Vanguard LifeStrategy® Funds

Prospectus

February 27, 2020

Investor Shares

Vanguard LifeStrategy Income Fund Investor Shares (VASIX)

Vanguard LifeStrategy Conservative Growth Fund Investor Shares (VSCGX) Vanguard LifeStrategy Moderate Growth Fund Investor Shares (VSMGX) Vanguard LifeStrategy Growth Fund Investor Shares (VASGX)

See the inside front cover for important information about access to your fund's annual and semiannual shareholder reports.

This prospectus contains financial data for the Funds through the fiscal year ended October 31, 2019.

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.

Important information about access to shareholder reports

Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of your fund's annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

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

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

Contents

Vanguard Fund Summaries

 

More on the Funds

22

LifeStrategy Income Fund

1

The Funds and Vanguard

32

 

 

 

 

LifeStrategy Conservative Growth Fund

6

Investment Advisor

33

 

 

 

 

LifeStrategy Moderate Growth Fund

11

Taxes

33

 

 

 

 

LifeStrategy Growth Fund

16

Share Price

34

 

 

 

 

Investing in Vanguard LifeStrategy Funds

21

Financial Highlights

35

 

 

 

 

 

 

General Information

40

 

 

 

 

 

 

Glossary of Investment Terms

44

 

 

 

 

Vanguard LifeStrategy Income Fund

Investment Objective

The Fund seeks to provide current income and some capital appreciation.

Fees and Expenses

The following table describes the fees and expenses you may pay if you buy and hold shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases

None

Purchase Fee

None

 

 

Sales Charge (Load) Imposed on Reinvested Dividends

None

 

 

Redemption Fee

None

 

 

Annual Fund Operating Expenses

 

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

 

 

 

Management Fees

None

 

 

12b-1 Distribution Fee

None

 

 

Other Expenses

None

 

 

Acquired Fund Fees and Expenses

0.11%

 

 

Total Annual Fund Operating Expenses

0.11%

 

 

1

Example

The following example is intended to help you compare the cost of investing in the Fund (based on the fees and expenses of the acquired funds) 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 Fund provides a return of 5% each year and that total annual fund operating expenses of the Fund and its underlying funds 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:

1 Year

3 Years

5 Years

10 Years

$11

$35

$62

$141

 

 

 

 

This example does not include fees associated with the income annuity program through which you invest. Detailed information about the annuity program fees is presented in the "Fee Table" section of the accompanying prospectus of the insurance company that offers your annuity program.

Portfolio Turnover

The Fund may pay transaction costs, such as purchase fees, 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 6% of the average value of its portfolio.

Principal Investment Strategies

The Fund invests in other Vanguard mutual funds according to a fixed formula that reflects an allocation of approximately 80% of the Fund's assets to bonds and 20% to common stocks. The targeted percentage of the Fund's assets allocated to each of the underlying funds is:

• Vanguard Total Bond Market II Index Fund

56%

Vanguard Total International Bond Index Fund

24%

• Vanguard Total Stock Market Index Fund

12%

Vanguard Total International Stock Index Fund

8%

2

The Fund's indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds; mortgage-backed and asset-backed securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize foreign currency exposure). The Fund's indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks.

Principal Risks

The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money. However, because fixed income securities such as bonds usually are less volatile than stocks and because the Fund invests most of its assets in fixed income securities, the Fund's overall level of risk should be relatively low.

With a target allocation of approximately 80% of its assets in bonds, the Fund is

proportionately subject to bond risks, including the following: interest rate risk, which is the chance that bond prices will decline because of rising interest rates; credit risk, which is the chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline, thus reducing an underlying fund's return; and income risk, which is the chance that an underlying fund's income will decline because of falling interest rates. If an underlying fund holds securities that are callable, the underlying fund's income may decline because of call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund's income. The Fund is also subject to the following risks associated with investments in currency-hedged foreign bonds: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or liquidity of securities issued by foreign governments, government agencies, or companies; and currency hedging risk, which is the chance that the currency hedging transactions entered into by the underlying international bond fund may not perfectly offset the fund's foreign currency exposure.

