# EDGAR Filing Document

**Accession Number:** 0001409957
**File Stem:** 0001683863-23-000583
**Filing Date:** 2023-2
**Character Count:** 224569
**Document Hash:** 02587ce4243966d7a800201a0057c71f
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001683863-23-000583.hdr.sgml**: 20230206

**ACCESSION NUMBER**: 0001683863-23-000583

**CONFORMED SUBMISSION TYPE**: 497

**PUBLIC DOCUMENT COUNT**: 20

**FILED AS OF DATE**: 20230206

**DATE AS OF CHANGE**: 20230206

**EFFECTIVENESS DATE**: 20230206

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Vanguard Montgomery Funds
- **CENTRAL INDEX KEY:** 0001409957
- **IRS NUMBER:** 261082315
- **FISCAL YEAR END:** 0331

**FILING VALUES:**
- **FORM TYPE:** 497
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-145624
- **FILM NUMBER:** 23589148

**BUSINESS ADDRESS:**
- **STREET 1:** P.O. BOX 2600
- **CITY:** VALLEY FORGE
- **STATE:** PA
- **ZIP:** 19482
- **BUSINESS PHONE:** 610-669-1000

**MAIL ADDRESS:**
- **STREET 1:** P.O. BOX 2600
- **CITY:** VALLEY FORGE
- **STATE:** PA
- **ZIP:** 19482

## Series and Classes Contracts Data

### Vanguard Market Neutral Fund (Series ID: S000019457)

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|  |  |  |
|:---|:---|:---|
| Class Name           | Ticker Symbol | Class ID   |
| Investor Shares      | VMNFX         | C000054090 |
| Institutional Shares | VMNIX         | C000054091 |

---

## Series and Classes Contracts Data

### Vanguard Market Neutral Fund (Series ID: S000019457)

| Class ID   | Class Name           | Ticker Symbol   |
|:---|:---|:---|
| C000054090 | Investor Shares      | VMNFX           |
| C000054091 | Institutional Shares | VMNIX           |

?xml version="1.0" encoding="utf-8"? 497

![](vanguard.jpg)

Vanguard Market Neutral Fund

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;April 29, 2022 (as supplemented on February 6, 2023)

**Investor Shares**

Vanguard Market Neutral Fund Investor Shares (VMNFX)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

This prospectus contains financial data for the Fund through the fiscal year ended December 31, 2021.

**The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**Contents**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| [Fund Summary](#xx_75b498c7-238a-497e-96fa-2f8ec8c19376_1) | 1  |
| [More on the Fund](#xx_80419fc2-581b-4d96-9b51-a02063257bba_1) | 7  |
| [The Fund and Vanguard](#xx_80419fc2-581b-4d96-9b51-a02063257bba_12) | 18  |
| [Investment Advisor](#xx_80419fc2-581b-4d96-9b51-a02063257bba_12) | 18  |
| [Dividends, Capital Gains, and Taxes](#xx_80419fc2-581b-4d96-9b51-a02063257bba_13) | 19  |
| [Share Price](#xx_80419fc2-581b-4d96-9b51-a02063257bba_17) | 23  |
| [Financial Highlights](#xx_68d9855d-f5ef-4f00-9003-0bb8841c2185_1) | 25  |

---

---

| | |
|:---|:---|
| [Investing With Vanguard](#xx_27c59288-c82a-4983-8651-ec443204a498_1) | 26  |
| [Purchasing Shares](#xx_27c59288-c82a-4983-8651-ec443204a498_1) | 26  |
| [Converting Shares](#xx_27c59288-c82a-4983-8651-ec443204a498_4) | 29  |
| [Redeeming Shares](#xx_27c59288-c82a-4983-8651-ec443204a498_5) | 30  |
| [Exchanging Shares](#xx_27c59288-c82a-4983-8651-ec443204a498_9) | 34  |
| [Frequent-Trading Limitations](#xx_27c59288-c82a-4983-8651-ec443204a498_9) | 34  |
| [Other Rules You Should Know](#xx_27c59288-c82a-4983-8651-ec443204a498_12) | 37  |
| [Fund and Account Updates](#xx_27c59288-c82a-4983-8651-ec443204a498_16) | 41  |
| [Employer-Sponsored Plans](#xx_27c59288-c82a-4983-8651-ec443204a498_17) | 42  |
| [Contacting Vanguard](#xx_27c59288-c82a-4983-8651-ec443204a498_19) | 44  |
| [Additional Information](#xx_27c59288-c82a-4983-8651-ec443204a498_20) | 45  |
| [Glossary of Investment Terms](#xx_6523a437-f953-4001-b49a-2566f1ec7c77_1) | 46  |

---

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**Fund Summary**

**Investment Objective**

The Fund seeks to provide long-term capital appreciation while limiting exposure to general stock market risk.

**Fees and Expenses**

The following table describes the fees and expenses you may pay if you buy, hold, and sell Investor Shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.

**Shareholder Fees**

(Fees paid directly from your investment)

---

| | |
|:---|:---|
| Sales Charge (Load) Imposed on Purchases |  |
| Purchase Fee |  |
| Sales Charge (Load) Imposed on Reinvested Dividends |  |
| Redemption Fee |  |
| Account Service Fee Per Year<br> (for certain fund account balances below $10,000)<br>| $20 |

---

**Annual Fund Operating Expenses**

(Expenses that you pay each year as a percentage of the value of your investment)

---

| | | |
|:---|:---|:---|
| Management Fees |  | 0.18% |
| 12b-1 Distribution Fee |  |  |
| Other Expenses |  |  |
| Dividend Expenses on Securities Sold Short<sup>1</sup> <br>| 0.84% |  |
| Borrowing Expenses on Securities Sold Short<sup>2</sup> <br>| 0.27% |  |
| Other Operating Expenses | 0.02% |  |
| Total of Other Expenses |  | 1.13% |
| Total Annual Fund Operating Expenses<sup>3</sup> <br>|  | 1.31% |

---

When a cash dividend is declared on a stock the Fund has sold short, the Fund is required to pay an amount equal to that dividend to the party from which the Fund borrowed the stock and to record the payment of the dividend as an expense.

In connection with its short sales, the Fund may receive income or be charged a fee on borrowed stock. This income or fee is calculated on a daily basis, based upon the market value of the borrowed stock and a variable rate that is dependent upon the availability of the stock. A net amount of fees is listed as Borrowing Expenses on Securities Sold Short.

Excluding borrowing and dividend expenses on securities sold short, the Total Annual Fund Operating Expenses are 0.20%.

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Example

The following example is intended to help you compare the cost of investing in the Fund's Investor Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you were to invest $10,000 in the Fund's shares. This example assumes that the shares provide a return of 5% each year and that total annual fund operating expenses remain as stated in the preceding table. You would incur these hypothetical expenses whether or not you were to redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | |
|:---|:---|:---|:---|
| 1 Year | 3 Years | 5 Years | 10 Years |
| $133 | $415 | $718 | $1579 |

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Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 133% of the average value of its portfolio.

**Principal Investment Strategies**

The Fund follows a market neutral strategy, which the Fund defines as a strategy designed to produce a portfolio that is neutral with respect to general stock market risk (sometimes referred to as beta neutrality). Beta is a measure of a portfolio's volatility relative to the volatility of the general stock market. The Fund, as a whole, does not seek to adhere to any other definition of market neutrality.

To implement the strategy, the advisor buys securities that it believes offer an appropriate balance between strong growth prospects and reasonable valuations relative to their industry peers and sells short securities that the advisor expects to be overvalued or have weak growth prospects, in amounts that it believes will achieve market neutrality. By taking long and short positions in different securities, the Fund attempts to limit the effect of market movements on portfolio performance. The advisor does this by using a quantitative process and may, at any time, buy or sell short any number of publicly traded, exchange-listed equity securities and may emphasize specific industries, styles (growth/value), capitalization ranges, countries, or other factors. The overall performance of the Fund depends on the net performance of its long and short positions, and it is

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possible for the Fund to experience a net loss across all positions. If the Fund's investment strategy is successful, however, the net performance of its long and short positions will produce long-term capital appreciation that reflects the quality of the advisor's security selections, with limited exposure to general stock market risk.

The Fund's long/short market neutral investment strategy is an absolute-return investment approach seeking performance that exceeds the returns of 3-month U.S. Treasury bills. An investment in the Fund, however, is different from an investment in 3-month U.S. Treasury bills because, among other things, U.S. Treasury bills are backed by the full faith and credit of the U.S. government, U.S. Treasury bills have a fixed rate of return, investors in U.S. Treasury bills have a very low risk of losing their investment, and an investment in the Fund is expected to be substantially more volatile than an investment in U.S. Treasury bills.

Because of the Fund's market neutral strategy, the Fund's overall price movements are not expected to correlate with the general stock market's price movements. In other words, the Fund is expected to have returns that are independent of the returns and direction of the general stock market.

**Principal Risks**

An investment in the Fund could lose money over short or long periods of time, and the entire amount invested could be lost. There can be no assurance that the Fund's investment objective or strategies will be achieved, and results may vary substantially over time. The Fund is subject to the following risks, which could affect the Fund's performance:

• *Strategy risk*, which is the chance that the Fund's investment strategy will not succeed. There is no guarantee that the Fund will be able to limit exposure to general stock market risk or produce returns that exceed the returns of 3-month U.S. Treasury bills. The Fund's use of short sales in combination with its long positions in an attempt to improve performance or to reduce overall portfolio risk may not be successful and may result in greater losses or lower positive returns than if the Fund held only long positions. When the general stock market is performing strongly, the Fund is expected to underperform the market because the Fund's short positions will likely lose money. If the Fund's market neutral strategy is unsuccessful, the Fund may be 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.

• *Short-selling risk*, which is the chance that the Fund will lose money in connection with its short sales of securities. Short selling allows an investor to profit from declines in the prices of securities. To engage in a short sale, the

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Fund must "borrow" securities for a fee. To close out short positions, the Fund may have to sell related long positions at disadvantageous times to produce cash to unwind a short position. There is no guarantee that the price of the borrowed securities will decline; in fact, it may rise. The Fund's loss on a short sale is theoretically unlimited, because there is no upward limit on the price a borrowed security could attain. Short selling involves higher transaction costs than long-only investing, which could offset any gains and increase any losses.

• *Manager risk*, which is the chance that poor security selection or strategy execution will cause the Fund to fail to achieve its investment objective or to underperform other funds with a similar investment strategy. The advisor's security selection process may not eliminate all stock market risk factors associated with the long and short positions it establishes for the Fund. It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks it holds short increase in value, thereby increasing potential losses to the Fund. Any gain from a short position may be partially or totally offset by a decline in a long position, or vice versa. In addition, significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.

• *Investment risk*, which is the chance that the types of securities purchased by the Fund will, intentionally or unintentionally, increase the Fund's sensitivity to certain investment factors. These factors may include, but are not limited to, market capitalization ranges, styles (growth/value), and industries of the underlying securities. These factors may cause the Fund to fail to achieve its investment objective of limiting exposure to general stock market risk or cause it to underperform other funds with a similar investment strategy.

• *Derivatives risk*. The Fund may invest in derivatives, which may involve risks different from, and possibly greater than, those of investments directly in the underlying securities or assets.

**An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.**

**Annual Total Returns**

The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund's Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Investor Shares compare with those of a relevant market index and other comparative benchmarks, which have investment characteristics similar to those of the Fund. The Spliced Market Neutral Index USD reflects the performance of the FTSE

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3-Month U.S. Treasury Bill Index through March 31, 2016, and the FTSE 3-Month Treasury Bill Index (Daily) thereafter. Returns for the Equity Market Neutral Funds Average are derived from data provided by Lipper, a Thomson Reuters Company. Keep in mind that the Fund's past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at *vanguard.com/ performance* or by calling Vanguard toll-free at 800-662-7447.

**Annual Total Returns — Vanguard Market Neutral Fund Investor Shares**

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![](mn634.jpg)

During the periods shown in the bar chart, the highest and lowest returns for a calendar quarter were:

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| | | |
|:---|:---|:---|
|  | Total Return | Quarter |
| Highest | 9.19% | December 31, 2021 |
| Lowest | -5.64% | June 30, 2019 |

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**Average Annual Total Returns for Periods Ended December 31, 2021** 

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| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Vanguard Market Neutral Fund Investor Shares** |  |  |  |
| Return Before Taxes  | 23.24% | -1.17% | 1.30% |
| Return After Taxes on Distributions  | 23.19 | -1.50 | 1.11 |
| Return After Taxes on Distributions and Sale of Fund Shares  | 13.79 | -0.94 | 0.97 |
| **FTSE 3-Month U.S. Treasury Bill Index**<br> (reflects no deduction for fees or expenses)<br>| 0.05% | 1.11% | 0.59% |
| **Spliced Market Neutral Index USD**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 0.05 | 1.11 | 0.60 |
| **FTSE 3-Month Treasury Bill Index (Daily)**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 0.05 | 1.11 | 0.60 |
| **Equity Market Neutral Funds Average**<br> (reflects no deduction for taxes)<br>| 3.94 | -1.84 | -0.41 |
| **Dow Jones U.S. Total Stock Market Float Adjusted Index**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 25.66 | 17.92 | 16.24 |

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Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned *Return After Taxes on Distributions and Sale of Fund Shares* may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.

**Investment Advisor**

The Vanguard Group, Inc. (Vanguard)

Portfolio Manager

Cesar Orosco, CFA, Ph.D., Head of Alpha Equity Investments at Vanguard. He has managed the Fund since 2021.

**Purchase and Sale of Fund Shares**

You may purchase or redeem shares online through our website *(vanguard.com)*, by mail (The Vanguard Group, P.O. Box 982901, El Paso, TX 79998-2901), or by telephone (800-662-2739). The minimum investment amount required to open and maintain a Fund account for Investor Shares is $50,000. The minimum investment amount required to add to an existing Fund account is generally $1. Financial intermediaries and institutional clients should contact Vanguard for information on special eligibility rules that may apply to them regarding Investor Shares. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility. If you are investing through an employer-sponsored retirement or savings plan, your plan administrator or your benefits office can provide you with detailed information on how you can invest through your plan.

**Tax Information**

The Fund's distributions may be taxable as ordinary income or capital gain. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply.

**Payments to Financial Intermediaries**

The Fund and its investment advisor do not pay financial intermediaries for sales of Fund shares.

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**More on the Fund**

This prospectus describes the principal risks you would face as a Fund shareholder. It is important to keep in mind one of the main principles of investing: generally, the higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: the lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance for fluctuations in the securities markets. Look for this ![](flag.gif) symbol throughout the prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk<sup>®</sup> explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.

**Share Class Overview**

This prospectus offers the Fund's Investor Shares. A separate prospectus offers the Fund's Institutional Shares, which are generally for investors who invest a minimum of $5 million.

Both share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment returns will differ.

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| |
|:---|
| Plain Talk About Fund Expenses |
| All mutual funds have operating expenses. These expenses, which are <br> deducted from a fund's gross income, are expressed as a percentage of the <br> net assets of the fund. Assuming that operating expenses remain as stated <br> in the Fees and Expenses section, Vanguard Market Neutral Fund Investor <br> Shares' expense ratio would be 1.31%, or $13.10 per $1,000 of average net <br> assets, including borrowing and dividend expenses on short sales. Excluding <br> borrowing and dividend expenses on short sales, the Investor Shares' <br> expense ratio would be 0.20%, or $2.00 per $1,000 of average net assets. In <br> comparison, the average expense ratio for alternative equity market neutral <br> funds in 2021 was 1.30%, or $13.00 per $1,000 of average net assets, also <br> excluding borrowing and dividend expenses on short sales (derived from <br> data provided by Lipper, a Thomson Reuters Company, which reports on the <br> mutual fund industry).<br>|

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|:---|
| Plain Talk About Costs of Investing |
| Costs are an important consideration in choosing a mutual fund. That is <br> because you, as a shareholder, pay a proportionate share of the costs of <br> operating a fund and any transaction costs incurred when the fund buys or <br> sells securities. These costs can erode a substantial portion of the gross <br> income or the capital appreciation a fund achieves. Even seemingly small <br> differences in expenses can, over time, have a dramatic effect on a <br> fund's performance.<br>|

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|:---|
| Plain Talk About Short Sale Borrowing and Dividend Expenses |
| The Fund engages in short selling as a principal investment strategy. A short <br> sale occurs when the Fund sells a stock it does not own and then borrows <br> the stock from a lender in order to settle the transaction. When the Fund <br> sells short, it will normally incur two types of expenses—borrowing <br> expenses and dividend expenses—both of which increase the Fund's <br> expense ratio.<br>|
| In connection with the short sale, the Fund may receive income or be <br> charged a fee on borrowed stock. This income or fee is calculated on a daily <br> basis, based upon the market value of the borrowed stock and a variable rate <br> that is dependent upon the availability of the stock. The net amounts of <br> income or fees are recorded as "interest income" (for net income received) <br> or "borrowing expense on securities sold short" (for net fees charged) on the <br> Fund's Statement of Operations.<br>|
| The Fund incurs dividend expenses until the borrowed stock is returned to <br> the lender. These expenses are paid to the lender of the stock and are based <br> upon the amount of any dividends declared on the stock. Having sold the <br> borrowed stock, the Fund does not itself collect the dividends, and thus has <br> a net expense payable to the lender. This payment is recorded as "dividend <br> expense on securities sold short" on the Fund's Statement of Operations. <br> Short sale dividend expenses generally reduce the market value of the stock <br> by the amount of the dividend declared, thus increasing the Fund's <br> unrealized gain or reducing the Fund's unrealized loss on the stock sold short.<br>|
| It is important to note that when the Fund sells a stock short, the proceeds <br> are typically held in cash equivalent investments, which earn interest at a <br> negotiated rate. This interest, when combined with the Fund's other <br> investment income, is expected to offset—in part—the Fund's short sale <br> borrowing and dividend expenses and thereby reduce total expenses.<br>|

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The following sections explain the principal investment strategies and policies that the Fund uses in pursuit of its investment 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. Note that the Fund's investment objective is not fundamental and may be changed without a shareholder vote.

