Vanguard International Stock Index Funds Annual Report

All three funds succeeded in capturing the
returns of their respective target indexes.
However, because of temporary price
differences arising from fair-value pricing
policies (please see the text box on page
9), the funds’ returns appear to have
diverged from those of their benchmarks,
which are not adjusted for fair value.
If you own one or more of the funds in a
taxable account, you may wish to review
the details of the funds’ after-tax returns
on page 94.
A vicious bear market
quickly turned bullish
A year ago, the global financial system
stood on the brink of collapse as the
expanding U.S. credit crisis precipitated
the deepest worldwide recession since
World War II. Since then, markets have
pulled back from the depths and, in fact,
have rallied impressively. Although U.S.
unemployment has risen to double digits
and signs of a robust recovery are hard
to find, the global economy has begun
to revive. For the first time in more than
a year, U.S. gross domestic product
registered growth, as reported by the
Commerce Department for the third
quarter of calendar 2009.
U.S. stocks recorded positive returns
for the fiscal year ended October 31 as
the market’s losses during the first four
months of the period—marking the final
plunge of a historic bear market—were
erased by a remarkable rally beginning
in March. Global stocks did even better,
thanks to some renewed strength in
Market Barometer
Average Annual Total Returns
Periods Ended October 31, 2009
One Year Three Years Five Years
Stocks
MSCI All Country World Index ex USA (International) 34.79% –2.49% 7.58%
Russell 1000 Index (Large-caps) 11.20 –6.84 0.71
Russell 2000 Index (Small-caps) 6.46 –8.51 0.59
Dow Jones U.S. Total Stock Market Index 11.34 –6.55 1.06
Bonds
Barclays Capital U.S. Aggregate Bond Index
(Broad taxable market) 13.79% 6.35% 5.05%
Barclays Capital Municipal Bond Index 13.60 4.17 4.15
Citigroup 3-Month Treasury Bill Index 0.28 2.50 2.94
CPI
Consumer Price Index –0.18% 2.32% 2.52%
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