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See the inside front cover for important information about accessto your fund’s annual and semiannual shareholder reports.

Semiannual Report | February 28, 2019

Vanguard International Growth Fund

Contents

Important information about access to shareholder reports

Beginning on January 1, 2021, as permitted by regulations adopted by theSecurities and Exchange Commission, paper copies of your fund’s annual andsemiannual shareholder reports will no longer be sent to you by mail, unless youspecifically request them. Instead, you will be notified by mail each time a reportis posted on the website and will be provided with a link to access the report.

If you have already elected to receive shareholder reports electronically, you will notbe affected by this change and do not need to take any action. You may elect toreceive shareholder reports and other communications from the fund electronicallyby contacting your financial intermediary (such as a broker-dealer or bank) or, if youinvest directly with the fund, by calling Vanguard at one of the phone numbers onthe back cover of this report or by logging on to vanguard.com.

You may elect to receive paper copies of all future shareholder reports freeof charge. If you invest through a financial intermediary, you can contact theintermediary to request that you continue to receive paper copies. If you investdirectly with the fund, you can call Vanguard at one of the phone numbers on theback cover of this report or log on to vanguard.com. Your election to receive papercopies will apply to all the funds you hold through an intermediary or directly withVanguard.

About Your Fund’s Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 1

Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Trustees Approve Advisory Arrangements. . . . . . . . . . . . . .22

About Your Fund’s Expenses

1

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

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

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

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

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

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

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

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

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

2

Six Months Ended February 28, 2019

International Growth Fund

BeginningAccount Value

8/31/2018

EndingAccount Value

2/28/2019

ExpensesPaid During

Period

Based on Actual Fund Return

Investor Shares $1,000.00 $949.44 $2.18

Admiral™ Shares 1,000.00 950.04 1.55

Based on Hypothetical 5% Yearly Return

Investor Shares $1,000.00 $1,022.56 $2.26

Admiral Shares 1,000.00 1,023.21 1.61

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios forthat period are 0.45% for Investor Shares and 0.32% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to theannualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recentsix-month period, then divided by the number of days in the most recent 12-month period (181/365).

Sector DiversificationAs of February 28, 2019


3

Communication Services 12.7%

Consumer Discretionary 32.0

Consumer Staples 6.0

Energy 1.5

Financials 15.0

Health Care 10.1

Industrials 9.7

Information Technology 8.1

Materials 4.1

Other 0.8

The table reflects the fund’s equity exposure, based on its invest-ments in stocks and stock index futures. Any holdings in short-termreserves are excluded. Sector categories are based on the GlobalIndustry Classification Standard (“GICS”), except for the “Other”category (if applicable), which includes securities that have notbeen provided a GICS classification as of the effective reportingperiod.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive,consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Market

Value•

Shares ($000)

Market

Value•

Shares ($000)

Common Stocks (98.3%)1

Australia (0.5%)

Brambles Ltd. 20,161,054 168,301

Austria (0.4%)

Erste Group Bank AG 3,447,596 130,019

Belgium (1.1%)

Umicore SA 8,779,863 379,060

Brazil (0.8%)

B3 SA - Brasil Bolsa

Balcao 13,303,825 116,138

Raia Drogasil SA 4,999,559 87,063

Telefonica Brasil SA

Preference Shares 5,582,011 69,535

272,736

Canada (1.1%)

Nutrien Ltd. 3,575,914 194,645

Toronto-Dominion Bank 3,057,005 175,296

369,941

China (18.9%) * Alibaba Group Holding

Ltd. ADR 10,636,558 1,946,809

Tencent Holdings Ltd. 41,822,300 1,790,967* Baidu Inc. ADR 4,633,984 753,208* TAL Education Group

ADR 18,485,132 658,071

Ping An Insurance

Group Co. of China

Ltd. 37,534,500 396,790* Ctrip.com International

Ltd. ADR 9,001,376 307,217*,^ NIO Inc. ADR 17,591,617 168,352*,^ iQIYI Inc. ADR 5,046,134 137,053*,2 Meituan Dianping 18,638,108 130,138

China Pacific Insurance

Group Co. Ltd. 33,827,200 127,275

*,^ Meituan Dianping

Class B 13,982,022 108,423

China Mengniu Dairy

Co. Ltd. 32,708,000 101,008

6,625,311

Denmark (2.9%) * Genmab A/S 2,594,661 447,800

Vestas Wind Systems

A/S 2,043,797 170,277

Chr Hansen Holding

A/S 1,658,818 168,842

Ambu A/S Class B 5,449,774 127,628

Novozymes A/S 2,401,809 109,065

1,023,612

France (7.0%)

Kering SA 1,368,726 746,737

L’Oreal SA 2,310,130 582,644

Schneider Electric SE 5,076,412 394,471

TOTAL SA 5,193,328 295,601

EssilorLuxottica SA 2,005,073 242,666

Vivendi SA 7,164,431 209,220

2,471,339

Germany (5.9%) *,^,3 Zalando SE 10,466,867 386,067

Bayerische Motoren

Werke AG 3,268,453 276,287*,3 Delivery Hero SE 6,275,610 243,348

Infineon Technologies

AG 8,669,188 190,527

adidas AG 716,713 173,983

BASF SE 2,275,881 173,236

Continental AG 815,675 133,597

SAP SE 1,238,958 132,603*,^,4 HelloFresh SE 10,552,945 114,968

GEA Group AG 3,320,563 79,431* MorphoSys AG 664,989 68,341*,3 Rocket Internet SE 2,762,933 64,982* AIXTRON SE 3,130,112 27,981*,4 Home24 SE 1,862,256 15,351

2,080,702

Financial Statements (unaudited)

Statement of Net AssetsAs of February 28, 2019

The fund reports a complete list of its holdings in regulatory filings four times in each fiscal year, at

the quarter-ends. For the second and fourth fiscal quarters, the lists appear in the fund’s semiannual

and annual reports to shareholders. For the first and third fiscal quarters, the fund files the lists with

the Securities and Exchange Commission on Form N-Q. Shareholders can look up the fund’s Forms

N-Q on the SEC’s website at sec.gov.