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![](flag.gif)

***An investment in the Fund could lose money over short or long periods of time, and the entire amount invested could be lost. There can be no assurance that the Fund's investment objective or strategies will be achieved, and results may vary substantially over time.***

Market disruptions can adversely affect local and global markets as well as normal market conditions and operations. Any such disruptions could have an adverse impact on the value of the Fund's investments and Fund performance.

**Security Selection**

Vanguard, the Fund's investment advisor, selects and maintains a diversified portfolio of common stocks for the Fund. The advisor employs active investment management methods, which means that securities are bought and sold according to the advisor's evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general.

The Fund follows a market neutral strategy, which the Fund defines as a strategy designed to produce a portfolio that is neutral with respect to general stock market risk (sometimes referred to as beta neutrality). Beta is a measure of a portfolio's volatility relative to the volatility of the general stock market. The Fund, as a whole, does not seek to adhere to any other definition of market neutrality. By taking long and short positions in different securities, the Fund attempts to limit the effect of market movements on portfolio performance. The advisor may, at any time, buy or sell short any number of publicly traded, exchange-listed equity securities and may emphasize specific industries, styles (growth/value), capitalization ranges, countries, or other factors. The overall performance of the Fund depends on the net performance of its long and short positions, and it is possible for the Fund to experience a net loss across all positions. If the Fund's investment strategy is successful, however, the net performance of its long and short positions will produce long-term capital appreciation that reflects the quality of the advisor's security selections, with limited exposure to general stock market risk.

To implement the strategy, Vanguard buys securities that it believes offer an appropriate balance between strong growth prospects and reasonable valuations relative to their industry peers and sells short securities that the advisor expects to be overvalued or have weak growth prospects, in amounts that it believes will achieve market neutrality. Vanguard manages the portfolio through the use of a quantitative process that was developed and managed by Vanguard's Alpha Equity Investment team and is continually evolving. All potential enhancements to the process go through rigorous peer vetting and validation before being implemented.

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![](flag.gif)

***The Fund is subject to strategy risk, which is the chance that the Fund's investment strategy will not succeed. There is no guarantee that the Fund will be able to limit exposure to general stock market risk or produce returns that exceed the returns of 3-month U.S. Treasury bills. The Fund's use of short sales in combination with its long positions in an attempt to improve performance or to reduce overall portfolio risk may not be successful and may result in greater losses or lower positive returns than if the Fund held only long positions. When the general stock market is performing strongly, the Fund is expected to underperform the market because the Fund's short positions will likely lose money. If the Fund's market neutral strategy is unsuccessful, the Fund may be 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.*** 

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| |
|:---|
| Plain Talk About Market Neutral Investing |
| The goal of market neutral investing is to generate returns that are <br> independent of the returns and direction of the stock market (called beta) <br> and driven largely by the value added by the advisor's skill in selecting stocks <br> (called alpha). A portfolio that has the same volatility as that of the general <br> stock market has a beta of 1. If a portfolio has a beta less than 1, the <br> portfolio is less volatile than the general stock market. On the other hand, a <br> portfolio that has a beta greater than 1 is more volatile than the general stock <br> market. For instance, if a portfolio has a beta of 1.1, it is expected to move <br> 1.1 times the movement of the general stock market. So, if the general stock <br> market increases 10%, the portfolio's expected return over the same period <br> would be 11%. A market neutral portfolio could hold, for example, long <br> positions with a beta of 0.5 and short positions with a beta of –0.5, which <br> would render the portfolio market neutral.<br>|
| Market neutral investing is often implemented through a long/short portfolio <br> of investments in publicly traded stocks. The advisor buys what it believes <br> are attractive (or undervalued) stocks for the long portion of the portfolio and <br> sells what it believes are unattractive (or overvalued) stocks for the short <br> portion of the portfolio, in amounts it believes will achieve market neutrality. <br> The long portion of the portfolio is expected to deliver the overall returns of <br> the stock market, plus additional performance unique to the specific stocks <br> purchased by the advisor. The short portion of the portfolio is expected to <br> deliver the inverse of the overall returns of the stock market, plus additional <br> performance unique to the specific stocks the advisor sold short. The long <br> and short positions can have risk exposures significantly different from those <br> of the general stock market. The larger these risk differences, the more the <br> performance of the portfolio will differ from that of the general stock market. <br> The market exposure of the combined long and short positions is expected <br> to cancel out, producing a net stock market return close to zero, plus or <br> minus the alpha added by the advisor's stock selection process. Market <br> neutral investing is sometimes called an "absolute return" strategy because <br> it seeks positive returns, whether the stock market goes up or down, <br> although many market neutral funds have experienced periods of negative <br> returns. Market neutral funds will generally underperform more traditional <br> (long-only) stock portfolios during periods of significant market appreciation.<br>|

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|:---|
| Plain Talk About Equity Short Sales |
| A short sale of an equity security is the sale of a security that the seller does <br> not own. In order to deliver the security to the purchaser, the short seller <br> borrows the security, typically from a broker-dealer or an institutional <br> investor, for a fee. The short seller later closes out the position by returning <br> the security to the lender, typically by purchasing the same security on the <br> open market. A short sale theoretically carries the risk of an unlimited loss, <br> because the price of the underlying security could increase without limit, <br> thus increasing the cost of buying that security to cover the short position. In <br> addition, there can be no assurance that the security needed to cover a short <br> position will be available for purchase. Also, the purchase of a security to <br> close out the short position can itself cause the price of the security to rise <br> further, thereby exacerbating the loss. Short selling is often used to profit <br> from an expected downward price movement in a security.<br>|

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***The Fund is subject to short-selling risk, which is the chance that the Fund will lose money in connection with its short sales of securities. Short selling allows an investor to profit from declines in the prices of securities. To engage in a short sale, the Fund must "borrow" securities for a fee. To close out short positions, the Fund may have to sell related long positions at disadvantageous times to produce cash to unwind a short position. There is no guarantee that the price of the borrowed securities will decline; in fact, it may rise. The Fund's loss on a short sale is theoretically unlimited, because there is no upward limit on the price a borrowed security could attain. Short selling involves higher transaction costs than long-only investing, which could offset any gains and increase any losses.***

The market value of the long and short positions in the Fund will not always be equal because of continuous changes in the prices of securities. The Fund expects that the advisor will need to frequently rebalance its long and short positions. The Fund's holdings will also need to reflect changes in the universe of securities the advisor considers undervalued or overvalued. As a result, the Fund is expected to experience a high portfolio turnover rate, possibly in excess of 100%.

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*The Fund is subject to manager risk, which is the chance that poor security selection or strategy execution will cause the Fund to fail to achieve its investment objective or to underperform other funds with a similar investment strategy. The advisor's security selection process may not eliminate all stock market risk factors associated with the long and short positions it establishes for the Fund. It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks it holds short increase in value, thereby increasing potential losses to the Fund. Any gain from a short position may be partially or totally offset by a decline in a long position, or vice versa. In addition, significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.*

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***The Fund is subject to investment risk, which is the chance that the types of securities purchased by the Fund will, intentionally or unintentionally, increase the Fund's sensitivity to certain investment factors. These factors may include, but are not limited to, market capitalization ranges, styles (growth/value), and industries of the underlying securities. These factors may cause the Fund to fail to achieve its investment objective of limiting exposure to general stock market risk or cause it to underperform other funds with a similar investment strategy.***

**Other Investment Policies and Risks**

In addition to investing in publicly traded stocks on a long and short basis, the Fund may make other kinds of investments to achieve its investment objective.

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***The Fund may invest in derivatives. In general, investments in derivatives may involve risks different from, and possibly greater than, those of investments directly in the underlying securities or assets.***

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 a currency), a physical asset (such as gold, oil, or wheat), a market index, or a reference rate. The Fund may invest in derivatives only if the expected risks and rewards of the derivatives are consistent with the investment objective, policies, strategies, and risks of the Fund as disclosed in this prospectus. In particular, derivatives will be used only when they may help the advisor to accomplish one or more of the following:

• Invest in eligible asset classes with greater efficiency and lower cost than is possible through direct investment.

• Add value when these instruments are attractively priced.

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The market for many derivatives is, or suddenly can become, illiquid, which may result in significant, rapid, and unpredictable changes in the prices for derivatives. The Fund's use of a derivative subjects it to the risk of nonperformance by the counterparty, potentially resulting in delayed, partial, or even nonpayment of amounts due under the derivative contract.

The Fund's derivative investments may include futures contracts and options thereon, options on stocks or stock indexes, warrants, swap agreements, or other derivatives. Losses (or gains) involving futures contracts can sometimes be substantial—in part because a relatively small price movement in a futures contract may result in an immediate and substantial loss (or gain) for a fund. Similar risks exist for other types of derivatives.

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| |
|:---|
| Plain Talk About Derivatives |
| Derivatives can take many forms. Some forms of derivatives—such as <br> exchange-traded futures and options on securities, commodities, or <br> indexes—have been trading on regulated exchanges for decades. These <br> types of derivatives are standardized contracts that can easily be bought and <br> sold and whose market values are determined and published daily. On the <br> other hand, non-exchange-traded derivatives—such as certain swap <br> agreements and foreign currency exchange forward contracts—tend to be <br> more specialized or complex and may be more difficult to accurately value.<br>|

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**Cash Management**

The Fund's daily cash balance may be invested in Vanguard Market Liquidity Fund and/or Vanguard Municipal Cash Management Fund (each, a CMT Fund), which are low-cost money market funds. When investing in a CMT Fund, the Fund bears its proportionate share of the expenses of the CMT Fund in which it invests. Vanguard receives no additional revenue from Fund assets invested in a CMT Fund.

**Methods Used to Meet Redemption Requests**

Under normal circumstances, the Fund typically expects to meet redemptions with positive cash flows. When this is not an option, the Fund seeks to maintain its risk exposure by selling a cross section of the Fund's holdings to meet redemptions, while also factoring in transaction costs. Additionally, the Fund may work with larger clients to implement their redemptions in a manner that is least disruptive to the portfolio; see "Potentially disruptive redemptions" under *Redeeming Shares* in the **Investing With Vanguard** section.

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Under certain circumstances, including under stressed market conditions, there are additional tools that the Fund may use in order to meet redemptions, including advancing the settlement of market trades with counterparties to match investor redemption payments or delaying settlement of an investor's transaction to match trade settlement within regulatory requirements. The Fund may also suspend payment of redemption proceeds for up to seven days; see "Emergency circumstances" under *Redeeming Shares* in the **Investing With Vanguard** section. Additionally under these unusual circumstances, the Fund may borrow money (subject to certain regulatory conditions and if available under board-approved procedures) through an interfund lending facility; through a bank line-of-credit, including a joint committed credit facility; or through an uncommitted line-of-credit from Vanguard in order to meet redemption requests.

**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 the strategy or policy employed is consistent with the Fund's investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Fund's investment objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.

In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategies—for instance, by allocating substantial assets to cash equivalent investments or other less volatile instruments—in response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.

**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 foreign 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.

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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 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 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 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 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 Vanguard Short-Term Inflation-Protected Securities Index Fund) generally prohibits, except as otherwise noted in the **Investing With Vanguard** section, an investor's purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account.

• Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.

See the **Investing With Vanguard** section of this prospectus for further details on Vanguard's transaction policies.

Each Vanguard fund (other than retail and government money market funds), in determining its net asset value, will use fair-value pricing when appropriate, as described in the *Share Price* section. 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.**

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**Turnover Rate**

Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The **Financial Highlights** section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund's return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account.

**The Fund and Vanguard**

The Fund is a member of The Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All of the funds that are members of Vanguard (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space, and equipment.

Vanguard Marketing Corporation provides marketing services to the funds. Although fund shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of the Vanguard funds' marketing costs.

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| |
|:---|
| Plain Talk About Vanguard's Unique Corporate Structure |
| Vanguard is owned jointly by the funds it oversees and thus indirectly by the <br> shareholders in those funds. Most other mutual funds are operated by <br> management companies that are owned by third parties—either public or <br> private stockholders—and not by the funds they serve.<br>|

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**Investment Advisor**

The Vanguard Group, Inc., P.O. Box 2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor to the Fund through its Quantitative Equity Group. As of December 31, 2021, Vanguard served as advisor for approximately $6.9 trillion in assets. Vanguard provides investment advisory services to the Fund pursuant to the Funds' Service Agreement and subject to the supervision and oversight of the trustees and officers of the Fund.

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For the fiscal year ended December 31, 2021, the advisory expenses represented an effective annual rate of 0.09% of the Fund's average net assets.

Although the Fund is managed solely by Vanguard, the Fund reserves the right to utilize a multimanager approach in the future. Under the terms of an SEC exemption, the Fund's board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement with a third-party investment advisor or hire a new third-party investment advisor—either as a replacement for an existing advisor or as an additional advisor. Any significant change in the Fund's advisory arrangements will be communicated to shareholders in writing. As the Fund's sponsor and overall manager, Vanguard may provide investment advisory services to the Fund at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced or that the terms of an existing advisory agreement be revised. The Fund has filed an application seeking a similar SEC exemption with respect to investment advisors that are wholly owned subsidiaries of Vanguard. If the exemption is granted, the Fund may rely on the new SEC relief.

For a discussion of why the board of trustees approved the Fund's investment advisory arrangement, see the most recent semiannual report to shareholders covering the fiscal period ended June 30.

The manager primarily responsible for the day-to-day management of the Fund is:

**Cesar Orosco**, CFA, Ph.D., Head of Alpha Equity Investments at Vanguard. He has been with Vanguard since 2020, has worked in investment management since 2004, has managed investment portfolios since 2004, and has managed the Fund since 2021. Education: B.S., Universidad de Lima; Ph.D., University of Pennsylvania.

The Fund's *Statement of Additional Information* provides information about the portfolio manager's compensation, other accounts under management, and ownership of shares of the Fund.

**Dividends, Capital Gains, and Taxes**

**Fund Distributions**

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. From time to time, the Fund may also

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make distributions that are treated as a return of capital. Income and capital gains distributions, if any, generally occur annually in December. In addition, the Fund may occasionally make a supplemental distribution at some other time during the year.

You can receive distributions of income or capital gains in cash, or you can have them automatically reinvested in more shares of the Fund. However, if you are investing through an employer-sponsored retirement or savings plan, your distributions will be automatically reinvested in additional Fund shares.

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| |
|:---|
| Plain Talk About Distributions |
| As a shareholder, you are entitled to your portion of a fund's income from <br> interest and dividends as well as capital gains from the fund's sale of <br> investments. Income consists of both the dividends that the fund earns from <br> any stock holdings and the interest it receives from any money market and <br> bond investments. Capital gains are realized whenever the fund sells <br> securities for higher prices than it paid for them. These capital gains are <br> either short-term or long-term, depending on whether the fund held the <br> securities for one year or less or for more than one year.<br>|

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**Basic Tax Points**

Investors in taxable accounts should be aware of the following basic federal income tax points:

• Distributions are taxable to you whether or not you reinvest these amounts in additional Fund shares.

• Distributions declared in December—if paid to you by the end of January—are taxable as if received in December.

• Any dividend distribution or short-term capital gains distribution that you receive is taxable to you as ordinary income. If you are an individual and meet certain holding-period requirements with respect to your Fund shares, you may be eligible for reduced tax rates on "qualified dividend income," if any, or a special tax deduction on "qualified REIT dividends," if any, distributed by the Fund.

• Any distribution of net long-term capital gains is taxable to you as long-term capital gains, no matter how long you have owned shares in the Fund.

• Capital gains distributions may vary considerably from year to year as a result of the Fund's normal investment activities and cash flows.

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• Your cost basis in the Fund will be decreased by the amount of any return of capital that you receive. This, in turn, will affect the amount of any capital gain or loss that you realize when selling or exchanging your Fund shares.

• Return of capital distributions generally are not taxable to you until your cost basis has been reduced to zero. If your cost basis is at zero, return of capital distributions will be treated as capital gains.

• A sale or exchange of Fund shares is a taxable event. This means that you may have a capital gain to report as income, or a capital loss to report as a deduction, when you complete your tax return.

• Any conversion between classes of shares of the same fund is a *nontaxable* event. By contrast, an exchange between classes of shares of *different* funds is a *taxable* event.

• Vanguard (or your intermediary) will send you a statement each year showing the tax status of all of your distributions.

Individuals, trusts, and estates whose income exceeds certain threshold amounts are subject to a 3.8% Medicare contribution tax on "net investment income." Net investment income takes into account distributions paid by the Fund and capital gains from any sale or exchange of Fund shares.

Dividend distributions and capital gains distributions that you receive, as well as your gains or losses from any sale or exchange of Fund shares, may be subject to state and local income taxes.

The Fund's short sales will be subject to tax rules that may affect the amount, timing, and character of distributions to shareholders. This prospectus provides general tax information only. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply. Please consult your tax advisor for detailed information about any tax consequences for you, including potential consequences for you if the Fund simultaneously holds long and short positions with respect to the same security.