With a target allocation of approximately 20% of its assets in stocks, the Fund is proportionately subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

The Fund is also subject to asset allocation risk, which is the chance that the selection of underlying funds, and the allocation of a high percentage of assets to a

3

relatively few number of underlying funds, may cause the Fund to be hurt disproportionately by the poor performance of any one underlying fund or to underperform other funds with a similar investment objective.

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 has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Fund compare with those of relevant market indexes and a composite bond/stock index, which have investment characteristics similar to those of the Fund. The bar chart and table do not reflect additional fees and expenses that are deducted by the income annuity program through which you invest. If such fees and expenses were included in the calculation of the Fund's returns, the returns would be lower. Keep in mind that the Fund's past performance 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 LifeStrategy Income Fund Investor Shares

 

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

 

 

60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20%

9.22

3.77

6.54

3.40

6.76

 

0.22

4.58

6.98

 

 

12.05

 

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-1.05

 

 

 

 

-20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the periods shown in the bar chart, the highest return for a calendar quarter was 4.87% (quarter ended March 31, 2019), and the lowest return for a quarter was –2.20% (quarter ended September 30, 2011).

4

Average Annual Total Returns for Periods Ended December 31, 2019

 

1 Year

5 Years

10 Years

Vanguard LifeStrategy Income Fund Investor Shares

12.05%

4.45%

5.18%

 

 

 

 

Comparative Indexes

 

 

 

(reflect no deduction for fees or expenses)

 

 

 

 

 

 

 

Bloomberg Barclays U.S. Aggregate Bond Index

8.72%

3.05%

3.75%

 

 

 

 

Bloomberg Barclays U.S. Aggregate Float Adjusted Index

8.87

3.07

3.78

 

 

 

 

Income Composite Index

12.26

4.63

5.36

 

 

 

 

Investment Advisor

The Fund does not employ an investment advisor but benefits from the investment advisory services provided to the underlying funds in which it invests. The investment advisor to the underlying funds is The Vanguard Group, Inc. (Vanguard).

Portfolio Manager

The Fund does not employ a portfolio manager. Rather, the Fund's board of trustees decides how to allocate the Fund's assets among the underlying funds.

Tax Information

The tax consequences of your investment in the Fund depend on the provisions of the income annuity program through which you invest. For more information on taxes, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

Payments to Financial Intermediaries

The Fund does not pay financial intermediaries for sales of Fund shares.

5

Vanguard LifeStrategy Conservative Growth Fund

Investment Objective

The Fund seeks to provide current income and low to moderate capital appreciation.

Fees and Expenses

The following table describes the fees and expenses you may pay if you buy and hold shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases

None

Purchase Fee

None

 

 

Sales Charge (Load) Imposed on Reinvested Dividends

None

 

 

Redemption Fee

None

 

 

Annual Fund Operating Expenses

 

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

 

 

 

Management Fees

None

 

 

12b-1 Distribution Fee

None

 

 

Other Expenses

None

 

 

Acquired Fund Fees and Expenses

0.12%

 

 

Total Annual Fund Operating Expenses

0.12%

 

 

6

Example

The following example is intended to help you compare the cost of investing in the Fund (based on the fees and expenses of the acquired funds) 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 Fund provides a return of 5% each year and that total annual fund operating expenses of the Fund and its underlying funds 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:

1 Year

3 Years

5 Years

10 Years

$12

$39

$68

$154

 

 

 

 

This example does not include fees associated with the income annuity program through which you invest. Detailed information about the annuity program fees is presented in the "Fee Table" section of the accompanying prospectus of the insurance company that offers your annuity program.

Portfolio Turnover

The Fund may pay transaction costs, such as purchase fees, 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 9% of the average value of its portfolio.

Principal Investment Strategies

The Fund invests in other Vanguard mutual funds according to a fixed formula that reflects an allocation of approximately 60% of the Fund's assets to bonds and 40% to common stocks. The targeted percentage of the Fund's assets allocated to each of the underlying funds is:

• Vanguard Total Bond Market II Index Fund

42%

• Vanguard Total Stock Market Index Fund

24%

Vanguard Total International Bond Index Fund

18%

Vanguard Total International Stock Index Fund

16%

7

The Fund's indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds; mortgage-backed and asset-backed securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize foreign currency exposure). The Fund's indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks.