4


Market

Value•

Shares ($000)

Market

Value•

Shares ($000)

Hong Kong (4.7%)

AIA Group Ltd. 127,277,600 1,270,273

Jardine Matheson

Holdings Ltd. 3,099,000 212,243

Hong Kong Exchanges

& Clearing Ltd. 4,767,930 164,347

1,646,863

India (2.2%)

Housing Development

Finance Corp. Ltd. 11,680,736 302,612

HDFC Bank Ltd. 7,780,817 227,806

Zee Entertainment

Enterprises Ltd. 27,208,888 178,576*,§,2 ANI Technologies 166,185 49,650

758,644

Indonesia (0.4%)

Bank Central Asia

Tbk PT 64,782,900 126,760

Israel (0.3%) * Check Point Software

Technologies Ltd. 978,890 119,718

Italy (2.3%)

Ferrari NV 4,745,012 610,512* Fiat Chrysler

Automobiles NV 13,737,294 203,011

813,523

Japan (11.0%)

SoftBank Group Corp. 6,053,300 561,712

SMC Corp. 1,548,600 541,735

M3 Inc. 26,545,800 439,118

Nidec Corp. 2,080,800 252,360

Bridgestone Corp. 6,324,500 250,523

Recruit Holdings Co.

Ltd. 8,709,100 244,161

Nintendo Co. Ltd. 713,800 195,752

Takeda Pharmaceutical

Co. Ltd. 4,689,100 188,703

Keyence Corp. 285,200 166,775

Sekisui Chemical Co.

Ltd. 9,761,500 153,571

Pigeon Corp. 3,300,800 134,768

Kubota Corp. 9,695,100 130,759

Toyota Motor Corp. 2,137,700 129,178

Murata Manufacturing

Co. Ltd. 728,600 113,651

ORIX Corp. 6,873,900 99,524

Suzuki Motor Corp. 1,855,100 95,258

SBI Holdings Inc. 4,470,400 94,528

KDDI Corp. 2,856,800 69,048

3,861,124

Netherlands (3.8%)

ASML Holding NV 7,358,719 1,346,194

Norway (0.8%)

DNB ASA 7,488,359 143,431

Norsk Hydro ASA 30,534,386 126,025

269,456

Other (0.2%) 5 Vanguard FTSE

All-World ex-US ETF 1,128,434 56,230

Singapore (0.4%)

Oversea-Chinese

Banking Corp. Ltd. 18,606,300 151,799

South Korea (2.0%) *,^ Celltrion Inc. 1,695,817 307,636

Samsung Electronics

Co. Ltd. 5,161,446 206,570

Samsung SDI Co. Ltd. 546,742 115,256

NAVER Corp. 539,978 63,800

693,262

Spain (3.2%)

Industria de Diseno

Textil SA 21,245,632 641,331

Banco Bilbao Vizcaya

Argentaria SA 79,161,502 491,032^ Distribuidora

Internacional de

Alimentacion SA 12,745,795 8,267

1,140,630

Sweden (4.7%)

Svenska Handelsbanken

AB Class A 35,069,697 399,529

Spotify Technology SA 2,632,668 368,942* Atlas Copco AB

Class A 10,589,929 287,018

Kinnevik AB 10,340,628 261,685

Assa Abloy AB Class B 7,041,057 145,526

SKF AB 6,883,760 115,615^ Elekta AB Class B 6,427,670 74,042

1,652,357

Switzerland (4.4%)

Nestle SA 5,177,491 468,325

Roche Holding AG 1,241,279 344,485

Novartis AG 2,570,314 234,243

UBS Group AG 14,683,126 186,327

Cie Financiere

Richemont SA 2,255,223 172,302

Lonza Group AG 560,478 155,651

1,561,333

5


Market

Value•

Shares ($000)

Market

Value•

Shares ($000)

Taiwan (1.1%)

Taiwan Semiconductor

Manufacturing

Co. Ltd. 49,227,000 377,754

Thailand (0.4%)

Kasikornbank PCL

(Foreign) 21,738,556 136,528

Turkey (0.2%)

Turkiye Garanti

Bankasi AS 38,670,212 64,409

United Kingdom (7.6%)

Rolls-Royce Holdings

plc 46,651,516 591,812

Diageo plc 9,856,147 381,676* Ocado Group plc 20,473,468 280,818

BHP Group plc 11,327,846 262,767

Royal Dutch Shell plc

Class A 6,506,874 202,736

Reckitt Benckiser

Group plc 2,343,204 178,963

Burberry Group plc 6,684,815 167,601

GlaxoSmithKline plc 6,811,239 135,754

Whitbread plc 1,986,669 127,919

Aviva plc 21,602,972 121,098

Smith & Nephew plc 5,870,828 111,551*,^,3 Aston Martin Lagonda

Global Holdings plc 6,321,596 90,271

2,652,966

United States (10.0%) * Amazon.com Inc. 669,737 1,098,255* Booking Holdings Inc. 72,687 123,353* Illumina Inc. 2,734,956 855,412* MercadoLibre Inc. 1,574,407 722,322

Philip Morris

International Inc. 1,365,456 118,713*,^ Tesla Inc. 1,894,281 605,942

3,523,997

Total Common Stocks

(Cost $24,754,888) 34,474,568

Preferred Stocks (0.2%)

*,§,2,6 CureVac GmbH 12,600 30,597*,§,2,4,6 You & Mr. Jones 44,800,000 51,520

Total Preferred Stocks

(Cost $75,682) 82,117

Temporary Cash Investments (4.1%)1

Money Market Fund (4.0%)7,8 Vanguard Market

Liquidity Fund,

2.563% 14,167,701 1,416,912

Face

Amount

($000)