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|:---|
| Plain Talk About Buying a Dividend |
| Unless you are a tax-exempt investor or investing through a tax-advantaged <br> account (such as an IRA or an employer-sponsored retirement or savings <br> plan), you should consider avoiding a purchase of fund shares shortly before <br> the fund makes a distribution, because doing so can cost you money in <br> taxes. This is known as "buying a dividend." For example: On December 15, <br> you invest $5,000, buying 250 shares for $20 each. If the fund pays a <br> distribution of $1 per share on December 16, its share price will drop to $19 <br> (not counting market change). You still have only $5,000 (250 shares x $19 = <br> $4,750 in share value, plus 250 shares x $1 = $250 in distributions), but you <br> *owe tax* on the $250 distribution you received—even if you reinvest it in <br> more shares. To avoid buying a dividend, check a fund's distribution schedule <br> before you invest.<br>|

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**General Information**

**Backup withholding.** By law, Vanguard must withhold 24% of any taxable distributions or redemptions from your account if you do not:

• Provide your correct taxpayer identification number.

• Certify that the taxpayer identification number is correct.

• Confirm that you are not subject to backup withholding.

Similarly, Vanguard (or your intermediary) must withhold taxes from your account if the IRS instructs us to do so.

**Foreign investors.** Vanguard funds offered for sale in the United States (Vanguard U.S. funds), including the Fund offered in this prospectus, are not widely available outside the United States. Non-U.S. investors should be aware that U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments in Vanguard U.S. funds. Foreign investors should visit the non-U.S. investors page on our website at *vanguard.com* for information on Vanguard's non-U.S. products.

**Invalid addresses.** If a dividend distribution or capital gains distribution check mailed to your address of record is returned as undeliverable, Vanguard will automatically reinvest the distribution and all future distributions until you provide us with a valid mailing address. Reinvestments will receive the net asset value calculated on the date of the reinvestment.

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**Share Price**

Share price, also known as *net asset value* (NAV), is calculated as of the close of regular trading on the New York Stock Exchange (NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for business (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to the share class by the number of Fund shares outstanding for that class. 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 foreign securities that trade on foreign 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. When a fund determines that 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).

The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party as of the close of regular trading on the NYSE. The values of any mutual fund shares, including institutional money market fund shares, held by a fund are based on the NAVs of the shares. The values of any ETF shares or closed-end fund shares held by a fund are based on the market value of the shares.

A fund also will use fair-value pricing if the value of a security it holds has 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 foreign securities, which may trade on foreign 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. markets that exceed a specified threshold or that are otherwise deemed to affect the value of foreign securities.

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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 or 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 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 the NAV may differ from quoted or published prices for the same securities.

Vanguard fund share prices are published daily on our website at *vanguard.com/prices*.

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**Financial Highlights**

Financial highlights information is intended to help you understand a fund's performance for the past five years (or, if shorter, its period of operations). Certain information reflects financial results for a single fund share. Total return represents the rate that an investor would have earned or lost each period on an investment in a fund or share class (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with fund financial statements, is included in a fund's most recent annual report to shareholders. You may obtain a free copy of a fund's latest annual or semiannual report, which is available upon request.

**Vanguard Market Neutral Fund Investor Shares** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| For a Share Outstanding Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 |
| **Net Asset Value, Beginning of Period** | **$8.94** | **$10.19** | **$11.62** | **$11.66** | **$12.39** |
| **Investment Operations** |  |  |  |  |  |
| Net Investment Income<sup>1</sup> <br>| .017 | .051 | .206 | .108 | .111 |
| Net Realized and Unrealized Gain (Loss) on Investments | 2.060 | (1.229) | (1.314) | (.038) | (.717) |
| Total from Investment Operations | 2.077 | (1.178) | (1.108) | .070 | (.606) |
| **Distributions** |  |  |  |  |  |
| Dividends from Net Investment Income | (.017) | (.072) | (.322) | (.110) | (.124) |
| Distributions from Realized Capital Gains |  |  |  |  |  |
| Total Distributions | (.017) | (.072) | (.322) | (.110) | (.124) |
| **Net Asset Value, End of Period** | **$11.00** | **$8.94** | **$10.19** | **$11.62** | **$11.66** |
| **Total Return** | **23.24%** | **-11.57%** | **-9.57%** | **0.59%** | **-4.89%** |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Net Assets, End of Period (Millions) | $283 | $243 | $408 | $1209 | $1368 |
| **Ratio of Total Expenses to Average Net Assets** |  |  |  |  |  |
| Based on Total Expenses<sup>2,3</sup> <br>| 1.31% | 1.18% | 1.46% | 1.80% | 1.54% |
| Net of Dividend and Borrowing Expense on Securities Sold <br> Short<br>| 0.20% | 0.20% | 0.20% | 0.20% | 0.22% |
| Ratio of Net Investment Income to Average Net Assets | 0.18% | 0.52% | 1.90% | 0.93% | 0.94% |
| Portfolio Turnover Rate | 133% | 172% | 141% | 110% | 79% |

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|:---|:---|
| 1 | Calculated based on average shares outstanding. |
| 2 | Includes dividend expense on securities sold short of 0.84%, 0.98%, 1.26%, 1.60%, and 1.32%, respectively. |
| 3 | Includes borrowing expense on securities sold short of 0.27%, 0.00%, 0.00%, 0.00%, and 0.00%, respectively. |

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**Investing With Vanguard**

This section of the prospectus explains the basics of doing business with Vanguard. Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as a bank, a broker, or an investment advisor. If you hold Vanguard fund shares directly with Vanguard, you should carefully read each topic within this section that pertains to your relationship with Vanguard. If you hold Vanguard fund shares indirectly through an intermediary (including shares held in a brokerage account through Vanguard Brokerage Services<sup>®</sup>), please see *Investing With Vanguard Through Other Firms*, and also refer to your account agreement with the intermediary for information about transacting in that account. If you hold Vanguard fund shares through an employer-sponsored retirement or savings plan, please see *Employer-Sponsored Plans*. Vanguard reserves the right to change the following policies without notice. Please call or check online for current information. See *Contacting Vanguard*.

For Vanguard fund shares held directly with Vanguard, each fund you hold in an account is a separate "fund account." For example, if you hold three funds in a nonretirement account titled in your own name, two funds in a nonretirement account titled jointly with your spouse, and one fund in an individual retirement account, you have six fund accounts—and this is true even if you hold the same fund in multiple accounts. Note that each reference to "you" in this prospectus applies to any one or more registered account owners or persons authorized to transact on your account.

**Purchasing Shares**

Vanguard reserves the right, without notice, to increase or decrease the minimum amount required to open, convert shares to, or maintain a fund account or to add to an existing fund account.

Investment minimums may differ for certain categories of investors.

**Account Minimums for Investor Shares**

**To open and maintain an account.** $50,000. Financial intermediaries and institutional clients should contact Vanguard for information on special eligibility rules that may apply to them regarding Investor Shares. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility.

**To add to an existing account.** Generally $1.

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**How to Initiate a Purchase Request**

Be sure to check *Exchanging Shares, Frequent-Trading Limitations*, and *Other Rules You Should Know* before placing your purchase request.

**Online.** You may open certain types of accounts, request a purchase of shares, and request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.

**By telephone.** You may call Vanguard to begin the account registration process or request that the account-opening forms be sent to you. You may also call Vanguard to request a purchase of shares in your account or to request an exchange. See *Contacting Vanguard*.

**By mail.** You may send Vanguard your account registration form and check to open a new fund account. To add to an existing fund account, you may send your check with an Invest-by-Mail form (from a transaction confirmation or your account statement) or with a deposit slip (available online).

**How to Pay for a Purchase**

**By electronic bank transfer.** You may purchase shares of a Vanguard fund through an electronic transfer of money from a bank account. To establish the electronic bank transfer service on an account, you must designate the bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can purchase shares by electronic bank transfer on a regular schedule (Automatic Investment Plan), if eligible, or upon request. Your purchase request can be initiated online (if you are registered for online access), by telephone, or by mail.

**By wire.** Wiring instructions vary for different types of purchases. Please call Vanguard for instructions and policies on purchasing shares by wire. See *Contacting Vanguard*.

**By check.** You may make initial or additional purchases to your fund account by sending a check with a deposit slip or by utilizing our mobile application if your account is eligible and you are registered for online access. Also see *How to Initiate a Purchase Request*. Make your check payable to Vanguard and include the appropriate fund number (e.g., Vanguard—634).

**By exchange.** You may purchase shares of a Vanguard fund using the proceeds from the simultaneous redemption of shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail with an exchange form. See *Exchanging Shares*.

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**Trade Date**

The trade date for any purchase request received in good order will depend on the day and time Vanguard receives your request, the manner in which you are paying, and the type of fund you are purchasing. Your purchase will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

For purchases by **check** into all funds other than money market funds and for purchases by **exchange**, **wire**, or **electronic bank transfer** into all funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the same day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the next business day.

For purchases by **check** into money market funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the next business day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the second business day following the day Vanguard receives the purchase request. Because money market instruments must be purchased with federal funds and it takes a money market mutual fund one business day to convert check proceeds into federal funds, the trade date for the purchase will be one business day later than for other funds.

If your purchase request is not accurate and complete, it may be rejected. See *Other Rules You Should Know—Good Order*.

For further information about purchase transactions, consult our website at *vanguard.com* or see *Contacting Vanguard*.

**Other Purchase Rules You Should Know**

**Check purchases.** All purchase checks must be written in U.S. dollars, be drawn on a U.S. bank, and be accompanied by good order instructions. Vanguard does not accept cash, traveler's checks, starter checks, or money orders. In addition, Vanguard may refuse checks that are not made payable to Vanguard.

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**New accounts.** We are required by law to obtain from you certain personal information that we will use to verify your identity. If you do not provide the information, we may not be able to open your account. If we are unable to verify your identity, Vanguard reserves the right, without notice, to close your account or take such other steps as we deem reasonable. Certain types of accounts may require additional documentation.

**Refused or rejected purchase requests.** Vanguard reserves the right to stop selling fund shares or to reject any purchase request at any time and without notice, including, but not limited to, purchases requested by exchange from another Vanguard fund. This also includes the right to reject any purchase request because the investor has a history of frequent trading or because the purchase may negatively affect a fund's operation or performance.

**Large purchases.** Call Vanguard before attempting to invest a large dollar amount.

**No cancellations.** Vanguard will not accept your request to cancel any purchase request once processing has begun. Please be careful when placing a purchase request.

**Converting Shares**

When a conversion occurs, you receive shares of one class in place of shares of another class of the same fund. At the time of conversion, the dollar value of the "new" shares you receive equals the dollar value of the "old" shares that were converted. In other words, the conversion has no effect on the value of your investment in the fund at the time of the conversion. However, the number of shares you own after the conversion may be greater than or less than the number of shares you owned before the conversion, depending on the NAVs of the two share classes.

Vanguard will not accept your request to cancel any self-directed conversion request once processing has begun. Please be careful when placing a conversion request.

A conversion between share classes of the same fund is a *nontaxable* event.

**Trade Date**

The trade date for any conversion request received in good order will depend on the day and time Vanguard receives your request. Your conversion will be executed using the NAVs of the different share classes on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In

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the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

For a conversion request received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. For a conversion request received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day. See *Other Rules You Should Know*.

**Conversions to Institutional Shares**

You are eligible for a self-directed conversion from Investor Shares to Institutional Shares of the same fund (if available), provided that your account meets all eligibility requirements. You may request a conversion through our website (if you are registered for online access), or you may contact Vanguard by telephone or by mail to request this transaction. Accounts that qualify for Institutional Shares will not be automatically converted.

**Redeeming Shares**

**How to Initiate a Redemption Request**

Be sure to check *Exchanging Shares, Frequent-Trading Limitations*, and *Other Rules You Should Know* before placing your redemption request.

**Online.** You may request a redemption of shares or request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.

**By telephone.** You may call Vanguard to request a redemption of shares or an exchange. See *Contacting Vanguard*.

**By mail.** You may send a form (available online) to Vanguard to redeem from a fund account or to make an exchange.

**How to Receive Redemption Proceeds**

**By electronic bank transfer.** You may have the proceeds of a fund redemption sent directly to a designated bank account. To establish the electronic bank transfer service on an account, you must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can redeem shares by

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electronic bank transfer on a regular schedule (Automatic Withdrawal Plan), if eligible, or upon request. Your redemption request can be initiated online (if you are registered for online access), by telephone, or by mail.

**By wire.** To receive your proceeds by wire, you may instruct Vanguard to wire your redemption proceeds ($100 minimum) to a previously designated bank account. To establish the wire redemption service, you generally must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form.

Please note that Vanguard charges a $10 wire fee for outgoing wire redemptions. The fee is assessed in addition to, rather than being withheld from, redemption proceeds and is paid directly to the fund in which you invest. For example, if you redeem $100 via a wire, you will receive the full $100, and the $10 fee will be assessed to your fund account through an additional redemption of fund shares. If you redeem your entire fund account, your redemption proceeds will be reduced by the amount of the fee. The wire fee does not apply to accounts held by Flagship and Flagship Select clients; accounts held through intermediaries, including Vanguard Brokerage Services; or accounts held by institutional clients.

**By exchange.** You may have the proceeds of a Vanguard fund redemption invested directly in shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail. See *Exchanging Shares*.

**By check**. If you have not chosen another redemption method, Vanguard will mail you a redemption check, generally payable to all registered account owners, normally within two business days of your trade date, and generally to the address of record.

**Trade Date**

The trade date for any redemption request received in good order will depend on the day and time Vanguard receives your request and the manner in which you are redeeming. Your redemption will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

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For redemptions by **check, exchange**, or **wire**: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;• Note on timing of wire redemptions from money market funds: For telephone requests received by Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern time, for Vanguard Federal Money Market Fund), the redemption proceeds generally will leave Vanguard by the close of business the same day. For telephone requests received by Vanguard on a business day after those cut-off times, or on a nonbusiness day, and for all requests other than by telephone, the redemption proceeds generally will leave Vanguard by the close of business on the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;• Note on timing of wire redemptions from all other funds: For requests received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the redemption proceeds generally will leave Vanguard by the close of business on the next business day. For requests received by Vanguard on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the redemption proceeds generally will leave Vanguard by the close of business on the second business day after Vanguard receives the request.

For redemptions by **electronic bank transfer**: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.

If your redemption request is not accurate and complete, it may be rejected. If we are unable to send your redemption proceeds by wire or electronic bank transfer because the receiving institution rejects the transfer, Vanguard will make additional efforts to complete your transaction. If Vanguard is still unable to complete the transaction, we may send the proceeds of the redemption to you by check, generally payable to all registered account owners, or use your proceeds to purchase new shares of the fund from which you sold shares for the purpose of the wire or electronic bank transfer transaction. See *Other Rules You Should Know—Good Order*.

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If your redemption request is received in good order, we typically expect that redemption proceeds will be paid by the Fund within one business day of the trade date; however, in certain circumstances, investors may experience a longer settlement period at the time of the transaction. For further information, see "Potentially disruptive redemptions" and "Emergency circumstances."

For further information about redemption transactions, consult our website at *vanguard.com* or see *Contacting Vanguard*.

**Other Redemption Rules You Should Know**

**Documentation for certain accounts.** Special documentation may be required to redeem from certain types of accounts, such as trust, corporate, nonprofit, or retirement accounts. Please call us *before* attempting to redeem from these types of accounts.

**Potentially disruptive redemptions.** Vanguard reserves the right to pay all or part of a redemption in kind—that is, in the form of securities—if we reasonably believe that a cash redemption would negatively affect the fund's operation or performance or that the shareholder may be engaged in market-timing or frequent trading. Under these circumstances, Vanguard also reserves the right to delay payment of the redemption proceeds for up to seven calendar days. By calling us *before* you attempt to redeem a large dollar amount, you may avoid in-kind or delayed payment of your redemption. Please see *Frequent-Trading Limitations* for information about Vanguard's policies to limit frequent trading.

**Recently purchased shares.** Although you can redeem shares at any time, proceeds may not be made available to you until the fund collects payment for your purchase. This may take up to seven calendar days for shares purchased by check or by electronic bank transfer. If you have written a check on a fund with checkwriting privileges, that check may be rejected if your fund account does not have a sufficient available balance.

**Address change.** If you change your address online or by telephone, there may be up to a 14-day restriction (starting on the business day after your address is changed) on your ability to request check redemptions online and by telephone. You can request a redemption in writing (using a form available online) at any time. Confirmations of address changes are sent to both the old and new addresses.

**Payment to a different person or address.** At your request, we can make your redemption check payable, or wire your redemption proceeds, to a different person or send it to a different address. However, this generally requires the written consent of all registered account owners and may require additional

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documentation, such as a signature guarantee or a notarized signature. You may obtain a signature guarantee from some commercial or savings banks, credit unions, trust companies, or member firms of a U.S. stock exchange.

**No cancellations.** Vanguard will not accept your request to cancel any redemption request once processing has begun. Please be careful when placing a redemption request.

**Emergency circumstances.** Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days. In addition, Vanguard funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.

**Exchanging Shares**

An exchange occurs when you use the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund. You can make exchange requests online (if you are registered for online access), by telephone, or by mail. See *Purchasing Shares* and *Redeeming Shares*.

If the NYSE is open for regular trading (generally until 4 p.m., Eastern time, on a business day) at the time an exchange request is received in good order, the trade date generally will be the same day. See *Other Rules You Should Know—Good Order* for additional information on all transaction requests.

Vanguard will not accept your request to cancel any exchange request once processing has begun. Please be careful when placing an exchange request.

Call Vanguard before attempting to exchange a large dollar amount. By calling us *before* you attempt to exchange a large dollar amount, you may avoid delayed or rejected transactions.

Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. See *Frequent-Trading Limitations* for additional restrictions on exchanges.

**Frequent-Trading Limitations**

Because excessive transactions can disrupt management of a fund and increase the fund's costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other

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than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) limits an investor's purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent-trading limits.

For Vanguard Retirement Investment Program pooled plans, the limitations apply to exchanges made online or by telephone.