Principal Risks

The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money. However, because fixed income securities such as bonds usually are less volatile than stocks and because the Fund invests more than half of its assets in fixed income securities, the Fund's overall level of risk should be low to moderate.

With a target allocation of approximately 60% of its assets in bonds, the Fund is

proportionately subject to bond risks, including the following: interest rate risk, which is the chance that bond prices will decline because of rising interest rates; credit risk, which is the chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline, thus reducing an underlying fund's return; and income risk, which is the chance that an underlying fund's income will decline because of falling interest rates. If an underlying fund holds securities that are callable, the underlying fund's income may decline because of call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund's income. The Fund is also subject to the following risks associated with investments in currency-hedged foreign bonds: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or liquidity of securities issued by foreign governments, government agencies, or companies; and currency hedging risk, which is the chance that the currency hedging transactions entered into by the underlying international bond fund may not perfectly offset the fund's foreign currency exposure.

With a target allocation of approximately 40% of its assets in stocks, the Fund is proportionately subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The Fund is also subject to the following risks associated with investments in foreign stocks: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will

8

adversely affect the value of securities issued by companies in foreign countries or regions; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.

The Fund is also subject to asset allocation risk, which is the chance that the selection of underlying funds, and the allocation of a high percentage of assets to a relatively few number of underlying funds, may cause the Fund to be hurt disproportionately by the poor performance of any one underlying fund or to underperform other funds with a similar investment objective.

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 has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Fund compare with those of relevant market indexes and a composite bond/stock index, which have investment characteristics similar to those of the Fund. The bar chart and table do not reflect additional fees and expenses that are deducted by the income annuity program through which you invest. If such fees and expenses were included in the calculation of the Fund's returns, the returns would be lower. Keep in mind that the Fund's past performance 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 LifeStrategy Conservative Growth Fund Investor Shares

 

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

 

 

60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.68

 

 

20%

11.14

1.76

9.19

9.08

6.95

 

 

5.96

10.92

 

 

 

 

 

 

 

 

 

 

 

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-0.17

 

 

 

 

-2.95

 

 

 

 

-20%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the periods shown in the bar chart, the highest return for a calendar quarter was 6.87% (quarter ended September 30, 2010), and the lowest return for a quarter was –6.35% (quarter ended September 30, 2011).

9

Average Annual Total Returns for Periods Ended December 31, 2019

 

1 Year

5 Years

10 Years

Vanguard LifeStrategy Conservative Growth Fund Investor

 

 

 

Shares

15.68%

5.67%

6.62%

 

 

 

 

Comparative Indexes

 

 

 

(reflect no deduction for fees or expenses)

 

 

 

 

 

 

 

Bloomberg Barclays U.S. Aggregate Bond Index

8.72%

3.05%

3.75%

 

 

 

 

Bloomberg Barclays U.S. Aggregate Float Adjusted Index

8.87

3.07

3.78

 

 

 

 

Dow Jones U.S. Total Stock Market Float Adjusted Index

30.90

11.18

13.43

 

 

 

 

Conservative Growth Composite Index

15.94

5.85

6.76

 

 

 

 

Investment Advisor

The Fund does not employ an investment advisor but benefits from the investment advisory services provided to the underlying funds in which it invests. The investment advisor to the underlying funds is The Vanguard Group, Inc. (Vanguard).

Portfolio Manager

The Fund does not employ a portfolio manager. Rather, the Fund's board of trustees decides how to allocate the Fund's assets among the underlying funds.

Tax Information

The tax consequences of your investment in the Fund depend on the provisions of the income annuity program through which you invest. For more information on taxes, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

Payments to Financial Intermediaries

The Fund does not pay financial intermediaries for sales of Fund shares.

10

Vanguard LifeStrategy Moderate Growth Fund

Investment Objective

The Fund seeks to provide capital appreciation and a low to moderate level of current income.