U.S. Government and Agency Obligations (0.1%) 9 United States Treasury

Bill, 2.374%, 3/7/19 12,000 11,9959 United States Treasury



Bill, 2.497%, 5/23/19 8,000 7,956

31,423

Total Temporary Cash Investments

(Cost $1,448,158) 1,448,335

Total Investments (102.6%)

(Cost $26,278,728) 36,005,020

6

7


Amount ($000)

Amount ($000)

Other Assets and Liabilities (-2.6%)

Other Assets

Investment in Vanguard 1,739Receivables for Accrued Income 48,078Receivables for Capital Shares Issued 21,364Variation Margin Receivable —

Futures Contracts 1,520Unrealized Appreciation —

Forward Currency Contracts 10,348Other Assets10 27,034

Total Other Assets 110,083

Liabilities

Payables for Investment Securities Purchased (792)

Collateral for Securities on Loan (949,354)Payables for Capital Shares Redeemed (19,181)Payables to Investment Advisor (14,180)Payables to Vanguard (31,179)Variation Margin Payable —

Futures Contracts (2,009)Unrealized Depreciation —

Forward Currency Contracts (6,332)

Total Liabilities (1,023,027)

Net Assets (100%) 35,092,076

At February 28, 2019, net assets consisted of:

Amount ($000)

Paid-in Capital 25,504,938Total Distributable Earnings (Loss) 9,587,138

Net Assets 35,092,076

Investor Shares—Net Assets

Applicable to 255,401,055 outstanding

$.001 par value shares of beneficial

interest (unlimited authorization) 7,192,607

Net Asset Value Per Share—

Investor Shares $28.16

Admiral Shares—Net Assets

Applicable to 311,439,108 outstanding

$.001 par value shares of beneficial

interest (unlimited authorization) 27,899,469

Net Asset Value Per Share—

Admiral Shares $89.58

• See Note A in Notes to Financial Statements.

* Non-income-producing security.

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $908,507,000.

§ Security value determined using significant unobservable inputs.

1 The fund invests a portion of its cash reserves in equity markets through the use of index futures contracts. After giving effect to futures investments, the fund’s effective common stock and temporary cash investment positions represent 99.4% and 3.0%, respectively, of net assets.

2 Restricted securities totaling $261,905,000, representing 0.7% of net assets. See Restricted Securities table for additional information.

3 Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At February 28, 2019, the aggregate value of these securities was $784,668,000, representing 2.2% of net assets.

4 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.

5 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.

6 Perpetual security with no stated maturity date.

7 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

8 Includes $949,354,000 of collateral received for securities on loan.

9 Securities with a value of $19,881,000 have been segregated as initial margin for open futures contracts.

10 Cash of $1,420,000 has been segregated as collateral for open forward currency contracts.

ADR—American Depositary Receipt.


Restricted Securities as of Period End

Acquisition Acquisition Cost Security Name Date ($000)

You & Mr. Jones September 2015 44,800

CureVac GmbH October 2015 30,882

ANI Technologies December 2015 51,748

Meituan Dianping December 2015 71,956

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

($000)

Value and Number of Unrealized Long (Short) Notional Appreciation Expiration Contracts Amount (Depreciation)

Long Futures Contracts

Dow Jones EURO STOXX 50 Index March 2019 3,656 137,149 7,350

Topix Index March 2019 750 108,061 5,397

FTSE 100 Index March 2019 725 68,039 1,368

S&P ASX 200 Index March 2019 622 67,826 4,130

18,245

Forward Currency Contracts

Contract Unrealized Unrealized Settlement Contract Amount (000) Appreciation (Depreciation)Counterparty Date Receive Deliver ($000) ($000)

BNP Paribas 3/20/19 EUR 116,235 USD 133,151 — (707)

UBS AG 3/12/19 JPY 8,900,280 USD 80,467 — (540)

Morgan Stanley Capital Services LLC 3/12/19 JPY 6,882,143 USD 61,223 581 —

Citibank, N.A. 3/26/19 AUD 85,914 USD 60,630 340 —

Morgan Stanley Capital Services LLC 3/20/19 GBP 38,286 USD 48,597 2,239 —

Citibank, N.A. 3/26/19 AUD 61,391 USD 43,804 — (237)

Barclays Bank plc 3/20/19 GBP 32,460 USD 41,470 1,630 —

Citibank, N.A. 3/12/19 JPY 4,388,340 USD 39,861 — (452)

JPMorgan Chase Bank, N.A. 3/12/19 JPY 3,824,850 USD 34,233 116 —

BNP Paribas 3/12/19 JPY 3,602,310 USD 32,597 — (247)

Citibank, N.A. 3/20/19 EUR 24,252 USD 27,649 — (15)

Morgan Stanley Capital Services LLC 3/20/19 EUR 18,752 USD 21,653 — (286)

8


Forward Currency Contracts (continued)

Contract Unrealized Unrealized

Settlement Contract Amount (000) Appreciation (Depreciation)

Counterparty Date Receive Deliver ($000) ($000)

JPMorgan Chase Bank, N.A. 3/20/19 EUR 18,359 USD 20,860 59 —

Deutsche Bank AG 3/20/19 EUR 16,650 USD 19,115 — (144)

Citibank, N.A. 3/20/19 GBP 14,728 USD 18,867 688 —

Goldman Sachs International 3/20/19 GBP 14,467 USD 18,740 469 —

JPMorgan Chase Bank, N.A. 3/20/19 EUR 15,706 USD 18,018 — (122)

Morgan Stanley Capital

Services LLC 3/26/19 AUD 23,269 USD 16,606 — (93)