These frequent-trading limitations *do not* apply to the following:

• Purchases of shares with reinvested dividend or capital gains distributions.

• Transactions through Vanguard's Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online<sup>®</sup>.

• Discretionary transactions through Vanguard Personal Advisor Services<sup>®</sup>, Vanguard Institutional Advisory Services<sup>®</sup>, and Vanguard Digital Advisor™.

• Redemptions of shares to pay fund or account fees.

• Redemptions of shares to remove excess shareholder contributions to certain types of retirement accounts (including, but not limited to, IRAs and Vanguard Individual 401(k) Plans).

• Transfers and reregistrations of shares within the same fund.

• Purchases of shares by asset transfer or direct rollover.

• Conversions of shares from one share class to another in the same fund.

• Checkwriting redemptions.

• Section 529 college savings plans.

• Certain approved institutional portfolios and asset allocation programs, as well as trades made by funds or trusts managed by Vanguard or its affiliates that invest in other Vanguard funds. (Please note that *shareholders* of Vanguard's funds of funds *are* subject to the limitations.)

For participants in employer-sponsored defined contribution plans,\* the frequent-trading limitations *do not* apply to:

• Purchases of shares with participant payroll or employer contributions or loan repayments.

• Purchases of shares with reinvested dividend or capital gains distributions.

• Distributions, loans, and in-service withdrawals from a plan.

• Redemptions of shares as part of a plan termination or at the direction of the plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Transactions executed through the Vanguard Managed Account Program.

• Redemptions of shares to pay fund or account fees.

• Share or asset transfers or rollovers.

• Reregistrations of shares.

• Conversions of shares from one share class to another in the same fund.

• Exchange requests submitted by written request to Vanguard. (Exchange requests submitted by fax, if otherwise permitted*, are* subject to the limitations.)

\* The following Vanguard fund accounts are subject to the frequent-trading limitations: SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and Vanguard Individual 401(k) Plans.

**Accounts Held by Institutions (Other Than Defined Contribution Plans)**

Vanguard will systematically monitor for frequent trading in institutional clients' accounts. If we detect suspicious trading activity, we will investigate and take appropriate action, which may include applying to a client's accounts the 30-day policy previously described, prohibiting a client's purchases of fund shares, and/or revoking the client's exchange privilege.

**Accounts Held by Intermediaries**

When intermediaries establish accounts in Vanguard funds for the benefit of their clients, we cannot always monitor the trading activity of the individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediary's clients. Intermediaries also may monitor their clients' trading activities with respect to Vanguard funds.

For those Vanguard funds that charge purchase and/or redemption fees, intermediaries will be asked to assess these fees on client accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If you invest with Vanguard through an intermediary, please read that firm's materials carefully to learn of any other rules or fees that may apply.

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**Other Rules You Should Know**

**Prospectus and Shareholder Report Mailings**

When two or more shareholders have the same last name and address, just one summary prospectus (or prospectus) and/or shareholder report may be sent in an attempt to eliminate the unnecessary expense of duplicate mailings. You may request individual prospectuses and reports by contacting our Client Services Department in writing, by telephone, or online. See *Contacting Vanguard*.

**Vanguard.com**

**Registration.** If you are a registered user of *vanguard.com*, you can review your account holdings; buy, sell, or exchange shares of most Vanguard funds; and perform most other transactions through our website. You must register for this service online.

**Electronic delivery.** Vanguard can deliver your account statements, transaction confirmations, prospectuses, certain tax forms, and shareholder reports electronically. If you are a registered user of *vanguard.com*, you can consent to the electronic delivery of these documents by logging on and changing your mailing preferences under "Account Maintenance." You can revoke your electronic consent at any time through our website, and we will begin to send paper copies of these documents within 30 days of receiving your revocation.

**Telephone Transactions**

**Automatic.** When we set up your account, we will automatically enable you to do business with us by telephone, *unless you instruct us otherwise in writing*.

**Tele-Account**<sup>®</sup>**.** To obtain fund and account information through Vanguard's automated telephone service, you must first establish a Personal Identification Number (PIN) by calling Tele-Account at 800-662-6273.

**Proof of a caller's authority.** We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:

• Authorization to act on the account (as the account owner or by legal documentation or other means).

• Account registration and address.

• Fund name and account number, if applicable.

• Other information relating to the caller, the account owner, or the account.

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**Good Order**

We reserve the right to reject any transaction instructions that are not in "good order." Good order generally means that your instructions:

• Are provided by the person(s) authorized in accordance with Vanguard's policies and procedures to access the account and request transactions.

• Include the fund name and account number.

• Include the amount of the transaction (stated in dollars, shares, or percentage).

Written instructions also must generally be provided on a Vanguard form and include:

• Signature(s) and date from the authorized person(s).

• Signature guarantees or notarized signatures, if required for the type of transaction. (Call Vanguard for specific requirements.)

• Any supporting documentation that may be required.

Good order requirements may vary among types of accounts and transactions. For more information, consult our website at *vanguard.com* or see *Contacting Vanguard*.

Vanguard reserves the right, without notice, to revise the requirements for good order.

**Future Trade-Date Requests**

Vanguard does not accept requests to hold a purchase, conversion, redemption, or exchange transaction for a future date. All such requests will receive trade dates as previously described in *Purchasing Shares, Converting Shares, Redeeming Shares*, and *Exchanging Shares*. Vanguard reserves the right to return future-dated purchase checks.

**Accounts With More Than One Owner**

If an account has more than one owner or authorized person, Vanguard generally will accept instructions from any one owner or authorized person.

**Responsibility for Fraud**

You should take precautions to protect yourself from fraud. Keep your account-related information private, and review any account confirmations, statements, or other information that we provide to you as soon as you receive them. Let us know immediately if you discover unauthorized activity or see something on your account that you do not understand or that looks unusual.

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Vanguard will not be responsible for losses that result from transactions by a person who we reasonably believe is authorized to act on your account.

**Uncashed Checks**

Please cash your distribution or redemption checks promptly. Vanguard will not pay interest on uncashed checks. Vanguard may be required to transfer assets related to uncashed checks to a state under the state's abandoned property law.

**Dormant Accounts**

If your account has no activity in it for a period of time, Vanguard may be required to transfer it to a state under the state's abandoned property law, subject to potential federal or state withholding taxes.

**Unusual Circumstances**

If you experience difficulty contacting Vanguard online or by telephone, you can send us your transaction request on a Vanguard form by regular or express mail.

**Investing With Vanguard Through Other Firms**

You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, a broker, or an investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply. Your financial intermediary can provide you with account information and any required tax forms. You may be required to pay a commission on purchases of mutual fund shares made through a financial intermediary.

Please see *Frequent-Trading Limitations—Accounts Held by Intermediaries* for information about the assessment of any purchase or redemption fees and the monitoring of frequent trading for accounts held by intermediaries.

**Account Service Fee**

Vanguard may charge a $20 account service fee on fund accounts that have a balance below $10,000 for any reason, including market fluctuation. The account service fee may be applied to both retirement *and* nonretirement fund accounts and may be assessed on fund accounts in all Vanguard funds, regardless of the account minimum. The fee, which will be collected by redeeming fund shares in the amount of $20, will be deducted from fund accounts subject to the fee once per calendar year.

If you elect to receive your statements and other materials electronically (i.e., by e-delivery), the account service fee will not be charged, so long as your election remains in effect. You can make your e-delivery election on *vanguard.com*.

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Certain account types have alternative fee structures, including SIMPLE IRAs, Vanguard Retirement Investment Program pooled plans, and Vanguard Individual 401(k) Plans.

**Low-Balance Accounts**

The Fund reserves the right to liquidate a fund account whose balance falls below the account minimum for any reason, including market fluctuation. This liquidation policy applies to nonretirement fund accounts and accounts that are held through intermediaries. Any such liquidation will be preceded by written notice to the investor.

**Right to Change Policies**

In addition to the rights expressly stated elsewhere in this prospectus, Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time and (2) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fee charged to a shareholder or a group of shareholders. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard believes they are in the best interest of a fund.

**Account Restrictions**

Vanguard reserves the right to: (1) redeem all or a portion of a fund/account to meet a legal obligation, including tax withholding, tax lien, garnishment order, or other obligation imposed on your account by a court or government agency; (2) redeem shares, close an account, or suspend account privileges, features, or options in the case of threatening conduct or activity; (3) redeem shares, close an account, or suspend account privileges, features, or options if Vanguard believes or suspects that not doing so could result in a suspicious, fraudulent, or illegal transaction; (4) place restrictions on the ability to redeem any or all shares in an account if it is required to do so by a court or government agency; (5) place restrictions on the ability to redeem any or all shares in an account if Vanguard believes that doing so will prevent fraud, financial exploitation or abuse, or to protect vulnerable investors; (6) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners; and (7) freeze any account and/or suspend account services upon initial notification to Vanguard of the death of an account owner.

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**Share Classes**

Vanguard reserves the right, without notice, to change the eligibility requirements of its share classes, including the types of clients who are eligible to purchase each share class.

**Shareholder Rights**

The Fund's Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Montgomery Funds (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application.

**Fund and Account Updates**

**Confirmation Statements**

We will send (or provide through our website, whichever you prefer) a confirmation of your trade date and the amount of your transaction when you buy, sell, exchange, or convert shares. However, we will not send confirmations reflecting only checkwriting redemptions or the reinvestment of dividend or capital gains distributions. For any month in which you had a checkwriting redemption, a Checkwriting Activity Statement will be sent to you itemizing the checkwriting redemptions for that month. Promptly review each confirmation statement that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on a confirmation statement, or Vanguard will consider the transaction properly processed.

**Portfolio Summaries**

We will send (or provide through our website, whichever you prefer) quarterly portfolio summaries to help you keep track of your accounts throughout the year. Each summary shows the market value of your account at the close of the statement period, as well as all distributions, purchases, redemptions, exchanges, transfers, and conversions for the current calendar quarter (or month). Promptly review each summary that we provide to you. It is important

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that you contact Vanguard immediately with any questions you may have about any transaction reflected on the summary, or Vanguard will consider the transaction properly processed.

**Tax Information Statements**

For most accounts, Vanguard (or your intermediary) is required to provide annual tax forms to assist you in preparing your income tax returns. These forms are generally available for each calendar year early in the following year. Registered users of *vanguard.com* can also view certain forms through our website. Vanguard (or your intermediary) may also provide you with additional tax-related documentation. For more information, consult our website at vanguard.com or see *Contacting Vanguard*.

**Annual and Semiannual Reports**

We will send (or provide through our website, whichever you prefer) reports about Vanguard Market Neutral Fund twice a year, in February and August. These reports include overviews of the financial markets and provide the following specific Fund information:

• Performance assessments and comparisons with industry benchmarks.

• Financial statements with listings of Fund holdings.

**Portfolio Holdings**

Please consult the Fund's *Statement of Additional Information* or our website for a description of the policies and procedures that govern disclosure of the Fund's portfolio holdings.

**Employer-Sponsored Plans**

Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.

• If you have any questions about the Fund or Vanguard, including those about the Fund's investment objective, strategies, or risks, contact Vanguard Participant Services toll-free at 800-523-1188 or visit our website at *vanguard.com*.

• If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.

• Be sure to carefully read each topic that pertains to your transactions with Vanguard.

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Vanguard reserves the right to change its policies without notice to shareholders.

**Transactions**

Processing times for your transaction requests may differ among recordkeepers or among transaction and funding types. Your plan's recordkeeper (which may also be Vanguard) will determine the necessary processing time frames for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.

If Vanguard is serving as your plan recordkeeper and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.

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**Contacting Vanguard** 

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| | |
|:---|:---|
| **Web** |  |
| Vanguard.com | &nbsp;&nbsp; For the most complete source of Vanguard news <br> For fund, account, and service information <br> For most account transactions <br> For literature requests <br> 24 hours a day, 7 days a week<br>|

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| **Phone** | **Phone** |
| Vanguard Tele-Account<sup>®</sup> <br> 800-662-6273<br>| &nbsp;&nbsp; For automated fund and account information<br> Toll-free, 24 hours a day, 7 days a week<br>|
| Investor Information 800-662-7447<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For fund and service information<br> For literature requests<br>|
| Client Services 800-662-2739<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For account information<br> For most account transactions<br>|
| Participant Services 800-523-1188<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For information and services for participants in <br> employer-sponsored plans<br>|
| Institutional Division<br> 888-809-8102<br>| &nbsp;&nbsp; For information and services for large institutional <br> investors<br>|
| Financial Advisor and Intermediary<br> Sales Support 800-997-2798<br>| &nbsp;&nbsp; For information and services for financial intermediaries <br> including financial advisors, broker-dealers, trust <br> institutions, and insurance companies<br>|
| Financial Advisory and Intermediary <br> Trading Support 800-669-0498<br>| &nbsp;&nbsp; For account information and trading support for <br> financial intermediaries including financial advisors, <br> broker-dealers, trust institutions, and insurance <br> companies<br>|

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**Additional Information**

The Fund's Bylaws require, unless the Trust otherwise consents in writing, that the U.S. Federal District Courts be the sole and exclusive forum for the resolution of complaints under the Securities Act of 1933. This provision may limit a shareholder's ability to bring a claim in a different forum and may result in increased shareholder costs in pursuing such a claim.

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| | | | |
|:---|:---|:---|:---|
|  | &nbsp;&nbsp; Newspaper<br> Abbreviation<br>| &nbsp;&nbsp; Vanguard<br> Fund Number<br>| &nbsp;&nbsp; CUSIP<br> Number<br>|
| **Market Neutral Fund** | **Market Neutral Fund** | **Market Neutral Fund** | **Market Neutral Fund** |
| Investor Shares<br>11/11/1998<sup>1</sup> <br>| MktNeuInv | 634 | 92205G104 |

---

Inception date of the Laudus Fund shares. The Laudus Fund was reorganized with and into Vanguard Market Neutral Fund on November 30, 2007.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

CGS identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor's Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database,©2022 American Bankers Association. "CUSIP" is a registered trademark of the American Bankers Association.

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**Glossary of Investment Terms**

**Borrowing Expense on Securities Sold Short.** A fee charged by a fund's broker when a fund sells a stock short. This fee is calculated on a daily basis, based upon the market value of the stock sold short and a variable rate that is dependent upon the availability of the stock.

**Capital Gains Distributions.** Payments to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.

**Cash Equivalent Investments.** Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and banker's acceptances.

**Common Stock.** A security representing ownership rights in a corporation.

**Dividend Distributions.** Payments to mutual fund shareholders of income from interest or dividends generated by a fund's investments.

**Dividend Expense on Securities Sold Short.** The amount of money that a fund is required to pay to a lender of stock that the fund has sold short when a dividend has been declared on the stock.

**Dow Jones U.S. Total Stock Market Float Adjusted Index**. An index that represents the entire U.S. stock market and tracks more than 5,000 stocks, excluding shares of securities not available for public trading.

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

**FTSE 3-Month Treasury Bill Index (Daily).** An index that measures the performance of short-term U.S. government debt securities and accrues income on a daily basis.

**FTSE 3-Month U.S. Treasury Bill Index.** An index that measures the performance of short-term U.S. government debt securities and accrues income on a monthly basis.

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

**Joint Committed Credit Facility.** The Fund participates, along with other funds managed by Vanguard, in a committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each Vanguard fund is individually liable for its borrowings, if any, under the credit facility. The amount and terms of the committed credit facility are subject to approval by the Fund's board of trustees and renegotiation with the lender syndicate on an annual basis.

**Mutual Fund.** An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.

**New York Stock Exchange (NYSE).** A stock exchange based in New York City that is open for regular trading on business days, Monday through Friday, from 9:30 a.m. to 4 p.m., Eastern time.

**Quantitative Process.** An assessment of specific measurable factors, such as cost of capital; value of assets; and projections of sales, costs, earnings, and profits. The use of a quantitative process provides a systematic approach to investment decisions and portfolios.

**Return of Capital.** A return of capital occurs when a fund's distributions exceed its earnings in a fiscal year. A return of capital is a return of all or part of your original investment or amounts paid in excess of your original investment in a fund. In general, a return of capital reduces your cost basis in a fund's shares and is not taxable to you until your cost basis has been reduced to zero.

**Securities.** Stocks, bonds, money market instruments, and other investments.

**Short Sale.** A transaction in which a fund sells a stock it does not own and then borrows the stock from a lender in order to settle the transaction. A fund will engage in short sales when its advisor believes that the price of the stock will decline or underperform.

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**Total Return.** A percentage change, over a specified time period, in a mutual fund's net asset value, assuming the reinvestment of all distributions of dividends and capital gains.

**Volatility.** The fluctuations in value of a mutual fund or other security. The greater a fund's volatility, the wider the fluctuations in its returns.

**Yield.** Income (interest or dividends) earned by an investment, expressed as a percentage of the investment's price.

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![](vanguard.jpg)

**Connect with Vanguard**<sup>®</sup>˃ vanguard.com

**For More Information**

If you would like more information about Vanguard Market Neutral Fund, the following documents are available free upon request:

**Annual/Semiannual Reports to Shareholders**

Additional information about the Fund's investments is available in the Fund's annual and semiannual reports to shareholders. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year.

**Statement of Additional Information (SAI)**

The SAI provides more detailed information about the Fund and is incorporated by reference into (and thus legally a part of) this prospectus.

