEX FUND – INVESTOR SHARES


	Total Distributions
	US$	Yen
The 45th Fiscal Year (1/1/05-12/31/05)	0.290	31.828
The 46th Fiscal Year (1/1/06-12/31/06)	0.359	39.400
The 47th Fiscal Year (1/1/07-12/31/07)	0.412	45.217
The 48th Fiscal Year (1/1/08-12/31/08)	0.404	44.339
The 49th Fiscal Year (1/1/09-12/31/09)	0.276	30.291
The 50th Fiscal Year (1/1/10-12/31/10)	0.361	39.620
The 51st Fiscal Year (1/1/11-12/31/11)	0.397	43.571
The 52st Fiscal Year (1/1/12-12/31/12)	0.662	72.655
The 53rd Fiscal Year (1/1/13-12/31/13)	0.617	67.716
The 54th Fiscal Year (1/1/14-12/31/14)	0.708	77.703
The 55th Fiscal Year (1/1/15-12/31/15)	0.717	78.691
2015 End of January	-	-
February	-	-
March	0.024	2.634
April	-	-
May	-	-
June	-	-
July	-	-
August	-	-
September	0.406	44.559
October	-	-
November	-	-
December	0.287	31.498
2016 End of January	-	-
February	-	-
March	0.133	14.597
April	-	-
	0.717

(C) Record of changes in Return

VANGUARD SMALL CAP INDEX FUND – INVESTOR SHARES


Fiscal Year	Annual Return (%)
The 45th Fiscal Year (1/1/05-12/31/05)	7.38
The 46th Fiscal Year (1/1/06-12/31/06)	15.63
The 47th Fiscal Year (1/1/07-12/31/07)	7.76
The 48th Fiscal Year (1/1/08-12/31/08)	-36.14
The 49th Fiscal Year (1/1/09-12/31/09)	36.11
The 50th Fiscal Year (1/1/10-12/31/10)	27.72
The 51st Fiscal Year (1/1/11-12/31/11)	-2.80
The 52nd Fiscal Year (1/1/12-12/31/12)	18.04	18.04074296
The 53rd Fiscal Year (1/1/13-12/31/13)	37.60
The 54th Fiscal Year (1/1/14-12/31/14)	7.35
The 55th Fiscal Year (1/1/15-12/31/15)	-3.78

(V22) Vanguard Index Funds - Vanguard Small-cap Index Fund
(1) Diversification of Investment Portfolio USD= 109.75

VANGUARD SMALL CAP INDEX FUND (All Share Classes)


(As of the end of April 2016)
	Name of Country	Market Value	Investment Ratio (%)
Type of Assets	US	Total Dollar
[Common Stock]		56,141,885,128	99.56
			0.00
			0.00
			0.00
	Sub-Total	56,141,885,128	99.56
Cash, Deposits, and Other Assets (after liabilities)		247,605,566	0.44
Total (Net Asset Value)		56,389,490,694	100.00
Total (Net Asset Value)		6,188,746.60	Million JPY

** Total Net Assets for Investor Shares: $ _______ 4,098,712,583.78______________ (as of the end of April 2016)

Note: Investment ratio is calculated by dividing each asset at its market value by the total Net Asset Value of the Fund. The same applies hereinafter.


(V22) Vanguard Index Funds - Vanguard Small-cap Index Fund
	Small-Cap Index Fund Equity Shares (Top 30)							Total NAV:	56,389,490,694
	(A) Names of Major Portfolio Equity Shares
								(As of the end of April 2016)
					Cost Basis (USD)		Market Value (USD)
No.	Name of Company	Country	Business	(# of Shares)	Price per	Total	Price per Share	Total	Investment Ratio
1.	Ingredion Inc.	US	Consumer Goods	1,476,177	70.96	104,745,486	115.09	169,893,211	0.30%
2.	Waste Connections Inc.	US	Industrials	2,513,033	40.01	100,543,620	67.28	169,076,860	0.30%
3.	Arthur J Gallagher & Co.	US	Financials	3,634,716	40.94	148,816,177	46.04	167,342,325	0.30%
4.	AGL Resources Inc.	US	Utilities	2,471,774	45.22	111,764,532	65.86	162,791,036	0.29%
5.	Valspar Corp.	US	Industrials	1,460,271	69.15	100,982,892	106.69	155,796,313	0.28%
6.	Duke Realty Corp.	US	Financials	7,102,435	16.54	117,461,780	21.87	155,330,253	0.28%
7.	Atmos Energy Corp.	US	Utilities	2,096,782	38.44	80,609,042	72.55	152,121,534	0.27%
8.	Westar Energy Inc.	US	Utilities	2,908,331	29.65	86,222,285	51.61	150,098,963	0.27%
9.	Mid-America Apartment Communities Inc	US	Financials	1,548,025	61.20	94,734,311	95.71	148,161,473	0.26%
10.	Regency Centers Corp.	US	Financials	2,004,515	54.03	108,305,043	73.70	147,732,756	0.26%
11.	Broadridge Financial Solutions Inc.	US	Industrials	2,440,449	28.26	68,961,809	59.84	146,036,468	0.26%
12.	Cadence Design Systems Inc.	US	Technology	6,269,979	11.92	74,732,755	23.19	145,400,813	0.26%
13.	Newfield Exploration Co.	US	Oil & Gas	3,976,503	27.67	110,031,091	36.25	144,148,234	0.26%
14.	Signature Bank	US	Financials	1,036,031	75.93	78,662,891	137.83	142,796,153	0.25%
15.	UGI Corp.	US	Utilities	3,530,787	26.37	93,108,297	40.24	142,078,869	0.25%
16.	HD Supply Holdings Inc.	US	Industrials	4,110,330	28.17	115,782,482	34.28	140,902,112	0.25%
17.	Huntington Ingalls Industries Inc.	US	Industrials	961,655	58.50	56,256,187	144.77	139,218,794	0.25%
18.	ITC Holdings Corp.	US	Utilities	3,136,612	29.30	91,899,214	44.07	138,230,491	0.25%
19.	RPM International Inc.	US	Basic Materials	2,728,228	27.69	75,552,512	50.53	137,857,361	0.24%
20.	MEDNAX Inc.	US	Health Care	1,926,593	37.18	71,636,966	71.29	137,346,815	0.24%
21.	Carlisle Cos. Inc.	US	Industrials	1,318,653	53.00	69,885,476	101.90	134,370,741	0.24%
22.	TECO Energy Inc.	US	Utilities	4,831,682	18.43	89,037,177	27.77	134,175,809	0.24%
23.	Teleflex Inc.	US	Health Care	855,047	76.17	65,131,083	155.78	133,199,222	0.24%
24.	Jack Henry & Associates Inc.	US	Industrials	1,620,000	36.47	59,080,664	81.03	131,268,600	0.23%
25.	Spirit AeroSystems Holdings Inc.	US	Industrials	2,783,627	24.87	69,232,076	47.15	131,248,013	0.23%
26.	Leggett & Platt Inc.	US	Consumer Goods	2,648,135	31.76	84,094,131	49.29	130,526,574	0.23%
27.	JetBlue Airways Corp.	US	Consumer Services	6,594,904	12.91	85,172,196	19.79	130,513,150	0.23%
28.	Packaging Corp. of America	US	Industrials	2,007,319	37.81	75,898,934	64.88	130,234,857	0.23%
29.	Omega Healthcare Investors Inc.	US	Financials	3,842,003	27.65	106,244,941	33.77	129,744,441	0.23%
30.	Middleby Corp.	US	Consumer Goods	1,177,471	48.03	56,555,554	109.64	129,097,920	0.23%