BNP Paribas 3/20/19 GBP 9,683 USD 12,292 566 —

Bank of America, N.A. 3/20/19 EUR 9,564 USD 10,853 45 —

UBS AG 3/20/19 GBP 8,276 USD 10,825 164 —


Services LLC 3/20/19 EUR 7,993 USD 9,086 21 —

Barclays Bank plc 3/26/19 AUD 11,146 USD 8,027 — (117)


Services LLC 3/12/19 JPY 872,100 USD 7,884 — (52)

JPMorgan Chase Bank, N.A. 3/26/19 AUD 6,818 USD 4,890 — (52)

Goldman Sachs International 3/26/19 AUD 6,823 USD 4,866 — (24)

Toronto—Dominion Bank 3/12/19 USD 70,505 JPY 7,674,290 1,586 —

Toronto—Dominion Bank 3/20/19 USD 47,423 EUR 41,532 100 —

BNP Paribas 3/20/19 USD 41,669 EUR 36,134 497 —

UBS AG 3/26/19 USD 32,688 AUD 45,844 154 —

Goldman Sachs International 3/12/19 USD 30,749 JPY 3,441,250 — (155)


Services LLC 3/20/19 USD 28,358 GBP 21,809 — (600)

Goldman Sachs International 3/20/19 USD 22,649 GBP 17,738 — (904)

JPMorgan Chase Bank, N.A. 3/20/19 USD 22,302 EUR 19,431 162 —

BNP Paribas 3/20/19 USD 20,749 GBP 16,266 — (849)

JPMorgan Chase Bank, N.A. 3/26/19 USD 20,696 AUD 29,334 — (122)

JPMorgan Chase Bank, N.A. 3/12/19 USD 20,641 JPY 2,318,180 — (176)

Goldman Sachs International 3/26/19 USD 11,800 AUD 16,431 140 —

Bank of America, N.A. 3/20/19 USD 9,183 EUR 8,063 — (4)

Bank of America, N.A. 3/20/19 USD 8,987 GBP 6,934 — (220)

Goldman Sachs International 3/12/19 USD 8,249 JPY 914,320 38 —

JPMorgan Chase Bank, N.A. 3/12/19 USD 8,082 JPY 866,230 303 —

Citibank, N.A. 3/20/19 USD 7,963 EUR 7,011 — (25)

Citibank, N.A. 3/12/19 USD 7,599 JPY 826,960 173 —

Barclays Bank plc 3/12/19 USD 6,243 JPY 682,220 117 —

Deutsche Bank AG 3/26/19 USD 4,926 AUD 6,897 31 —

Deutsche Bank AG 3/20/19 USD 4,657 GBP 3,496 15 —

9


Forward Currency Contracts (continued)

Contract Unrealized Unrealized Settlement Contract Amount (000) Appreciation (Depreciation)Counterparty Date Receive Deliver ($000) ($000)

BNP Paribas 3/12/19 USD 4,602 JPY 517,770 — (48)

Citibank, N.A. 3/20/19 USD 4,015 EUR 3,494 33 —

Citibank, N.A. 3/26/19 USD 3,709 AUD 5,227 — (1)

Citibank, N.A. 3/20/19 USD 3,185 GBP 2,504 — (140)

Citibank, N.A. 3/26/19 USD 3,039 AUD 4,241 29 —

BNP Paribas 3/26/19 USD 2,112 AUD 2,902 52 —

10,348 (6,332)

AUD—Australian dollar.

EUR—euro.

GBP—British pound.

JPY—Japanese yen.

USD—U.S. dollar.

At February 28, 2019, the counterparties had deposited in segregated accounts securities and cash with a value of $6,759,000 in connection with open forward currency contracts.

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

10

Six Months Ended

February 28, 2019

($000)

Investment Income

Income

Dividends—Unaffiliated Issuers1 120,622

Dividends—Affiliated Issuers 812

Interest—Unaffiliated Issuers 344

Interest—Affiliated Issuers 5,254

Securities Lending—Net 13,562

Total Income 140,594

Expenses

Investment Advisory Fees—Note B

Basic Fee 23,871

Performance Adjustment 5,048

The Vanguard Group—Note C

Management and Administrative—Investor Shares 9,002

Management and Administrative—Admiral Shares 17,726

Marketing and Distribution—Investor Shares 497

Marketing and Distribution—Admiral Shares 824

Custodian Fees 1,318

Shareholders’ Reports—Investor Shares 89

Shareholders’ Reports—Admiral Shares 93

Trustees’ Fees and Expenses 19

Total Expenses 58,487

Net Investment Income 82,107

Realized Net Gain (Loss)

Investment Securities Sold—Unaffiliated Issuers 80,599

Investment Securities Sold—Affiliated Issuers 130

Futures Contracts (22,480)

Forward Currency Contracts (17,549)

Foreign Currencies 387

Realized Net Gain (Loss) 41,087

Change in Unrealized Appreciation (Depreciation)

Investment Securities—Unaffiliated Issuers (1,979,532)

Investment Securities—Affiliated Issuers (71,051)

Futures Contracts 19,122

Forward Currency Contracts 13,274

Foreign Currencies (981)

Change in Unrealized Appreciation (Depreciation) (2,019,168)

Net Increase (Decrease) in Net Assets Resulting from Operations (1,895,974)

1 Dividends are net of foreign withholding taxes of $15,202,000.

Statement of Operations



11

Statement of Changes in Net Assets



Six Months Ended Year Ended

February 28, August 31,

2019 2018

($000) ($000)

Increase (Decrease) in Net Assets

Operations

Net Investment Income 82,107 485,445

Realized Net Gain (Loss) 41,087 1,574,400

Change in Unrealized Appreciation (Depreciation) (2,019,168) 1,400,252

Net Increase (Decrease) in Net Assets Resulting from Operations (1,895,974) 3,460,097

Distributions

Net Investment Income

Investor Shares (101,822) (66,639)

Admiral Shares (414,446) (217,469)

Realized Capital Gain1

Investor Shares (234,310) —

Admiral Shares (863,521) —

Total Distributions (1,614,099) (284,108)

Capital Share Transactions

Investor Shares (108,118) (426,156)

Admiral Shares 1,466,505 3,661,907

Net Increase (Decrease) from Capital Share Transactions 1,358,387 3,235,751

Total Increase (Decrease) (2,151,686) 6,411,740

Net Assets

Beginning of Period 37,243,762 30,832,022

End of Period 35,092,076 37,243,762

1 Includes fiscal 2019 and 2018 short-term gain distributions totaling $14,439,000 and $0, respectively. Short-term gain distributions are treated as ordinary income dividends for tax purposes.