To receive a free copy of the latest annual or semiannual report or the SAI, or to request additional information about the Fund or other Vanguard funds, please visit *vanguard.com* or contact us as follows:

*If you are an individual investor:*

Telephone: 800-662-7447; Text telephone for people with hearing impairment: 800-749-7273

If you are a participant in an employer-sponsored plan:

Telephone: 800-523-1188; Text telephone for people

with hearing impairment: 800-749-7273

If you are a current Vanguard shareholder and would like information about your account, account transactions, and/or account statements, please call:

Client Services Department

Telephone: 800-662-2739; Text telephone for people with hearing impairment: 800-749-7273

**Information Provided by the SEC**

Reports and other information about the Fund are available in the EDGAR database on the SEC's website at sec.gov, or you can receive copies of this information, for a fee, by electronic request at the following email address: publicinfo@sec.gov.

Fund's Investment Company Act file number: 811-22114© 2022 The Vanguard Group, Inc. All rights reserved.

Vanguard Marketing Corporation, Distributor.

P 634 022023

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![](vanguard.jpg)

Vanguard Market Neutral Fund

Prospectus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;April 29, 2022 (as supplemented on February 6, 2023)

**Institutional Shares**

Vanguard Market Neutral Fund Institutional Shares (VMNIX)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

This prospectus contains financial data for the Fund through the fiscal year ended December 31, 2021.

**The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**Contents**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| [Fund Summary](#xx_152a805d-ae42-46fe-8a69-858ed1c4bf59_1) | 1  |
| [More on the Fund](#xx_40ff8d35-faef-4b3e-a9f5-b85aa9cffa2c_1) | 8  |
| [The Fund and Vanguard](#xx_40ff8d35-faef-4b3e-a9f5-b85aa9cffa2c_12) | 19  |
| [Investment Advisor](#xx_40ff8d35-faef-4b3e-a9f5-b85aa9cffa2c_12) | 19  |
| [Dividends, Capital Gains, and Taxes](#xx_40ff8d35-faef-4b3e-a9f5-b85aa9cffa2c_13) | 20  |
| [Share Price](#xx_40ff8d35-faef-4b3e-a9f5-b85aa9cffa2c_17) | 24  |
| [Financial Highlights](#xx_7e70e42b-3d03-4d36-930e-e60194ac92aa_1) | 26  |

---

---

| | |
|:---|:---|
| [Investing With Vanguard](#xx_66344246-5bd5-4143-9230-4ef56336a417_1) | 27  |
| [Purchasing Shares](#xx_66344246-5bd5-4143-9230-4ef56336a417_1) | 27  |
| [Converting Shares](#xx_66344246-5bd5-4143-9230-4ef56336a417_4) | 30  |
| [Redeeming Shares](#xx_66344246-5bd5-4143-9230-4ef56336a417_5) | 31  |
| [Exchanging Shares](#xx_66344246-5bd5-4143-9230-4ef56336a417_9) | 35  |
| [Frequent-Trading Limitations](#xx_66344246-5bd5-4143-9230-4ef56336a417_10) | 36  |
| [Other Rules You Should Know](#xx_66344246-5bd5-4143-9230-4ef56336a417_12) | 38  |
| [Fund and Account Updates](#xx_66344246-5bd5-4143-9230-4ef56336a417_16) | 42  |
| [Employer-Sponsored Plans](#xx_66344246-5bd5-4143-9230-4ef56336a417_17) | 43  |
| [Contacting Vanguard](#xx_66344246-5bd5-4143-9230-4ef56336a417_19) | 45  |
| [Additional Information](#xx_66344246-5bd5-4143-9230-4ef56336a417_20) | 46  |
| [Glossary of Investment Terms](#xx_baf1a752-dbe4-4af2-bb18-4e78e38a2458_1) | 47  |

---

------

**Fund Summary**

**Investment Objective**

The Fund seeks to provide long-term capital appreciation while limiting exposure to general stock market risk.

**Fees and Expenses**

The following table describes the fees and expenses you may pay if you buy, hold, and sell Institutional Shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.

**Shareholder Fees**

(Fees paid directly from your investment)

---

| |
|:---|
| Sales Charge (Load) Imposed on Purchases |
| Purchase Fee |
| Sales Charge (Load) Imposed on Reinvested Dividends |
| Redemption Fee |

---

**Annual Fund Operating Expenses**

(Expenses that you pay each year as a percentage of the value of your investment)

---

| | | |
|:---|:---|:---|
| Management Fees |  | 0.12% |
| 12b-1 Distribution Fee |  |  |
| Other Expenses |  |  |
| Dividend Expenses on Securities Sold Short<sup>1</sup> <br>| 0.84% |  |
| Borrowing Expenses on Securities Sold Short<sup>2</sup> <br>| 0.27% |  |
| Other Operating Expenses | 0.02% |  |
| Total of Other Expenses |  | 1.13% |
| Total Annual Fund Operating Expenses<sup>3</sup> <br>|  | 1.25% |

---

When a cash dividend is declared on a stock the Fund has sold short, the Fund is required to pay an amount equal to that dividend to the party from which the Fund borrowed the stock and to record the payment of the dividend as an expense.

In connection with its short sales, the Fund may receive income or be charged a fee on borrowed stock. This income or fee is calculated on a daily basis, based upon the market value of the borrowed stock and a variable rate that is dependent upon the availability of the stock. A net amount of fees is listed as Borrowing Expenses on Securities Sold Short.

Excluding borrowing and dividend expenses on securities sold short, the Total Annual Fund Operating Expenses are 0.14%.

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Example

The following example is intended to help you compare the cost of investing in the Fund's Institutional Shares with the cost of investing in other mutual funds. It illustrates the hypothetical expenses that you would incur over various periods if you were to invest $10,000 in the Fund's shares. This example assumes that the shares provide a return of 5% each year and that total annual fund operating expenses remain as stated in the preceding table. You would incur these hypothetical expenses whether or not you were to redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

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| | | | |
|:---|:---|:---|:---|
| 1 Year | 3 Years | 5 Years | 10 Years |
| $127 | $397 | $686 | $1511 |

---

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense example, reduce the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 133% of the average value of its portfolio.

**Principal Investment Strategies**

The Fund follows a market neutral strategy, which the Fund defines as a strategy designed to produce a portfolio that is neutral with respect to general stock market risk (sometimes referred to as beta neutrality). Beta is a measure of a portfolio's volatility relative to the volatility of the general stock market. The Fund, as a whole, does not seek to adhere to any other definition of market neutrality.

To implement the strategy, the advisor buys securities that it believes offer an appropriate balance between strong growth prospects and reasonable valuations relative to their industry peers and sells short securities that the advisor expects to be overvalued or have weak growth prospects, in amounts that it believes will achieve market neutrality. By taking long and short positions in different securities, the Fund attempts to limit the effect of market movements on portfolio performance. The advisor does this by using a quantitative process and may, at any time, buy or sell short any number of publicly traded, exchange-listed equity securities and may emphasize specific industries, styles (growth/value), capitalization ranges, countries, or other factors. The overall performance of the Fund depends on the net performance of its long and short positions, and it is

------

possible for the Fund to experience a net loss across all positions. If the Fund's investment strategy is successful, however, the net performance of its long and short positions will produce long-term capital appreciation that reflects the quality of the advisor's security selections, with limited exposure to general stock market risk.

The Fund's long/short market neutral investment strategy is an absolute-return investment approach seeking performance that exceeds the returns of 3-month U.S. Treasury bills. An investment in the Fund, however, is different from an investment in 3-month U.S. Treasury bills because, among other things, U.S. Treasury bills are backed by the full faith and credit of the U.S. government, U.S. Treasury bills have a fixed rate of return, investors in U.S. Treasury bills have a very low risk of losing their investment, and an investment in the Fund is expected to be substantially more volatile than an investment in U.S. Treasury bills.

Because of the Fund's market neutral strategy, the Fund's overall price movements are not expected to correlate with the general stock market's price movements. In other words, the Fund is expected to have returns that are independent of the returns and direction of the general stock market.

**Principal Risks**

An investment in the Fund could lose money over short or long periods of time, and the entire amount invested could be lost. There can be no assurance that the Fund's investment objective or strategies will be achieved, and results may vary substantially over time. The Fund is subject to the following risks, which could affect the Fund's performance:

• *Strategy risk*, which is the chance that the Fund's investment strategy will not succeed. There is no guarantee that the Fund will be able to limit exposure to general stock market risk or produce returns that exceed the returns of 3-month U.S. Treasury bills. The Fund's use of short sales in combination with its long positions in an attempt to improve performance or to reduce overall portfolio risk may not be successful and may result in greater losses or lower positive returns than if the Fund held only long positions. When the general stock market is performing strongly, the Fund is expected to underperform the market because the Fund's short positions will likely lose money. If the Fund's market neutral strategy is unsuccessful, the Fund may be 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.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• *Short-selling risk*, which is the chance that the Fund will lose money in connection with its short sales of securities. Short selling allows an investor to profit from declines in the prices of securities. To engage in a short sale, the Fund must "borrow" securities for a fee. To close out short positions, the Fund may have to sell related long positions at disadvantageous times to produce cash to unwind a short position. There is no guarantee that the price of the borrowed securities will decline; in fact, it may rise. The Fund's loss on a short sale is theoretically unlimited, because there is no upward limit on the price a borrowed security could attain. Short selling involves higher transaction costs than long-only investing, which could offset any gains and increase any losses.

• *Manager risk*, which is the chance that poor security selection or strategy execution will cause the Fund to fail to achieve its investment objective or to underperform other funds with a similar investment strategy. The advisor's security selection process may not eliminate all stock market risk factors associated with the long and short positions it establishes for the Fund. It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks it holds short increase in value, thereby increasing potential losses to the Fund. Any gain from a short position may be partially or totally offset by a decline in a long position, or vice versa. In addition, significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.

• *Investment risk*, which is the chance that the types of securities purchased by the Fund will, intentionally or unintentionally, increase the Fund's sensitivity to certain investment factors. These factors may include, but are not limited to, market capitalization ranges, styles (growth/value), and industries of the underlying securities. These factors may cause the Fund to fail to achieve its investment objective of limiting exposure to general stock market risk or cause it to underperform other funds with a similar investment strategy.

• *Derivatives risk*. The Fund may invest in derivatives, which may involve risks different from, and possibly greater than, those of investments directly in the underlying securities or assets.

**An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.**

------

**Annual Total Returns**

The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund's Institutional Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Institutional Shares compare with those of a relevant market index and other comparative benchmarks, which have investment characteristics similar to those of the Fund. The Spliced Market Neutral Index USD reflects the performance of the FTSE 3-Month U.S. Treasury Bill Index through March 31, 2016, and the FTSE 3-Month Treasury Bill Index (Daily) thereafter. Returns for the Equity Market Neutral Funds Average are derived from data provided by Lipper, a Thomson Reuters Company. Keep in mind that the Fund's past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at *vanguard.com/performance* or by calling Vanguard toll-free at 800-662-7447.

**Annual Total Returns — Vanguard Market Neutral Fund Institutional Shares**

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![](mn734.jpg)

During the periods shown in the bar chart, the highest and lowest returns for a calendar quarter were:

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| | | |
|:---|:---|:---|
|  | Total Return | Quarter |
| Highest | 9.27% | December 31, 2021 |
| Lowest | -5.66% | June 30, 2019 |

---

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**Average Annual Total Returns for Periods Ended December 31, 2021** 

---

| | | | |
|:---|:---|:---|:---|
|  | 1 Year | 5 Years | 10 Years |
| **Vanguard Market Neutral Fund Institutional Shares** |  |  |  |
| Return Before Taxes  | 23.39% | -1.10% | 1.38% |
| Return After Taxes on Distributions  | 23.33 | -1.44 | 1.18 |
| Return After Taxes on Distributions and Sale of Fund Shares  | 13.89 | -0.89 | 1.04 |
| **FTSE 3-Month U.S. Treasury Bill Index**<br> (reflects no deduction for fees or expenses)<br>| 0.05% | 1.11% | 0.59% |
| **Spliced Market Neutral Index USD**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 0.05 | 1.11 | 0.60 |
| **FTSE 3-Month Treasury Bill Index (Daily)**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 0.05 | 1.11 | 0.60 |
| **Equity Market Neutral Funds Average**<br> (reflects no deduction for taxes)<br>| 3.94 | -1.84 | -0.41 |
| **Dow Jones U.S. Total Stock Market Float Adjusted Index**<br> (reflects no deduction for fees, expenses, or taxes)<br>| 25.66 | 17.92 | 16.24 |

---

Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned *Return After Taxes on Distributions and Sale of Fund Shares* may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.

**Investment Advisor**

The Vanguard Group, Inc. (Vanguard)

Portfolio Manager

Cesar Orosco, CFA, Ph.D., Head of Alpha Equity Investments at Vanguard. He has managed the Fund since 2021.

------

**Purchase and Sale of Fund Shares**

You may purchase or redeem shares online through our website *(vanguard.com)*, by mail (The Vanguard Group, P.O. Box 982901, El Paso, TX 79998-2901), or by telephone (800-662-2739). The minimum investment amount required to open and maintain a Fund account for Institutional Shares is $5 million. The minimum investment amount required to add to an existing Fund account is generally $1. If you are investing through an employer-sponsored retirement or savings plan, your plan administrator or your benefits office can provide you with detailed information on how you can invest through your plan.

**Tax Information**

The Fund's distributions may be taxable as ordinary income or capital gain. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply.

**Payments to Financial Intermediaries**

The Fund and its investment advisor do not pay financial intermediaries for sales of Fund shares.

------

**More on the Fund**

This prospectus describes the principal risks you would face as a Fund shareholder. It is important to keep in mind one of the main principles of investing: generally, the higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: the lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance for fluctuations in the securities markets. Look for this ![](flag.gif) symbol throughout the prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk<sup>®</sup> explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.

**Share Class Overview**

This prospectus offers the Fund's Institutional Shares, which are generally for investors who invest a minimum of $5 million. A separate prospectus offers the Fund's Investor Shares, which generally have an investment minimum of $50,000.

Both share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment returns will differ.

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| |
|:---|
| Plain Talk About Fund Expenses |
| All mutual funds have operating expenses. These expenses, which are <br> deducted from a fund's gross income, are expressed as a percentage of the <br> net assets of the fund. Assuming that operating expenses remain as stated <br> in the Fees and Expenses section, Vanguard Market Neutral Fund <br> Institutional Shares' expense ratio would be 1.25%, or $12.50 per $1,000 of <br> average net assets, including borrowing and dividend expenses on short <br> sales. Excluding borrowing and dividend expenses on short sales, the <br> Institutional Shares' expense ratio would be 0.14%, or $1.40 per $1,000 of <br> average net assets. In comparison, the average expense ratio for alternative <br> equity market neutral funds in 2021 was 1.13%, or $11.30 per $1,000 of <br> average net assets, also excluding borrowing and dividend expenses on <br> short sales (derived from data provided by Lipper, a Thomson Reuters <br> Company, which reports on the mutual fund industry).<br>|

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| |
|:---|
| Plain Talk About Costs of Investing |
| Costs are an important consideration in choosing a mutual fund. That is <br> because you, as a shareholder, pay a proportionate share of the costs of <br> operating a fund and any transaction costs incurred when the fund buys or <br> sells securities. These costs can erode a substantial portion of the gross <br> income or the capital appreciation a fund achieves. Even seemingly small <br> differences in expenses can, over time, have a dramatic effect on a <br> fund's performance.<br>|

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| |
|:---|
| Plain Talk About Short Sale Borrowing and Dividend Expenses |
| The Fund engages in short selling as a principal investment strategy. A short <br> sale occurs when the Fund sells a stock it does not own and then borrows <br> the stock from a lender in order to settle the transaction. When the Fund <br> sells short, it will normally incur two types of expenses—borrowing <br> expenses and dividend expenses—both of which increase the Fund's <br> expense ratio.<br>|
| In connection with the short sale, the Fund may receive income or be <br> charged a fee on borrowed stock. This income or fee is calculated on a daily <br> basis, based upon the market value of the borrowed stock and a variable rate <br> that is dependent upon the availability of the stock. The net amounts of <br> income or fees are recorded as "interest income" (for net income received) <br> or "borrowing expense on securities sold short" (for net fees charged) on the <br> Fund's Statement of Operations.<br>|
| The Fund incurs dividend expenses until the borrowed stock is returned to <br> the lender. These expenses are paid to the lender of the stock and are based <br> upon the amount of any dividends declared on the stock. Having sold the <br> borrowed stock, the Fund does not itself collect the dividends, and thus has <br> a net expense payable to the lender. This payment is recorded as "dividend <br> expense on securities sold short" on the Fund's Statement of Operations. <br> Short sale dividend expenses generally reduce the market value of the stock <br> by the amount of the dividend declared, thus increasing the Fund's <br> unrealized gain or reducing the Fund's unrealized loss on the stock sold short.<br>|
| It is important to note that when the Fund sells a stock short, the proceeds <br> are typically held in cash equivalent investments, which earn interest at a <br> negotiated rate. This interest, when combined with the Fund's other <br> investment income, is expected to offset—in part—the Fund's short sale <br> borrowing and dividend expenses and thereby reduce total expenses.<br>|

---

The following sections explain the principal investment strategies and policies that the Fund uses in pursuit of its investment 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. Note that the Fund's investment objective is not fundamental and may be changed without a shareholder vote.

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![](flag.gif)

***An investment in the Fund could lose money over short or long periods of time, and the entire amount invested could be lost. There can be no assurance that the Fund's investment objective or strategies will be achieved, and results may vary substantially over time.***

Market disruptions can adversely affect local and global markets as well as normal market conditions and operations. Any such disruptions could have an adverse impact on the value of the Fund's investments and Fund performance.

**Security Selection**

Vanguard, the Fund's investment advisor, selects and maintains a diversified portfolio of common stocks for the Fund. The advisor employs active investment management methods, which means that securities are bought and sold according to the advisor's evaluations of companies and their financial prospects, the prices of the securities, and the stock market and the economy in general.