(V22) Vanguard Index Funds - Vanguard Small-cap Index Fund


(a) Statement of Net Assets (as of April 2016) (All Share Classes)		USD= 109.75
	(As of the end of April 2016)
		JPY (in thousands
	US$	except column V)
I. Total Assets	57,418,246,731	6,301,652,579
II Total Liabilities	1,028,756,037	112,905,975
III. Total Net Assets (I - II) *	56,389,490,694	6,188,746,604
IV. Total Number of Shares Outstanding **	837,446,296 Shares
V. Net Asset Value per Share (III / IV) ***	67.34	7,390

*	Total Net Assets for Investor Shares = $[_______4098712583.78____________ ]
**	Total Number of Shares Outstanding for Investor Shares = [___________75437759.5236______________
***	Net Asset Value per Share for Investor Shares = $[___54.33_____]

(V22) Vanguard Index Funds - Vanguard Small -cap Index Fund

PART II-I-5-(4) Record of Sales and Repurchases:

Record of sales and repurchases during the following fiscal year and number of outstanding units of the Fund as of the end of such fiscal year are as follows:


		Number of Units
Class USD Unit		Outstanding at the end	Sold	Repurchased	Outstanding at the end
		of			of
45th Fiscal Year	Worldwide	232,882	46,712	72,661	206,933
From January 1, 2005 till December 31, 2005	(in Japan)	219,209	97,610	58,852	257,967
46th Fiscal Year	Worldwide	206,933	52,883	51,136	208,680
From January 1, 2006 till December 31, 2006	(in Japan)	257,967	80,925	70,619	268,273
47th Fiscal Year	Worldwide	208,680	42,295	60,246	190,729
From January 1, 2007 till December 31, 2007	(in Japan)	268,273	48,940	70,185	247,028
48th Fiscal Year	Worldwide	190,729	54,383	46,583	198,529
From January 1, 2008 till December 31, 2008	(in Japan)	247,028	22,095	56,802	212,321
49th Fiscal Year	Worldwide	198,529	60,987	44,417	215,099
From January 1, 2009 till December 31, 2009	(in Japan)	212,321	15,560	33,078	194,803
50th Fiscal Year	Worldwide	215,099	61,365	124,812	151,652
From January 1, 2010 till December 31, 2010	(in Japan)	194,803	12,245	16,418	190,630
51st Fiscal Year	Worldwide	151,652	34,477	68,538	117,591
From January 1, 2011 till December 31, 2011	(in Japan)	190,630	20,770	17,221	194,179
52nd Fiscal Year	Worldwide	117,591	20,585	39,766	98,410
From January 1, 2012 till December 31, 2012	(in Japan)	194,179	8,720	21,796	181,103
53rd Fiscal Year	Worldwide	98,410	23,940	26,671	95,679
From January 1, 2013 till December 31, 2013	(in Japan)	181,103	19,700	73,892	126,911
54th Fiscal Year	Worldwide	95,679	16,875	30,084	82,470
From January 1, 2014 till December 31, 2014	(in Japan)	126,911	15,220	17,491	124,640
55th Fiscal Year	Worldwide	82,470	14,992	20,951	76,511
From January 1, 2015 till December 31, 2015	(in Japan)	124,640	11,700	14,027	122,313

(Note 1) Number in upper cell is in thousands.
(Note 2) Number in lower cell is the number of shares traded in Japan.

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