12

Investor Shares

Six Months

Ended

For a Share Outstanding February 28, Year Ended August 31,

Throughout Each Period 2019 2018 2017 2016 2015 2014

Net Asset Value, Beginning of Period $31.23 $28.38 $22.38 $20.83 $23.79 $20.42

Investment Operations

Net Investment Income .0541 .3811 .2401 .304 .308 .4712

Net Realized and Unrealized Gain (Loss)

on Investments (1.793) 2.722 6.028 1.539 (2.774) 3.235

Total from Investment Operations (1.739) 3.103 6.268 1.843 (2.466) 3.706

Distributions

Dividends from Net Investment Income (.403) (.253) (.268) (.293) (.494) (.336)

Distributions from Realized Capital Gains (.928) — — — — —

Total Distributions (1.331) (.253) (.268) (.293) (.494) (.336)

Net Asset Value, End of Period $28.16 $31.23 $28.38 $22.38 $20.83 $23.79

Total Return3 -5.06% 10.97% 28.43% 8.95% -10.46% 18.26%

Ratios/Supplemental Data

Net Assets, End of Period (Millions) $7,193 $8,074 $7,731 $6,700 $7,172 $8,976

Ratio of Total Expenses to

Average Net Assets4 0.45% 0.45% 0.45% 0.46% 0.47% 0.47%

Ratio of Net Investment Income to

Average Net Assets 0.39% 1.25% 1.01% 1.47% 1.34% 2.08%2

Portfolio Turnover Rate 16% 16% 15% 29% 29% 21%

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

1 Calculated based on average shares outstanding.

2 Net investment income per share and the ratio of net investment income to average net assets include $.080 and 0.35%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

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

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

Financial Highlights



13

Admiral Shares

Six Months

Ended

For a Share Outstanding February 28, Year Ended August 31,

Throughout Each Period 2019 2018 2017 2016 2015 2014

Net Asset Value, Beginning of Period $99.45 $90.24 $71.19 $66.28 $75.70 $64.98

Investment Operations

Net Investment Income .2271 1.3651 .8791 1.062 1.088 1.6132

Net Realized and Unrealized Gain (Loss)

on Investments (5.724) 8.652 19.127 4.877 (8.821) 10.277

Total from Investment Operations (5.497) 10.017 20.006 5.939 (7.733) 11.890

Distributions

Dividends from Net Investment Income (1.418) (.807) (.956) (1.029) (1.687) (1.170)

Distributions from Realized Capital Gains (2.955) — — — — —

Total Distributions (4.373) (.807) (.956) (1.029) (1.687) (1.170)

Net Asset Value, End of Period $89.58 $99.45 $90.24 $71.19 $66.28 $75.70

Total Return3 -5.00% 11.14% 28.57% 9.07% -10.32% 18.42%

Ratios/Supplemental Data

Net Assets, End of Period (Millions) $27,899 $29,170 $23,101 $15,704 $13,752 $14,415

Ratio of Total Expenses to

Average Net Assets4 0.32% 0.32% 0.32% 0.33% 0.34% 0.34%

Ratio of Net Investment Income to

Average Net Assets 0.52% 1.38% 1.14% 1.60% 1.47% 2.21%2

Portfolio Turnover Rate 16% 16% 15% 29% 29% 21%

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

1 Calculated based on average shares outstanding.

2 Net investment income per share and the ratio of net investment income to average net assets include $.255 and 0.35%, respectively, resulting from income received from Vodafone Group plc in the form of cash and shares in Verizon Communications Inc. in February 2014.

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

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

Financial Highlights



14

Notes to Financial Statements


Vanguard International Growth Fund is registered under the Investment Company Act of 1940 as

an open-end investment company, or mutual fund. The fund invests in securities of foreign issuers,

which may subject it to investment risks not normally associated with investing in securities of U.S.

corporations. The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of

the share classes has different eligibility and minimum purchase requirements, and is designed for

different types of investors.

A. The following significant accounting policies conform to generally accepted accounting principles

for U.S. investment companies. The fund consistently follows such policies in preparing its financial

statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange

(generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted

sales prices or official closing prices taken from the primary market in which each security trades;

such securities not traded on the valuation date are valued at the mean of the latest quoted bid and

asked prices. Securities for which market quotations are not readily available, or whose values have

been affected by events occurring before the fund’s pricing time but after the close of the securities’

primary markets, are valued at their fair values calculated according to procedures adopted by the

board of trustees. These procedures include obtaining quotations from an independent pricing

service, monitoring news to identify significant market- or security-specific events, and evaluating

changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-

traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value

pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ

from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity

Fund are valued at that fund’s net asset value. Temporary cash investments are valued using the

latest bid prices or using valuations based on a matrix system (which considers such factors as

security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies

are translated into U.S. dollars using exchange rates obtained from an independent third party as

of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation

(depreciation) on investment securities include the effects of changes in exchange rates since the

securities were purchased, combined with the effects of changes in security prices. Fluctuations

in the value of other assets and liabilities resulting from changes in exchange rates are recorded as

unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which

time they are recorded as realized foreign currency gains (losses).