The Fund follows a market neutral strategy, which the Fund defines as a strategy designed to produce a portfolio that is neutral with respect to general stock market risk (sometimes referred to as beta neutrality). Beta is a measure of a portfolio's volatility relative to the volatility of the general stock market. The Fund, as a whole, does not seek to adhere to any other definition of market neutrality. By taking long and short positions in different securities, the Fund attempts to limit the effect of market movements on portfolio performance. The advisor may, at any time, buy or sell short any number of publicly traded, exchange-listed equity securities and may emphasize specific industries, styles (growth/value), capitalization ranges, countries, or other factors. The overall performance of the Fund depends on the net performance of its long and short positions, and it is possible for the Fund to experience a net loss across all positions. If the Fund's investment strategy is successful, however, the net performance of its long and short positions will produce long-term capital appreciation that reflects the quality of the advisor's security selections, with limited exposure to general stock market risk.

To implement the strategy, Vanguard buys securities that it believes offer an appropriate balance between strong growth prospects and reasonable valuations relative to their industry peers and sells short securities that the advisor expects to be overvalued or have weak growth prospects, in amounts that it believes will achieve market neutrality. Vanguard manages the portfolio through the use of a quantitative process that was developed and managed by Vanguard's Alpha Equity Investment team and is continually evolving. All potential enhancements to the process go through rigorous peer vetting and validation before being implemented.

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***The Fund is subject to strategy risk, which is the chance that the Fund's investment strategy will not succeed. There is no guarantee that the Fund will be able to limit exposure to general stock market risk or produce returns that exceed the returns of 3-month U.S. Treasury bills. The Fund's use of short sales in combination with its long positions in an attempt to improve performance or to reduce overall portfolio risk may not be successful and may result in greater losses or lower positive returns than if the Fund held only long positions. When the general stock market is performing strongly, the Fund is expected to underperform the market because the Fund's short positions will likely lose money. If the Fund's market neutral strategy is unsuccessful, the Fund may be 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.*** 

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|:---|
| Plain Talk About Market Neutral Investing |
| The goal of market neutral investing is to generate returns that are <br> independent of the returns and direction of the stock market (called beta) <br> and driven largely by the value added by the advisor's skill in selecting stocks <br> (called alpha). A portfolio that has the same volatility as that of the general <br> stock market has a beta of 1. If a portfolio has a beta less than 1, the <br> portfolio is less volatile than the general stock market. On the other hand, a <br> portfolio that has a beta greater than 1 is more volatile than the general stock <br> market. For instance, if a portfolio has a beta of 1.1, it is expected to move <br> 1.1 times the movement of the general stock market. So, if the general stock <br> market increases 10%, the portfolio's expected return over the same period <br> would be 11%. A market neutral portfolio could hold, for example, long <br> positions with a beta of 0.5 and short positions with a beta of –0.5, which <br> would render the portfolio market neutral.<br>|
| Market neutral investing is often implemented through a long/short portfolio <br> of investments in publicly traded stocks. The advisor buys what it believes <br> are attractive (or undervalued) stocks for the long portion of the portfolio and <br> sells what it believes are unattractive (or overvalued) stocks for the short <br> portion of the portfolio, in amounts it believes will achieve market neutrality. <br> The long portion of the portfolio is expected to deliver the overall returns of <br> the stock market, plus additional performance unique to the specific stocks <br> purchased by the advisor. The short portion of the portfolio is expected to <br> deliver the inverse of the overall returns of the stock market, plus additional <br> performance unique to the specific stocks the advisor sold short. The long <br> and short positions can have risk exposures significantly different from those <br> of the general stock market. The larger these risk differences, the more the <br> performance of the portfolio will differ from that of the general stock market. <br> The market exposure of the combined long and short positions is expected <br> to cancel out, producing a net stock market return close to zero, plus or <br> minus the alpha added by the advisor's stock selection process. Market <br> neutral investing is sometimes called an "absolute return" strategy because <br> it seeks positive returns, whether the stock market goes up or down, <br> although many market neutral funds have experienced periods of negative <br> returns. Market neutral funds will generally underperform more traditional <br> (long-only) stock portfolios during periods of significant market appreciation.<br>|

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|:---|
| Plain Talk About Equity Short Sales |
| A short sale of an equity security is the sale of a security that the seller does <br> not own. In order to deliver the security to the purchaser, the short seller <br> borrows the security, typically from a broker-dealer or an institutional <br> investor, for a fee. The short seller later closes out the position by returning <br> the security to the lender, typically by purchasing the same security on the <br> open market. A short sale theoretically carries the risk of an unlimited loss, <br> because the price of the underlying security could increase without limit, <br> thus increasing the cost of buying that security to cover the short position. In <br> addition, there can be no assurance that the security needed to cover a short <br> position will be available for purchase. Also, the purchase of a security to <br> close out the short position can itself cause the price of the security to rise <br> further, thereby exacerbating the loss. Short selling is often used to profit <br> from an expected downward price movement in a security.<br>|

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***The Fund is subject to short-selling risk, which is the chance that the Fund will lose money in connection with its short sales of securities. Short selling allows an investor to profit from declines in the prices of securities. To engage in a short sale, the Fund must "borrow" securities for a fee. To close out short positions, the Fund may have to sell related long positions at disadvantageous times to produce cash to unwind a short position. There is no guarantee that the price of the borrowed securities will decline; in fact, it may rise. The Fund's loss on a short sale is theoretically unlimited, because there is no upward limit on the price a borrowed security could attain. Short selling involves higher transaction costs than long-only investing, which could offset any gains and increase any losses.***

The market value of the long and short positions in the Fund will not always be equal because of continuous changes in the prices of securities. The Fund expects that the advisor will need to frequently rebalance its long and short positions. The Fund's holdings will also need to reflect changes in the universe of securities the advisor considers undervalued or overvalued. As a result, the Fund is expected to experience a high portfolio turnover rate, possibly in excess of 100%.

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***The Fund is subject to manager risk, which is the chance that poor security selection or strategy execution will cause the Fund to fail to achieve its investment objective or to underperform other funds with a similar investment strategy. The advisor's security selection process may not eliminate all stock market risk factors associated with the long and short positions it establishes for the Fund. It is possible that the stocks the Fund holds long will decline in value at the same time that the stocks it holds short increase in value, thereby increasing potential losses to the Fund. Any gain from a short position may be partially or totally offset by a decline in a long position, or vice versa. In addition, significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.***

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***The Fund is subject to investment risk, which is the chance that the types of securities purchased by the Fund will, intentionally or unintentionally, increase the Fund's sensitivity to certain investment factors. These factors may include, but are not limited to, market capitalization ranges, styles (growth/value), and industries of the underlying securities. These factors may cause the Fund to fail to achieve its investment objective of limiting exposure to general stock market risk or cause it to underperform other funds with a similar investment strategy.***

**Other Investment Policies and Risks**

In addition to investing in publicly traded stocks on a long and short basis, the Fund may make other kinds of investments to achieve its investment objective.

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***The Fund may invest in derivatives. In general, investments in derivatives may involve risks different from, and possibly greater than, those of investments directly in the underlying securities or assets.***

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 a currency), a physical asset (such as gold, oil, or wheat), a market index, or a reference rate. The Fund may invest in derivatives only if the expected risks and rewards of the derivatives are consistent with the investment objective, policies, strategies, and risks of the Fund as disclosed in this prospectus. In particular, derivatives will be used only when they may help the advisor to accomplish one or more of the following:

• Invest in eligible asset classes with greater efficiency and lower cost than is possible through direct investment.

• Add value when these instruments are attractively priced.

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The market for many derivatives is, or suddenly can become, illiquid, which may result in significant, rapid, and unpredictable changes in the prices for derivatives. The Fund's use of a derivative subjects it to the risk of nonperformance by the counterparty, potentially resulting in delayed, partial, or even nonpayment of amounts due under the derivative contract.

The Fund's derivative investments may include futures contracts and options thereon, options on stocks or stock indexes, warrants, swap agreements, or other derivatives. Losses (or gains) involving futures contracts can sometimes be substantial—in part because a relatively small price movement in a futures contract may result in an immediate and substantial loss (or gain) for a fund. Similar risks exist for other types of derivatives.

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| |
|:---|
| Plain Talk About Derivatives |
| Derivatives can take many forms. Some forms of derivatives—such as <br> exchange-traded futures and options on securities, commodities, or <br> indexes—have been trading on regulated exchanges for decades. These <br> types of derivatives are standardized contracts that can easily be bought and <br> sold and whose market values are determined and published daily. On the <br> other hand, non-exchange-traded derivatives—such as certain swap <br> agreements and foreign currency exchange forward contracts—tend to be <br> more specialized or complex and may be more difficult to accurately value.<br>|

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**Cash Management**

The Fund's daily cash balance may be invested in Vanguard Market Liquidity Fund and/or Vanguard Municipal Cash Management Fund (each, a CMT Fund), which are low-cost money market funds. When investing in a CMT Fund, the Fund bears its proportionate share of the expenses of the CMT Fund in which it invests. Vanguard receives no additional revenue from Fund assets invested in a CMT Fund.

**Methods Used to Meet Redemption Requests**

Under normal circumstances, the Fund typically expects to meet redemptions with positive cash flows. When this is not an option, the Fund seeks to maintain its risk exposure by selling a cross section of the Fund's holdings to meet redemptions, while also factoring in transaction costs. Additionally, the Fund may work with larger clients to implement their redemptions in a manner that is least disruptive to the portfolio; see "Potentially disruptive redemptions" under *Redeeming Shares* in the **Investing With Vanguard** section.

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Under certain circumstances, including under stressed market conditions, there are additional tools that the Fund may use in order to meet redemptions, including advancing the settlement of market trades with counterparties to match investor redemption payments or delaying settlement of an investor's transaction to match trade settlement within regulatory requirements. The Fund may also suspend payment of redemption proceeds for up to seven days; see "Emergency circumstances" under *Redeeming Shares* in the **Investing With Vanguard** section. Additionally under these unusual circumstances, the Fund may borrow money (subject to certain regulatory conditions and if available under board-approved procedures) through an interfund lending facility; through a bank line-of-credit, including a joint committed credit facility; or through an uncommitted line-of-credit from Vanguard in order to meet redemption requests.

**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 the strategy or policy employed is consistent with the Fund's investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Fund's investment objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.

In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategies—for instance, by allocating substantial assets to cash equivalent investments or other less volatile instruments—in response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.

**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 foreign 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.

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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 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 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 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 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 Vanguard Short-Term Inflation-Protected Securities Index Fund) generally prohibits, except as otherwise noted in the **Investing With Vanguard** section, an investor's purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account.

• Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.

See the **Investing With Vanguard** section of this prospectus for further details on Vanguard's transaction policies.

Each Vanguard fund (other than retail and government money market funds), in determining its net asset value, will use fair-value pricing when appropriate, as described in the *Share Price* section. 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.**

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**Turnover Rate**

Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The **Financial Highlights** section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund's return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account.

**The Fund and Vanguard**

The Fund is a member of The Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All of the funds that are members of Vanguard (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space, and equipment.

Vanguard Marketing Corporation provides marketing services to the funds. Although fund shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of the Vanguard funds' marketing costs.

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|:---|
| Plain Talk About Vanguard's Unique Corporate Structure |
| Vanguard is owned jointly by the funds it oversees and thus indirectly by the <br> shareholders in those funds. Most other mutual funds are operated by <br> management companies that are owned by third parties—either public or <br> private stockholders—and not by the funds they serve.<br>|

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**Investment Advisor**

The Vanguard Group, Inc., P.O. Box 2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor to the Fund through its Quantitative Equity Group. As of December 31, 2021, Vanguard served as advisor for approximately $6.9 trillion in assets. Vanguard provides investment advisory services to the Fund pursuant to the Funds' Service Agreement and subject to the supervision and oversight of the trustees and officers of the Fund.

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For the fiscal year ended December 31, 2021, the advisory expenses represented an effective annual rate of 0.09% of the Fund's average net assets.

Although the Fund is managed solely by Vanguard, the Fund reserves the right to utilize a multimanager approach in the future. Under the terms of an SEC exemption, the Fund's board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement with a third-party investment advisor or hire a new third-party investment advisor—either as a replacement for an existing advisor or as an additional advisor. Any significant change in the Fund's advisory arrangements will be communicated to shareholders in writing. As the Fund's sponsor and overall manager, Vanguard may provide investment advisory services to the Fund at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced or that the terms of an existing advisory agreement be revised. The Fund has filed an application seeking a similar SEC exemption with respect to investment advisors that are wholly owned subsidiaries of Vanguard. If the exemption is granted, the Fund may rely on the new SEC relief.

For a discussion of why the board of trustees approved the Fund's investment advisory arrangement, see the most recent semiannual report to shareholders covering the fiscal period ended June 30.

The manager primarily responsible for the day-to-day management of the Fund is:

**Cesar Orosco**, CFA, Ph.D., Head of Alpha Equity Investments at Vanguard. He has been with Vanguard since 2020, has worked in investment management since 2004, has managed investment portfolios since 2004, and has managed the Fund since 2021. Education: B.S., Universidad de Lima; Ph.D., University of Pennsylvania.

The Fund's *Statement of Additional Information* provides information about the portfolio manager's compensation, other accounts under management, and ownership of shares of the Fund.

**Dividends, Capital Gains, and Taxes**

**Fund Distributions**

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. From time to time, the Fund may also

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make distributions that are treated as a return of capital. Income and capital gains distributions, if any, generally occur annually in December. In addition, the Fund may occasionally make a supplemental distribution at some other time during the year.

You can receive distributions of income or capital gains in cash, or you can have them automatically reinvested in more shares of the Fund. However, if you are investing through an employer-sponsored retirement or savings plan, your distributions will be automatically reinvested in additional Fund shares.

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|:---|
| Plain Talk About Distributions |
| As a shareholder, you are entitled to your portion of a fund's income from <br> interest and dividends as well as capital gains from the fund's sale of <br> investments. Income consists of both the dividends that the fund earns from <br> any stock holdings and the interest it receives from any money market and <br> bond investments. Capital gains are realized whenever the fund sells <br> securities for higher prices than it paid for them. These capital gains are <br> either short-term or long-term, depending on whether the fund held the <br> securities for one year or less or for more than one year.<br>|

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**Basic Tax Points**

Investors in taxable accounts should be aware of the following basic federal income tax points:

• Distributions are taxable to you whether or not you reinvest these amounts in additional Fund shares.

• Distributions declared in December—if paid to you by the end of January—are taxable as if received in December.

• Any dividend distribution or short-term capital gains distribution that you receive is taxable to you as ordinary income. If you are an individual and meet certain holding-period requirements with respect to your Fund shares, you may be eligible for reduced tax rates on "qualified dividend income," if any, or a special tax deduction on "qualified REIT dividends," if any, distributed by the Fund.

• Any distribution of net long-term capital gains is taxable to you as long-term capital gains, no matter how long you have owned shares in the Fund.

• Capital gains distributions may vary considerably from year to year as a result of the Fund's normal investment activities and cash flows.

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• Your cost basis in the Fund will be decreased by the amount of any return of capital that you receive. This, in turn, will affect the amount of any capital gain or loss that you realize when selling or exchanging your Fund shares.

• Return of capital distributions generally are not taxable to you until your cost basis has been reduced to zero. If your cost basis is at zero, return of capital distributions will be treated as capital gains.

• A sale or exchange of Fund shares is a taxable event. This means that you may have a capital gain to report as income, or a capital loss to report as a deduction, when you complete your tax return.

• Any conversion between classes of shares of the same fund is a *nontaxable* event. By contrast, an exchange between classes of shares of *different* funds is a *taxable* event.

• Vanguard (or your intermediary) will send you a statement each year showing the tax status of all of your distributions.

Individuals, trusts, and estates whose income exceeds certain threshold amounts are subject to a 3.8% Medicare contribution tax on "net investment income." Net investment income takes into account distributions paid by the Fund and capital gains from any sale or exchange of Fund shares.

Dividend distributions and capital gains distributions that you receive, as well as your gains or losses from any sale or exchange of Fund shares, may be subject to state and local income taxes.

The Fund's short sales will be subject to tax rules that may affect the amount, timing, and character of distributions to shareholders. This prospectus provides general tax information only. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply. Please consult your tax advisor for detailed information about any tax consequences for you, including potential consequences for you if the Fund simultaneously holds long and short positions with respect to the same security.

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|:---|
| Plain Talk About Buying a Dividend |
| Unless you are a tax-exempt investor or investing through a tax-advantaged <br> account (such as an IRA or an employer-sponsored retirement or savings <br> plan), you should consider avoiding a purchase of fund shares shortly before <br> the fund makes a distribution, because doing so can cost you money in <br> taxes. This is known as "buying a dividend." For example: On December 15, <br> you invest $5,000, buying 250 shares for $20 each. If the fund pays a <br> distribution of $1 per share on December 16, its share price will drop to $19 <br> (not counting market change). You still have only $5,000 (250 shares x $19 = <br> $4,750 in share value, plus 250 shares x $1 = $250 in distributions), but you <br> *owe tax* on the $250 distribution you received—even if you reinvest it in <br> more shares. To avoid buying a dividend, check a fund's distribution schedule <br> before you invest.<br>|

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**General Information**

**Backup withholding.** By law, Vanguard must withhold 24% of any taxable distributions or redemptions from your account if you do not:

• Provide your correct taxpayer identification number.

• Certify that the taxpayer identification number is correct.

• Confirm that you are not subject to backup withholding.

Similarly, Vanguard (or your intermediary) must withhold taxes from your account if the IRS instructs us to do so.

**Foreign investors.** Vanguard funds offered for sale in the United States (Vanguard U.S. funds), including the Fund offered in this prospectus, are not widely available outside the United States. Non-U.S. investors should be aware that U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments in Vanguard U.S. funds. Foreign investors should visit the non-U.S. investors page on our website at *vanguard.com* for information on Vanguard's non-U.S. products.

**Invalid addresses.** If a dividend distribution or capital gains distribution check mailed to your address of record is returned as undeliverable, Vanguard will automatically reinvest the distribution and all future distributions until you provide us with a valid mailing address. Reinvestments will receive the net asset value calculated on the date of the reinvestment.

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**Share Price**

Share price, also known as *net asset value* (NAV), is calculated as of the close of regular trading on the New York Stock Exchange (NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for business (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to the share class by the number of Fund shares outstanding for that class. 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 foreign securities that trade on foreign 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. When a fund determines that 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).

The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party as of the close of regular trading on the NYSE. The values of any mutual fund shares, including institutional money market fund shares, held by a fund are based on the NAVs of the shares. The values of any ETF shares or closed-end fund shares held by a fund are based on the market value of the shares.

A fund also will use fair-value pricing if the value of a security it holds has 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 foreign securities, which may trade on foreign 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. markets that exceed a specified threshold or that are otherwise deemed to affect the value of foreign securities.

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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 or 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 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 the NAV may differ from quoted or published prices for the same securities.

Vanguard fund share prices are published daily on our website at *vanguard.com/prices*.

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**Financial Highlights**

Financial highlights information is intended to help you understand a fund's performance for the past five years (or, if shorter, its period of operations). Certain information reflects financial results for a single fund share. Total return represents the rate that an investor would have earned or lost each period on an investment in a fund or share class (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with fund financial statements, is included in a fund's most recent annual report to shareholders. You may obtain a free copy of a fund's latest annual or semiannual report, which is available upon request.

**Vanguard Market Neutral Fund Institutional Shares** 

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | Year Ended December 31, |
| For a Share Outstanding Throughout Each Period | 2021 | 2020 | 2019 | 2018 | 2017 |
| **Net Asset Value, Beginning of Period** | **$8.90** | **$10.15** | **$11.57** | **$11.61** | **$12.34** |
| **Investment Operations** |  |  |  |  |  |
| Net Investment Income<sup>1</sup> <br>| .017 | .057 | .213 | .119 | .123 |
| Net Realized and Unrealized Gain (Loss) on Investments | 2.065 | (1.230) | (1.305) | (.043) | (.719) |
| Total from Investment Operations | 2.082 | (1.173) | (1.092) | .076 | (.596) |
| **Distributions** |  |  |  |  |  |
| Dividends from Net Investment Income | (.022) | (.077) | (.328) | (.116) | (.134) |
| Distributions from Realized Capital Gains |  |  |  |  |  |
| Total Distributions | (.022) | (.077) | (.328) | (.116) | (.134) |
| **Net Asset Value, End of Period** | **$10.96** | **$8.90** | **$10.15** | **$11.57** | **$11.61** |
| **Total Return** | **23.39%** | **-11.58%** | **-9.48%** | **0.65%** | **-4.83%** |
| **Ratios/Supplemental Data** |  |  |  |  |  |
| Net Assets, End of Period (Millions) | $45 | $65 | $142 | $346 | $332 |
| **Ratio of Total Expenses to Average Net Assets** |  |  |  |  |  |
| Based on Total Expenses<sup>2,3</sup> <br>| 1.25% | 1.12% | 1.40% | 1.74% | 1.46% |
| Net of Dividend and Borrowing Expense on Securities Sold <br> Short<br>| 0.14% | 0.14% | 0.14% | 0.14% | 0.14% |
| Ratio of Net Investment Income to Average Net Assets | 0.17% | 0.59% | 1.96% | 0.99% | 1.02% |
| Portfolio Turnover Rate | 133% | 172% | 141% | 110% | 79% |

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| 1 | Calculated based on average shares outstanding. |
| 2 | Includes dividend expense on securities sold short of 0.84%, 0.98%, 1.26%, 1.60%, and 1.32%, respectively. |
| 3 | Includes borrowing expense on securities sold short of 0.27%, 0.00%, 0.00%, 0.00%, and 0.00%, respectively. |

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**Investing With Vanguard**

This section of the prospectus explains the basics of doing business with Vanguard. Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as a bank, a broker, or an investment advisor. If you hold Vanguard fund shares directly with Vanguard, you should carefully read each topic within this section that pertains to your relationship with Vanguard. If you hold Vanguard fund shares indirectly through an intermediary (including shares held in a brokerage account through Vanguard Brokerage Services<sup>®</sup>), please see *Investing With Vanguard Through Other Firms*, and also refer to your account agreement with the intermediary for information about transacting in that account. If you hold Vanguard fund shares through an employer-sponsored retirement or savings plan, please see *Employer-Sponsored Plans. Vanguard reserves the right to change the following policies without notice. Please call or check online for current information. See Contacting Vanguard.*

For Vanguard fund shares held directly with Vanguard, each fund you hold in an account is a separate "fund account." For example, if you hold three funds in a nonretirement account titled in your own name, two funds in a nonretirement account titled jointly with your spouse, and one fund in an individual retirement account, you have six fund accounts—and this is true even if you hold the same fund in multiple accounts. Note that each reference to "you" in this prospectus applies to any one or more registered account owners or persons authorized to transact on your account.

**Purchasing Shares**

Vanguard reserves the right, without notice, to increase or decrease the minimum amount required to open, convert shares to, or maintain a fund account or to add to an existing fund account.

Investment minimums may differ for certain categories of investors.

**Account Minimums for Institutional Shares** 

**To open and maintain an account.** $5 million. If you request Institutional Shares when you open a new account but the investment amount does not meet the account minimum for Institutional Shares your investment will be placed in another share class of the Fund, as appropriate.

Certain Vanguard institutional clients may meet the minimum investment amount by aggregating separate accounts within the same fund. This aggregation policy does not apply to financial intermediaries.

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Vanguard may charge additional recordkeeping fees for institutional clients whose accounts are recordkept by Vanguard. Please contact your Vanguard representative to determine whether additional recordkeeping fees apply to your account.

**To add to an existing account.** Generally $1.

**How to Initiate a Purchase Request**

Be sure to check *Exchanging Shares, Frequent-Trading Limitations*, and *Other Rules You Should Know* before placing your purchase request.

**Online.** You may open certain types of accounts, request a purchase of shares, and request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.

**By telephone.** You may call Vanguard to begin the account registration process or request that the account-opening forms be sent to you. You may also call Vanguard to request a purchase of shares in your account or to request an exchange. See *Contacting Vanguard*.

**By mail.** You may send Vanguard your account registration form and check to open a new fund account. To add to an existing fund account, you may send your check with an Invest-by-Mail form (from a transaction confirmation or your account statement) or with a deposit slip (available online).

**How to Pay for a Purchase**

**By electronic bank transfer.** You may purchase shares of a Vanguard fund through an electronic transfer of money from a bank account. To establish the electronic bank transfer service on an account, you must designate the bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can purchase shares by electronic bank transfer on a regular schedule (Automatic Investment Plan), if eligible, or upon request. Your purchase request can be initiated online (if you are registered for online access), by telephone, or by mail.

**By wire.** Wiring instructions vary for different types of purchases. Please call Vanguard for instructions and policies on purchasing shares by wire. See *Contacting Vanguard*.

**By check.** You may make initial or additional purchases to your fund account by sending a check with a deposit slip or by utilizing our mobile application if your account is eligible and you are registered for online access. Also see *How to Initiate a Purchase Request*. Make your check payable to Vanguard and include the appropriate fund number (e.g., Vanguard—734).

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**By exchange.** You may purchase shares of a Vanguard fund using the proceeds from the simultaneous redemption of shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail with an exchange form. See *Exchanging Shares*.

**Trade Date**

The trade date for any purchase request received in good order will depend on the day and time Vanguard receives your request, the manner in which you are paying, and the type of fund you are purchasing. Your purchase will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

For purchases by **check** into all funds other than money market funds and for purchases by **exchange**, **wire**, or **electronic bank transfer** into all funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the same day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the next business day.

For purchases by **check** into money market funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the next business day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the second business day following the day Vanguard receives the purchase request. Because money market instruments must be purchased with federal funds and it takes a money market mutual fund one business day to convert check proceeds into federal funds, the trade date for the purchase will be one business day later than for other funds.

If your purchase request is not accurate and complete, it may be rejected. See *Other Rules You Should Know—Good Order*.

For further information about purchase transactions, consult our website at *vanguard.com* or see *Contacting Vanguard*.

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**Other Purchase Rules You Should Know**

**Check purchases.** All purchase checks must be written in U.S. dollars, be drawn on a U.S. bank, and be accompanied by good order instructions. Vanguard does not accept cash, traveler's checks, starter checks, or money orders. In addition, Vanguard may refuse checks that are not made payable to Vanguard.

**New accounts.** We are required by law to obtain from you certain personal information that we will use to verify your identity. If you do not provide the information, we may not be able to open your account. If we are unable to verify your identity, Vanguard reserves the right, without notice, to close your account or take such other steps as we deem reasonable. Certain types of accounts may require additional documentation.

**Refused or rejected purchase requests.** Vanguard reserves the right to stop selling fund shares or to reject any purchase request at any time and without notice, including, but not limited to, purchases requested by exchange from another Vanguard fund. This also includes the right to reject any purchase request because the investor has a history of frequent trading or because the purchase may negatively affect a fund's operation or performance.

**Large purchases.** Call Vanguard before attempting to invest a large dollar amount.

**No cancellations.** Vanguard will not accept your request to cancel any purchase request once processing has begun. Please be careful when placing a purchase request.

**Converting Shares**

When a conversion occurs, you receive shares of one class in place of shares of another class of the same fund. At the time of conversion, the dollar value of the "new" shares you receive equals the dollar value of the "old" shares that were converted. In other words, the conversion has no effect on the value of your investment in the fund at the time of the conversion. However, the number of shares you own after the conversion may be greater than or less than the number of shares you owned before the conversion, depending on the NAVs of the two share classes.

Vanguard will not accept your request to cancel any self-directed conversion request once processing has begun. Please be careful when placing a conversion request.

A conversion between share classes of the same fund is a *nontaxable* event.

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**Trade Date**

The trade date for any conversion request received in good order will depend on the day and time Vanguard receives your request. Your conversion will be executed using the NAVs of the different share classes on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

For a conversion request received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. For a conversion request received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day. See *Other Rules You Should Know*.

**Conversions to Institutional Shares**

You are eligible for a self-directed conversion from Investor Shares to Institutional Shares of the same Fund (if available), provided that your account meets all eligibility requirements. You may request a conversion through our website (if you are registered for online access), or you may contact Vanguard by telephone or by mail to request this transaction. Accounts that qualify for Institutional Shares will not be automatically converted.

**Mandatory Conversions to Investor Shares**

If an account no longer meets the balance requirements for Institutional Shares Vanguard may automatically convert the shares in the account to Investor Shares. A decline in the account balance because of market movement may result in such a conversion. Vanguard will notify the investor in writing before any mandatory conversion occurs.

**Redeeming Shares**

**How to Initiate a Redemption Request**

Be sure to check *Exchanging Shares, Frequent-Trading Limitations*, and *Other Rules You Should Know* before placing your redemption request.

**Online.** You may request a redemption of shares or request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.

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**By telephone.** You may call Vanguard to request a redemption of shares or an exchange. See *Contacting Vanguard*.

**By mail.** You may send a form (available online) to Vanguard to redeem from a fund account or to make an exchange.

**How to Receive Redemption Proceeds**

**By electronic bank transfer.** You may have the proceeds of a fund redemption sent directly to a designated bank account. To establish the electronic bank transfer service on an account, you must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can redeem shares by electronic bank transfer on a regular schedule (Automatic Withdrawal Plan), if eligible, or upon request. Your redemption request can be initiated online (if you are registered for online access), by telephone, or by mail.

**By wire.** To receive your proceeds by wire, you may instruct Vanguard to wire your redemption proceeds ($100 minimum) to a previously designated bank account. To establish the wire redemption service, you generally must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form.

Please note that Vanguard charges a $10 wire fee for outgoing wire redemptions. The fee is assessed in addition to, rather than being withheld from, redemption proceeds and is paid directly to the fund in which you invest. For example, if you redeem $100 via a wire, you will receive the full $100, and the $10 fee will be assessed to your fund account through an additional redemption of fund shares. If you redeem your entire fund account, your redemption proceeds will be reduced by the amount of the fee. The wire fee does not apply to accounts held by Flagship and Flagship Select clients; accounts held through intermediaries, including Vanguard Brokerage Services; or accounts held by institutional clients.

**By exchange.** You may have the proceeds of a Vanguard fund redemption invested directly in shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail. See *Exchanging Shares*.

**By check**. If you have not chosen another redemption method, Vanguard will mail you a redemption check, generally payable to all registered account owners, normally within two business days of your trade date, and generally to the address of record.

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**Trade Date**

The trade date for any redemption request received in good order will depend on the day and time Vanguard receives your request and the manner in which you are redeeming. Your redemption will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard's discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See *Share Price*.

For redemptions by **check, exchange**, or **wire**: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;• Note on timing of wire redemptions from money market funds: For telephone requests received by Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern time, for Vanguard Federal Money Market Fund), the redemption proceeds generally will leave Vanguard by the close of business the same day. For telephone requests received by Vanguard on a business day after those cut-off times, or on a nonbusiness day, and for all requests other than by telephone, the redemption proceeds generally will leave Vanguard by the close of business on the next business day.

&nbsp;&nbsp;&nbsp;&nbsp;• Note on timing of wire redemptions from all other funds: For requests received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the redemption proceeds generally will leave Vanguard by the close of business on the next business day. For requests received by Vanguard on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the redemption proceeds generally will leave Vanguard by the close of business on the second business day after Vanguard receives the request.

For redemptions by **electronic bank transfer**: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If

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the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.

If your redemption request is not accurate and complete, it may be rejected. If we are unable to send your redemption proceeds by wire or electronic bank transfer because the receiving institution rejects the transfer, Vanguard will make additional efforts to complete your transaction. If Vanguard is still unable to complete the transaction, we may send the proceeds of the redemption to you by check, generally payable to all registered account owners, or use your proceeds to purchase new shares of the fund from which you sold shares for the purpose of the wire or electronic bank transfer transaction. See *Other Rules You Should Know—Good Order*.

If your redemption request is received in good order, we typically expect that redemption proceeds will be paid by the Fund within one business day of the trade date; however, in certain circumstances, investors may experience a longer settlement period at the time of the transaction. For further information, see "Potentially disruptive redemptions" and "Emergency circumstances."

For further information about redemption transactions, consult our website at *vanguard.com* or see *Contacting Vanguard*.

**Other Redemption Rules You Should Know**

**Documentation for certain accounts.** Special documentation may be required to redeem from certain types of accounts, such as trust, corporate, nonprofit, or retirement accounts. Please call us *before* attempting to redeem from these types of accounts.

**Potentially disruptive redemptions.** Vanguard reserves the right to pay all or part of a redemption in kind—that is, in the form of securities—if we reasonably believe that a cash redemption would negatively affect the fund's operation or performance or that the shareholder may be engaged in market-timing or frequent trading. Under these circumstances, Vanguard also reserves the right to delay payment of the redemption proceeds for up to seven calendar days. By calling us *before* you attempt to redeem a large dollar amount, you may avoid in-kind or delayed payment of your redemption. Please see *Frequent-Trading Limitations for information about Vanguard's policies to limit frequent trading.*

**Recently purchased shares.** Although you can redeem shares at any time, proceeds may not be made available to you until the fund collects payment for your purchase. This may take up to seven calendar days for shares purchased by

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check or by electronic bank transfer. If you have written a check on a fund with checkwriting privileges, that check may be rejected if your fund account does not have a sufficient available balance.

**Address change.** If you change your address online or by telephone, there may be up to a 14-day restriction (starting on the business day after your address is changed) on your ability to request check redemptions online and by telephone. You can request a redemption in writing (using a form available online) at any time. Confirmations of address changes are sent to both the old and new addresses.

**Payment to a different person or address.** At your request, we can make your redemption check payable, or wire your redemption proceeds, to a different person or send it to a different address. However, this generally requires the written consent of all registered account owners and may require additional documentation, such as a signature guarantee or a notarized signature. You may obtain a signature guarantee from some commercial or savings banks, credit unions, trust companies, or member firms of a U.S. stock exchange.

**No cancellations.** Vanguard will not accept your request to cancel any redemption request once processing has begun. Please be careful when placing a redemption request.

**Emergency circumstances.** Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days. In addition, Vanguard funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.

**Exchanging Shares**

An exchange occurs when you use the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund. You can make exchange requests online (if you are registered for online access), by telephone, or by mail. See *Purchasing Shares* and *Redeeming Shares*.

If the NYSE is open for regular trading (generally until 4 p.m., Eastern time, on a business day) at the time an exchange request is received in good order, the trade date generally will be the same day. See *Other Rules You Should Know—Good Order* for additional information on all transaction requests.

Vanguard will not accept your request to cancel any exchange request once processing has begun. Please be careful when placing an exchange request.

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Call Vanguard before attempting to exchange a large dollar amount. By calling us *before* you attempt to exchange a large dollar amount, you may avoid delayed or rejected transactions.

Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. See *Frequent-Trading Limitations* for additional restrictions on exchanges.

**Frequent-Trading Limitations**

Because excessive transactions can disrupt management of a fund and increase the fund's costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) limits an investor's purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent-trading limits.

For Vanguard Retirement Investment Program pooled plans, the limitations apply to exchanges made online or by telephone.