3. Futures and Forward Currency Contracts: The fund uses index futures contracts to a limited extent,

with the objective of maintaining full exposure to the stock market while maintaining liquidity. The

fund may purchase or sell futures contracts to achieve a desired level of investment, whether to

accommodate portfolio turnover or cash flows from capital share transactions. The primary risks

associated with the use of futures contracts are imperfect correlation between changes in market

values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid

market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the

counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades

futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearing-

house, and has entered into clearing agreements with its clearing brokers. The clearinghouse

15


imposes initial margin requirements to secure the fund’s performance and requires daily settlement

of variation margin representing changes in the market value of each contract. Any assets pledged

as initial margin for open contracts are noted in the Statement of Net Assets.

The fund enters into forward currency contracts to provide the appropriate currency exposure

related to any open futures contracts or to protect the value of securities and related receivables

and payables against changes in foreign exchange rates. The fund’s risks in using these contracts

include movement in the values of the foreign currencies relative to the U.S. dollar and the ability of

the counterparties to fulfill their obligations under the contracts. The fund mitigates its counterparty

risk by entering into forward currency contracts only with a diverse group of prequalified counterparties,

monitoring their financial strength, entering into master netting arrangements with its counterparties,

and requiring its counterparties to transfer collateral as security for their performance. In the absence

of a default, the collateral pledged or received by the fund cannot be repledged, resold, or

rehypothecated. The master netting arrangements provide that, in the event of a counterparty’s

default (including bankruptcy), the fund may terminate the forward currency contracts, determine

the net amount owed by either party in accordance with its master netting arrangements, and sell

or retain any collateral held up to the net amount owed to the fund under the master netting

arrangements. The forward currency contracts contain provisions whereby a counterparty may

terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment

by the fund if the fund is in a net liability position at the time of the termination. The payment

amount would be reduced by any collateral the fund has pledged. Any assets pledged as collateral

for open contracts are noted in the Statement of Net Assets. The value of collateral received or

pledged is compared daily to the value of the forward currency contracts exposure with each

counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted

and settled within two business days.

Futures contracts are valued at their quoted daily settlement prices. Forward currency contracts are

valued at their quoted daily prices obtained from an independent third party, adjusted for currency

risk based on the expiration date of each contract. The notional amounts of the contracts are not

recorded in the Statement of Net Assets. Fluctuations in the value of the contracts are recorded in

the Statement of Net Assets as an asset (liability) and in the Statement of Operations as unrealized

appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains

(losses) on futures or forward currency contracts.

During the six months ended February 28, 2019, the fund’s average investments in long and short

futures contracts represented less than 1% and 0% of net assets, respectively, based on the

average of the notional amounts at each quarter-end during the period. The fund’s average investment

in forward currency contracts represented 2% of net assets, based on the average of the notional

amounts at each quarter-end during the period.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company

and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for

all open federal income tax years (August 31, 2015–2018), and for the period ended February 28,

2019, and has concluded that no provision for federal income tax is required in the fund’s financial

statements.

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

are determined on a tax basis and may differ from net investment income and realized capital gains

for financial reporting purposes.

16


6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional

borrowers. Security loans are subject to termination by the fund at any time, and are required to be

secured at all times by collateral in an amount at least equal to the market value of securities loaned.

Daily market fluctuations could cause the value of loaned securities to be more or less than the

value of the collateral received. When this occurs, the collateral is adjusted and settled before the

opening of the market on the next business day. The fund further mitigates its counterparty risk by

entering into securities lending transactions only with a diverse group of prequalified counterparties,

monitoring their financial strength, and entering into master securities lending agreements with its

counterparties. The master securities lending agreements provide that, in the event of a counterparty’s

default (including bankruptcy), the fund may terminate any loans with that borrower, determine the

net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however,

such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in

the event of a default, the fund may experience delays and costs in recovering the securities loaned.

The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability

in the Statement of Net Assets for the return of the collateral, during the period the securities are

on loan. Securities lending income represents fees charged to borrowers plus income earned on

invested cash collateral, less expenses associated with the loan. During the term of the loan, the

fund is entitled to all distributions made on or in respect of the loaned securities.

7. Credit Facility: The fund and certain other funds managed by The Vanguard Group (“Vanguard”)

participate in a $3.1 billion committed credit facility provided by a syndicate of lenders pursuant to

a credit agreement that may be renewed annually; each fund is individually liable for its borrowings,

if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes,

and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating

funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn

amount of the facility; these fees are allocated to the funds based on a method approved by the

fund’s board of trustees and included in Management and Administrative expenses on the fund’s

Statement of Operations. Any borrowings under this facility bear interest at a rate based upon the

higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight

bank funding rate plus an agreed-upon spread. Subsequent to the report date, the credit agreement

was amended to increase total commitments under the facility from $3.1 billion to $4.3 billion.

No other term changes were significant.

The fund had no borrowings outstanding at February 28, 2019, or at any time during the period

then ended.

8. Other: Dividend income is recorded on the ex-dividend date. Interest income includes income

distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and

discounts on debt securities purchased are amortized and accreted, respectively, to interest income

over the lives of the respective securities. Security transactions are accounted for on the date securities

are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities

are those of the specific securities sold.

Withholding taxes on foreign dividends and capital gains have been provided for in accordance with

the fund’s understanding of the applicable countries’ tax rules and rates. The fund has filed tax

reclaims for previously withheld taxes on dividends earned in certain European Union countries.

These filings are subject to various administrative and judicial proceedings within these countries.

17


Such tax reclaims received during the year, if any, are included in dividend income. No other amounts

for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the

ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing

of payment.

Each class of shares has equal rights as to assets and earnings, except that each class separately

bears certain class-specific expenses related to maintenance of shareholder accounts (included in

Management and Administrative expenses) and shareholder reporting. Marketing and distribution

expenses are allocated to each class of shares based on a method approved by the board of trustees.