These frequent-trading limitations *do not* apply to the following:

• Purchases of shares with reinvested dividend or capital gains distributions.

• Transactions through Vanguard's Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online<sup>®</sup>.

• Discretionary transactions through Vanguard Personal Advisor Services<sup>®</sup>, Vanguard Institutional Advisory Services<sup>®</sup>, and Vanguard Digital Advisor™.

• Redemptions of shares to pay fund or account fees.

• Redemptions of shares to remove excess shareholder contributions to certain types of retirement accounts (including, but not limited to, IRAs and Vanguard Individual 401(k) Plans).

• Transfers and reregistrations of shares within the same fund.

• Purchases of shares by asset transfer or direct rollover.

• Conversions of shares from one share class to another in the same fund.

• Checkwriting redemptions.

• Section 529 college savings plans.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Certain approved institutional portfolios and asset allocation programs, as well as trades made by funds or trusts managed by Vanguard or its affiliates that invest in other Vanguard funds. (Please note that *shareholders* of Vanguard's funds of funds *are* subject to the limitations.)

For participants in employer-sponsored defined contribution plans,\* the frequent-trading limitations *do not* apply to:

• Purchases of shares with participant payroll or employer contributions or loan repayments.

• Purchases of shares with reinvested dividend or capital gains distributions.

• Distributions, loans, and in-service withdrawals from a plan.

• Redemptions of shares as part of a plan termination or at the direction of the plan.

• Transactions executed through the Vanguard Managed Account Program.

• Redemptions of shares to pay fund or account fees.

• Share or asset transfers or rollovers.

• Reregistrations of shares.

• Conversions of shares from one share class to another in the same fund.

• Exchange requests submitted by written request to Vanguard. (Exchange requests submitted by fax, if otherwise permitted*, are* subject to the limitations.)

\* The following Vanguard fund accounts are subject to the frequent-trading limitations: SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and Vanguard Individual 401(k) Plans.

**Accounts Held by Institutions (Other Than Defined Contribution Plans)**

Vanguard will systematically monitor for frequent trading in institutional clients' accounts. If we detect suspicious trading activity, we will investigate and take appropriate action, which may include applying to a client's accounts the 30-day policy previously described, prohibiting a client's purchases of fund shares, and/or revoking the client's exchange privilege.

**Accounts Held by Intermediaries**

When intermediaries establish accounts in Vanguard funds for the benefit of their clients, we cannot always monitor the trading activity of the individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares

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by an intermediary, including for the benefit of certain of the intermediary's clients. Intermediaries also may monitor their clients' trading activities with respect to Vanguard funds.

For those Vanguard funds that charge purchase and/or redemption fees, intermediaries will be asked to assess these fees on client accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If you invest with Vanguard through an intermediary, please read that firm's materials carefully to learn of any other rules or fees that may apply.

**Other Rules You Should Know**

**Prospectus and Shareholder Report Mailings**

When two or more shareholders have the same last name and address, just one summary prospectus (or prospectus) and/or shareholder report may be sent in an attempt to eliminate the unnecessary expense of duplicate mailings. You may request individual prospectuses and reports by contacting our Client Services Department in writing, by telephone, or online. See *Contacting Vanguard*.

**Vanguard.com**

**Registration.** If you are a registered user of *vanguard.com*, you can review your account holdings; buy, sell, or exchange shares of most Vanguard funds; and perform most other transactions through our website. You must register for this service online.

**Electronic delivery.** Vanguard can deliver your account statements, transaction confirmations, prospectuses, certain tax forms, and shareholder reports electronically. If you are a registered user of *vanguard.com*, you can consent to the electronic delivery of these documents by logging on and changing your mailing preferences under "Account Maintenance." You can revoke your electronic consent at any time through our website, and we will begin to send paper copies of these documents within 30 days of receiving your revocation.

**Telephone Transactions**

**Automatic.** When we set up your account, we will automatically enable you to do business with us by telephone, *unless you instruct us otherwise in writing*.

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**Tele-Account**<sup>®</sup>**.** To obtain fund and account information through Vanguard's automated telephone service, you must first establish a Personal Identification Number (PIN) by calling Tele-Account at 800-662-6273.

**Proof of a caller's authority.** We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:

• Authorization to act on the account (as the account owner or by legal documentation or other means).

• Account registration and address.

• Fund name and account number, if applicable.

• Other information relating to the caller, the account owner, or the account.

**Good Order**

We reserve the right to reject any transaction instructions that are not in "good order." Good order generally means that your instructions:

• Are provided by the person(s) authorized in accordance with Vanguard's policies and procedures to access the account and request transactions.

• Include the fund name and account number.

• Include the amount of the transaction (stated in dollars, shares, or percentage).

Written instructions also must generally be provided on a Vanguard form and include:

• Signature(s) and date from the authorized person(s).

• Signature guarantees or notarized signatures, if required for the type of transaction. (Call Vanguard for specific requirements.)

• Any supporting documentation that may be required.

Good order requirements may vary among types of accounts and transactions. For more information, consult our website at *vanguard.com* or see *Contacting Vanguard*.

Vanguard reserves the right, without notice, to revise the requirements for good order.

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**Future Trade-Date Requests**

Vanguard does not accept requests to hold a purchase, conversion, redemption, or exchange transaction for a future date. All such requests will receive trade dates as previously described in *Purchasing Shares, Converting Shares, Redeeming Shares*, and *Exchanging Shares*. Vanguard reserves the right to return future-dated purchase checks.

**Accounts With More Than One Owner**

If an account has more than one owner or authorized person, Vanguard generally will accept instructions from any one owner or authorized person.

**Responsibility for Fraud**

You should take precautions to protect yourself from fraud. Keep your account-related information private, and review any account confirmations, statements, or other information that we provide to you as soon as you receive them. Let us know immediately if you discover unauthorized activity or see something on your account that you do not understand or that looks unusual.

Vanguard will not be responsible for losses that result from transactions by a person who we reasonably believe is authorized to act on your account.

**Uncashed Checks**

Please cash your distribution or redemption checks promptly. Vanguard will not pay interest on uncashed checks. Vanguard may be required to transfer assets related to uncashed checks to a state under the state's abandoned property law.

**Dormant Accounts**

If your account has no activity in it for a period of time, Vanguard may be required to transfer it to a state under the state's abandoned property law, subject to potential federal or state withholding taxes.

**Unusual Circumstances**

If you experience difficulty contacting Vanguard online or by telephone, you can send us your transaction request on a Vanguard form by regular or express mail.

**Investing With Vanguard Through Other Firms**

You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, a broker, or an investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply. Your financial

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intermediary can provide you with account information and any required tax forms. You may be required to pay a commission on purchases of mutual fund shares made through a financial intermediary.

Please see *Frequent-Trading Limitations—Accounts Held by Intermediaries* for information about the assessment of any purchase or redemption fees and the monitoring of frequent trading for accounts held by intermediaries.

**Low-Balance Accounts**

The Fund reserves the right to liquidate a fund account whose balance falls below the account minimum for any reason, including market fluctuation. This liquidation policy applies to nonretirement fund accounts and accounts that are held through intermediaries. Any such liquidation will be preceded by written notice to the investor.

**Right to Change Policies**

In addition to the rights expressly stated elsewhere in this prospectus, Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time and (2) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fee charged to a shareholder or a group of shareholders. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard believes they are in the best interest of a fund.

**Account Restrictions**

Vanguard reserves the right to: (1) redeem all or a portion of a fund/account to meet a legal obligation, including tax withholding, tax lien, garnishment order, or other obligation imposed on your account by a court or government agency; (2) redeem shares, close an account, or suspend account privileges, features, or options in the case of threatening conduct or activity; (3) redeem shares, close an account, or suspend account privileges, features, or options if Vanguard believes or suspects that not doing so could result in a suspicious, fraudulent, or illegal transaction; (4) place restrictions on the ability to redeem any or all shares in an account if it is required to do so by a court or government agency; (5) place restrictions on the ability to redeem any or all shares in an account if Vanguard believes that doing so will prevent fraud, financial exploitation or abuse, or to protect vulnerable investors; (6) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners; and (7) freeze any account and/or suspend account services upon initial notification to Vanguard of the death of an account owner.

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**Share Classes**

Vanguard reserves the right, without notice, to change the eligibility requirements of its share classes, including the types of clients who are eligible to purchase each share class.

**Shareholder Rights**

The Fund's Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Montgomery Funds (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application.

**Fund and Account Updates**

**Confirmation Statements**

We will send (or provide through our website, whichever you prefer) a confirmation of your trade date and the amount of your transaction when you buy, sell, exchange, or convert shares. However, we will not send confirmations reflecting only checkwriting redemptions or the reinvestment of dividend or capital gains distributions. For any month in which you had a checkwriting redemption, a Checkwriting Activity Statement will be sent to you itemizing the checkwriting redemptions for that month. Promptly review each confirmation statement that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on a confirmation statement, or Vanguard will consider the transaction properly processed.

**Portfolio Summaries**

We will send (or provide through our website, whichever you prefer) quarterly portfolio summaries to help you keep track of your accounts throughout the year. Each summary shows the market value of your account at the close of the statement period, as well as all distributions, purchases, redemptions, exchanges, transfers, and conversions for the current calendar quarter (or month). Promptly review each summary that we provide to you. It is important

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that you contact Vanguard immediately with any questions you may have about any transaction reflected on the summary, or Vanguard will consider the transaction properly processed.

**Tax Information Statements**

For most accounts, Vanguard (or your intermediary) is required to provide annual tax forms to assist you in preparing your income tax returns. These forms are generally available for each calendar year early in the following year. Registered users of *vanguard.com* can also view certain forms through our website. Vanguard (or your intermediary) may also provide you with additional tax-related documentation. For more information, consult our website at vanguard.com or see *Contacting Vanguard*.

**Annual and Semiannual Reports**

We will send (or provide through our website, whichever you prefer) reports about Vanguard Market Neutral Fund twice a year, in February and August. These reports include overviews of the financial markets and provide the following specific Fund information:

• Performance assessments and comparisons with industry benchmarks.

• Financial statements with listings of Fund holdings.

**Portfolio Holdings**

Please consult the Fund's *Statement of Additional Information* or our website for a description of the policies and procedures that govern disclosure of the Fund's portfolio holdings.

**Employer-Sponsored Plans**

Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.

• If you have any questions about the Fund or Vanguard, including those about the Fund's investment objective, strategies, or risks, contact Vanguard Participant Services toll-free at 800-523-1188 or visit our website at *vanguard.com*.

• If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.

• Be sure to carefully read each topic that pertains to your transactions with Vanguard.

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Vanguard reserves the right to change its policies without notice to shareholders.

**Transactions**

Processing times for your transaction requests may differ among recordkeepers or among transaction and funding types. Your plan's recordkeeper (which may also be Vanguard) will determine the necessary processing time frames for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.

If Vanguard is serving as your plan recordkeeper and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.

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**Contacting Vanguard** 

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| | |
|:---|:---|
| **Web** |  |
| Vanguard.com | &nbsp;&nbsp; For the most complete source of Vanguard news <br> For fund, account, and service information <br> For most account transactions <br> For literature requests <br> 24 hours a day, 7 days a week<br>|

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| **Phone** | **Phone** |
| Vanguard Tele-Account<sup>®</sup> <br> 800-662-6273<br>| &nbsp;&nbsp; For automated fund and account information<br> Toll-free, 24 hours a day, 7 days a week<br>|
| Investor Information 800-662-7447<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For fund and service information<br> For literature requests<br>|
| Client Services 800-662-2739<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For account information<br> For most account transactions<br>|
| Participant Services 800-523-1188<br> (Text telephone for people with <br> hearing impairment at 800-749-7273)<br>| &nbsp;&nbsp; For information and services for participants in <br> employer-sponsored plans<br>|
| Institutional Division<br> 888-809-8102<br>| &nbsp;&nbsp; For information and services for large institutional <br> investors<br>|
| Financial Advisor and Intermediary<br> Sales Support 800-997-2798<br>| &nbsp;&nbsp; For information and services for financial intermediaries <br> including financial advisors, broker-dealers, trust <br> institutions, and insurance companies<br>|
| Financial Advisory and Intermediary <br> Trading Support 800-669-0498<br>| &nbsp;&nbsp; For account information and trading support for <br> financial intermediaries including financial advisors, <br> broker-dealers, trust institutions, and insurance <br> companies<br>|

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**Additional Information**

The Fund's Bylaws require, unless the Trust otherwise consents in writing, that the U.S. Federal District Courts be the sole and exclusive forum for the resolution of complaints under the Securities Act of 1933. This provision may limit a shareholder's ability to bring a claim in a different forum and may result in increased shareholder costs in pursuing such a claim.

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| | | | |
|:---|:---|:---|:---|
|  | &nbsp;&nbsp; Newspaper<br> Abbreviation<br>| &nbsp;&nbsp; Vanguard<br> Fund Number<br>| &nbsp;&nbsp; CUSIP<br> Number<br>|
| **Market Neutral Fund** | **Market Neutral Fund** | **Market Neutral Fund** | **Market Neutral Fund** |
| Institutional Shares<br>10/19/1998<sup>1</sup> <br>| MktNeuInst | 734 | 92205G203 |

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Inception date of the Laudus Fund shares. The Laudus Fund was reorganized with and into Vanguard Market Neutral Fund on November 30, 2007.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

CGS identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor's Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database,©2022 American Bankers Association. "CUSIP" is a registered trademark of the American Bankers Association.

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**Glossary of Investment Terms**

**Borrowing Expense on Securities Sold Short.** A fee charged by a fund's broker when a fund sells a stock short. This fee is calculated on a daily basis, based upon the market value of the stock sold short and a variable rate that is dependent upon the availability of the stock.

**Capital Gains Distributions.** Payments to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.

**Cash Equivalent Investments.** Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and banker's acceptances.

**Common Stock.** A security representing ownership rights in a corporation.

**Dividend Distributions.** Payments to mutual fund shareholders of income from interest or dividends generated by a fund's investments.

**Dividend Expense on Securities Sold Short.** The amount of money that a fund is required to pay to a lender of stock that the fund has sold short when a dividend has been declared on the stock.

**Dow Jones U.S. Total Stock Market Float Adjusted Index**. An index that represents the entire U.S. stock market and tracks more than 5,000 stocks, excluding shares of securities not available for public trading.

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

**FTSE 3-Month Treasury Bill Index (Daily).** An index that measures the performance of short-term U.S. government debt securities and accrues income on a daily basis.

**FTSE 3-Month U.S. Treasury Bill Index.** An index that measures the performance of short-term U.S. government debt securities and accrues income on a monthly basis.

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

**Joint Committed Credit Facility.** The Fund participates, along with other funds managed by Vanguard, in a committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each Vanguard fund is individually liable for its borrowings, if any, under the credit facility. The amount and terms of the committed credit facility are subject to approval by the Fund's board of trustees and renegotiation with the lender syndicate on an annual basis.

**Mutual Fund.** An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.

**New York Stock Exchange (NYSE).** A stock exchange based in New York City that is open for regular trading on business days, Monday through Friday, from 9:30 a.m. to 4 p.m., Eastern time.

**Quantitative Process.** An assessment of specific measurable factors, such as cost of capital; value of assets; and projections of sales, costs, earnings, and profits. The use of a quantitative process provides a systematic approach to investment decisions and portfolios.

**Return of Capital.** A return of capital occurs when a fund's distributions exceed its earnings in a fiscal year. A return of capital is a return of all or part of your original investment or amounts paid in excess of your original investment in a fund. In general, a return of capital reduces your cost basis in a fund's shares and is not taxable to you until your cost basis has been reduced to zero.

**Securities.** Stocks, bonds, money market instruments, and other investments.

**Short Sale.** A transaction in which a fund sells a stock it does not own and then borrows the stock from a lender in order to settle the transaction. A fund will engage in short sales when its advisor believes that the price of the stock will decline or underperform.

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**Total Return.** A percentage change, over a specified time period, in a mutual fund's net asset value, assuming the reinvestment of all distributions of dividends and capital gains.

**Volatility.** The fluctuations in value of a mutual fund or other security. The greater a fund's volatility, the wider the fluctuations in its returns.

**Yield.** Income (interest or dividends) earned by an investment, expressed as a percentage of the investment's price.

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**Connect with Vanguard**<sup>®</sup>˃ vanguard.com

**For More Information**

If you would like more information about Vanguard Market Neutral Fund, the following documents are available free upon request:

**Annual/Semiannual Reports to Shareholders**

Additional information about the Fund's investments is available in the Fund's annual and semiannual reports to shareholders. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year.

**Statement of Additional Information (SAI)**

The SAI provides more detailed information about the Fund and is incorporated by reference into (and thus legally a part of) this prospectus.

To receive a free copy of the latest annual or semiannual report or the SAI, or to request additional information about the Fund or other Vanguard funds, please visit *vanguard.com* or contact us as follows:

*If you are an individual investor:*

Telephone: 800-662-7447; Text telephone for people with hearing impairment: 800-749-7273

*If you are a client of Vanguard's Institutional Division:*

Telephone: 888-809-8102; Text telephone for people

with hearing impairment: 800-749-7273

If you are a current Vanguard shareholder and would like information about your account, account transactions, and/or account statements, please call:

Client Services Department

Telephone: 800-662-2739; Text telephone for people with hearing impairment: 800-749-7273

**Information Provided by the SEC**

Reports and other information about the Fund are available in the EDGAR database on the SEC's website at sec.gov, or you can receive copies of this information, for a fee, by electronic request at the following email address: publicinfo@sec.gov.

Fund's Investment Company Act file number: 811-22114© 2022 The Vanguard Group, Inc. All rights reserved.

Vanguard Marketing Corporation, Distributor.

I 734 022023

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