Income, other non-class-specific expenses, and gains and losses on investments are allocated to

each class of shares based on its relative net assets.

B. The investment advisory firms Baillie Gifford Overseas Ltd. and Schroder Investment Management

North America Inc. each provide investment advisory services to a portion of the fund for a fee

calculated at an annual percentage rate of average net assets managed by the advisor. The basic

fees of Baillie Gifford Overseas Ltd. and Schroder Investment Management North America Inc.

are subject to quarterly adjustments based on performance relative to the MSCI All Country World

Index ex USA for the preceding three years.

Vanguard manages the cash reserves of the fund as described below.

For the six months ended February 28, 2019, the aggregate investment advisory fee represented

an effective annual basic rate of 0.14% of the fund’s average net assets, before an increase of

$5,048,000 (0.03%) based on performance.

C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard

and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing,

and distribution, and cash management services at Vanguard’s cost of operations (as defined by

the FSA). These costs of operations are allocated to the fund based on methods and guidelines

approved by the board of trustees. Vanguard does not require reimbursement in the current period

for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs);

the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement

of Net Assets. All other costs of operations payable to Vanguard are generally settled twice a month.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in

Vanguard. At February 28, 2019, the fund had contributed to Vanguard capital in the amount of

$1,739,000, representing 0.00% of the fund’s net assets and 0.70% of Vanguard’s capitalization.

The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

D. Various inputs may be used to determine the value of the fund’s investments. These inputs

are summarized in three broad levels for financial statement purposes. The inputs or methodologies

used to value securities are not necessarily an indication of the risk associated with investing in

those securities.

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

Level 2—Other significant observable inputs (including quoted prices for similar securities, interest

rates, prepayment speeds, credit risk, etc.).

Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine

the fair value of investments). Any investments valued with significant unobservable inputs are noted

on the Statement of Net Assets.

18


The following table summarizes the market value of the fund’s investments as of February 28, 2019,

based on the inputs used to value them:

Level 1 Level 2 Level 3

Investments ($000) ($000) ($000)

Common Stocks—North and South America 4,166,674 — —

Common Stocks—Other 4,515,600 25,742,644 49,650

Preferred Stocks — — 82,117

Temporary Cash Investments 1,416,912 31,423 —

Futures Contracts—Assets1 1,520 — —

Futures Contracts—Liabilities1 (2,009) — —

Forward Currency Contracts—Assets — 10,348 —

Forward Currency Contracts—Liabilities — (6,332) —

Total 10,098,697 25,778,083 131,767

1 Represents variation margin on the last day of the reporting period.

E. At February 28, 2019, the fair values of derivatives were reflected in the Statement of Net Assets

as follows:

Foreign

Equity Exchange

Contracts Contracts Total

Statement of Net Assets Caption ($000) ($000) ($000)

Variation Margin Receivable—Futures Contracts 1,520 — 1,520

Unrealized Appreciation—Forwards Contracts — 10,348 10,348

Total Assets 1,520 10,348 11,868

Variation Margin Payable—Futures Contracts (2,009) — (2,009)

Unrealized Depreciation—Forwards Contracts — (6,332) (6,332)

Total Liabilities (2,009) (6,332) (8,341)

Realized net gain (loss) and the change in unrealized appreciation (depreciation) on derivatives for

the six months ended February 28, 2019, were:

Foreign

Equity Exchange

Contracts Contracts Total

Realized Net Gain (Loss) on Derivatives ($000) ($000) ($000)

Futures Contracts (22,480) — (22,480)

Forward Currency Contracts — (17,549) (17,549)

Realized Net Gain (Loss) on Derivatives (22,480) (17,549) (40,029)

Change in Unrealized Appreciation (Depreciation) on Derivatives

Futures Contracts 19,122 — 19,122

Forward Currency Contracts — 13,274 13,274

Change in Unrealized Appreciation (Depreciation) on Derivatives 19,122 13,274 32,396

19

20


F. As of February 28, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Amount ($000)

Tax Cost 26,302,751

Gross Unrealized Appreciation 11,553,743

Gross Unrealized Depreciation (1,841,947)

Net Unrealized Appreciation (Depreciation) 9,711,796

G. During the six months ended February 28, 2019, the fund purchased $2,675,818,000 of investment securities and sold $2,958,398,000 of investment securities, other than temporary cash investments.

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

Six Months Ended Year Ended February 28, 2019 August 31, 2018

Amount Shares Amount Shares ($000) (000) ($000) (000)

Investor Shares

Issued 528,708 19,110 2,130,616 68,838

Issued in Lieu of Cash Distributions 322,714 12,842 64,011 2,138

Redeemed (959,540) (35,077) (2,620,783) (84,901)

Net Increase (Decrease)—Investor Shares (108,118) (3,125) (426,156) (13,925)

Admiral Shares

Issued 3,162,396 36,602 7,766,732 78,708

Issued in Lieu of Cash Distributions 1,174,404 14,695 199,790 2,098

Redeemed (2,870,295) (33,180) (4,304,615) (43,465)

Net Increase (Decrease)—Admiral Shares 1,466,505 18,117 3,661,907 37,341


I. Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:

Current Period Transactions

Aug. 31, Proceeds Net Change in Feb. 28, 2018 from Realized Net Capital Gain 2019 Market Purchases Securities Gain Unrealized Distributions Market Value at Cost Sold (Loss) App. (Dep.) Income Received Value ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)

HelloFresh SE 150,128 — — — (35,160) — — 114,968

Home 24 SE NA1 — — — (38,777) — — 15,351

Vanguard FTSE All-World ex-US ETF 58,780 — — — (2,550) 812 — 56,230

Vanguard Market Liquidity Fund 956,789 NA2 NA2 130 (30) 5,254 — 1,416,912

You & Mr. Jones 46,054 — — — 5,466 — — 51,520

Total 1,211,751 130 (71,051) 6,066 — 1,654,981

1 Not applicable—at August 31, 2018, the issuer was not an affiliated company of the fund.

2 Not applicable—purchases and sales are for temporary cash investment purposes.

J. Management has determined that no other events or transactions occurred subsequent to February 28, 2019, that would require recognition or disclosure in these financial statements.

21

The board of trustees of Vanguard International Growth Fund has renewed the fund’s investment

advisory arrangements with Baillie Gifford Overseas Ltd. (Baillie Gifford) and Schroder Investment

Management North America Inc. (Schroder Inc.), as well as the sub-advisory agreement with Schroder

Investment Management North America Ltd. (Schroder Ltd.). The board determined that renewing

the fund’s advisory arrangements was in the best interests of the fund and its shareholders.

The board based its decision upon an evaluation of each advisor’s investment staff, portfolio

management process, and performance. This evaluation included information provided to the board

by Vanguard’s Portfolio Review Department, which is responsible for fund and advisory oversight

and product management. The Portfolio Review Department met regularly with the advisors and

made monthly presentations to the board during the fiscal year that directed the board’s focus to

relevant information and topics.

The board, or an investment committee made up of board members, also received information

throughout the year during advisor presentations. For each advisor presentation, the board was

provided with letters and reports that included information about, among other things, the advisory

firm and the advisor’s assessment of the investment environment, portfolio performance, and

portfolio characteristics.

In addition, the board received monthly reports, which included a Market and Economic Report,

a Fund Dashboard Monthly Summary, and a Fund Performance Report.

Prior to their meeting, the trustees were provided with a memo and materials that summarized the

information they received over the course of the year. They also considered the factors discussed

below, among others. However, no single factor determined whether the board approved the

arrangements. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board reviewed the quality of the fund’s investment management services over both the

short and long term, and took into account the organizational depth and stability of each advisor.

The board considered the following:

Baillie Gifford. Baillie Gifford—a unit of Baillie Gifford & Co., founded in 1908—is among the largest

independently owned investment management firms in the United Kingdom. Baillie Gifford uses

fundamental research to make long-term investments in companies that have above-average growth

potential resulting from sustainable competitive advantages, special cultures and management,

or competitive strength in underestimated technology shifts. Baillie Gifford believes that equities’

asymmetrical return pattern means that alpha is generated by focusing on the upside and the

potential to earn exponential returns rather than being overly concerned with avoiding losing

investments. The advisor takes a bottom-up, stock-driven approach to sector and country allocation.

Baillie Gifford has advised a portion of the fund since 2003.

Trustees Approve Advisory Arrangements

22

Schroder. Schroders plc, the parent company of Schroder Inc. and Schroder Ltd. (collectively,

Schroder), was founded in 1804 in London, England. Schroder specializes in global equity and fixed

income management and seeks to invest in securities of international companies where it has

identified a significant growth gap, which is defined as forward earnings growth that is not yet

recognized by the market. Schroder believes that market inefficiencies often drive material differences

between underlying company fundamentals and market estimates. The advisor also believes that

in-depth fundamental research, incorporating a comprehensive macroeconomic viewpoint and a

robust framework of fundamental risk analysis, is the most reliable means of finding those companies

and identifying the growth gap. Schroder Inc. has advised the fund since its inception in 1981, and

its affiliate Schroder Ltd. has advised the fund since 2003.

The board concluded that each advisor’s experience, stability, depth, and performance, among

other factors, warranted continuation of the advisory arrangements.

Investment performance

The board considered the short- and long-term performance of each advisor’s sub-portfolio,

including any periods of outperformance or underperformance compared with a relevant

benchmark and peer group. The board concluded that the performance was such that each

advisory arrangement should continue.

Cost

The board concluded that the fund’s expense ratio was well below the average expense ratio

charged by funds in its peer group and that the fund’s advisory fee rate was also well below

the peer-group average.

The board did not consider the profitability of Baillie Gifford or Schroder in determining whether

to approve the advisory fees, because the firms are independent of Vanguard and the advisory

fees are the result of arm’s-length negotiations.

The benefit of economies of scale

The board concluded that the fund’s shareholders benefit from economies of scale because of

breakpoints in the advisory fee schedules for Baillie Gifford and Schroder. The breakpoints reduce

the effective rate of the fees as the fund’s assets managed by each advisor increase.

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

23

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

Connect with Vanguard® > vanguard.com

Fund Information > 800-662-7447

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Institutional Investor Services > 800-523-1036

Text Telephone for PeopleWho Are Deaf or Hard of Hearing > 800-749-7273

This material may be used in conjunctionwith the offering of shares of any Vanguardfund only if preceded or accompanied bythe fund’s current prospectus.

All comparative mutual fund data are from Lipper, aThomson Reuters Company, or Morningstar, Inc., unlessotherwise noted.

You can obtain a free copy of Vanguard’s proxy votingguidelines by visiting vanguard.com/proxyreporting or bycalling Vanguard at 800-662-2739. The guidelines arealso available from the SEC’s website, sec.gov. Inaddition, you may obtain a free report on how your fundvoted the proxies for securities it owned during the 12months ended June 30. To get the report, visit eithervanguard.com/proxyreporting or sec.gov.

You can review information about your fund on theSEC’s website, and you can receive copies of thisinformation, for a fee, by sending a request via emailaddressed to [email protected].

Source for Bloomberg Barclays indexes: BloombergIndex Services Limited. Copyright 2019, Bloomberg. Allrights reserved.

CFA® is a registered trademark owned by CFA Institute.

© 2019 The Vanguard Group, Inc.All rights reserved.Vanguard Marketing Corporation, Distributor.

Q812 042019

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