Fees and Expenses

The following table describes the fees and expenses you may pay if you buy and hold shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases

None

Purchase Fee

None

 

 

Sales Charge (Load) Imposed on Reinvested Dividends

None

 

 

Redemption Fee

None

 

 

Annual Fund Operating Expenses

 

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

 

 

 

Management Fees

None

 

 

12b-1 Distribution Fee

None

 

 

Other Expenses

None

 

 

Acquired Fund Fees and Expenses

0.13%

 

 

Total Annual Fund Operating Expenses

0.13%

 

 

11

Example

The following example is intended to help you compare the cost of investing in the Fund (based on the fees and expenses of the acquired funds) 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 Fund provides a return of 5% each year and that total annual fund operating expenses of the Fund and its underlying funds 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:

1 Year

3 Years

5 Years

10 Years

$13

$42

$73

$166

 

 

 

 

This example does not include fees associated with the income annuity program through which you invest. Detailed information about the annuity program fees is presented in the "Fee Table" section of the accompanying prospectus of the insurance company that offers your annuity program.

Portfolio Turnover

The Fund may pay transaction costs, such as purchase fees, 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 9% of the average value of its portfolio.

Principal Investment Strategies

The Fund invests in other Vanguard mutual funds according to a fixed formula that reflects an allocation of approximately 60% of the Fund's assets to common stocks and 40% to bonds. The targeted percentage of the Fund's assets allocated to each of the underlying funds is:

• Vanguard Total Stock Market Index Fund

36%

• Vanguard Total Bond Market II Index Fund

28%

Vanguard Total International Stock Index Fund

24%

Vanguard Total International Bond Index Fund

12%

12

The Fund's indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks. The Fund's indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds; mortgage-backed and asset-backed securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize foreign currency exposure).

Principal Risks

The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money. However, because fixed income securities such as bonds usually are less volatile than stocks and because the Fund invests a significant portion of its assets in fixed income securities, the Fund's overall level of risk should be moderate.

With a target allocation of approximately 60% of its assets in stocks, the Fund is proportionately subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The Fund is also subject to the following risks associated with investments in foreign stocks: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value of securities issued by companies in foreign countries or regions; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.

With a target allocation of approximately 40% of its assets in bonds, the Fund is proportionately subject to bond risks, including the following: interest rate risk, which is the chance that bond prices will decline because of rising interest rates; credit risk, which is the chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline, thus reducing an underlying fund's return; and income risk, which is the chance that an underlying fund's income will decline because of falling interest rates. If an underlying fund holds securities that are callable, the underlying fund's income may decline because of call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund's income. The Fund is also subject to the following risks associated with investments in currency-hedged foreign bonds: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or

13

liquidity of securities issued by foreign governments, government agencies, or companies; and currency hedging risk, which is the chance that the currency hedging transactions entered into by the underlying international bond fund may not perfectly offset the fund's foreign currency exposure.

The Fund is also subject to asset allocation risk, which is the chance that the selection of underlying funds, and the allocation of a high percentage of assets to a relatively few number of underlying funds, may cause the Fund to be hurt disproportionately by the poor performance of any one underlying fund or to underperform other funds with a similar investment objective.

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 has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Fund compare with those of relevant market indexes and a composite stock/bond index, which have investment characteristics similar to those of the Fund. The bar chart and table do not reflect additional fees and expenses that are deducted by the income annuity program through which you invest. If such fees and expenses were included in the calculation of the Fund's returns, the returns would be lower. Keep in mind that the Fund's past performance 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 LifeStrategy Moderate Growth Fund Investor Shares

 

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

 

 

60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40%

 

 

 

 

 

 

15.04

 

 

 

 

 

 

15.04

 

 

19.37

 

 

20%

13.31

 

 

11.76

7.07

 

 

7.13

 

 

 

 

 

 

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-20%

 

 

 

 

 

 

 

 

 

 

-0.57

 

 

 

 

-4.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the periods shown in the bar chart, the highest return for a calendar quarter was 9.13% (quarter ended September 30, 2010), and the lowest return for a quarter was –9.75% (quarter ended September 30, 2011).

14

Average Annual Total Returns for Periods Ended December 31, 2019

 

1 Year

5 Years

10 Years

Vanguard LifeStrategy Moderate Growth Fund Investor

 

 

 

Shares

19.37%

6.82%

8.08%

 

 

 

 

Comparative Indexes

 

 

 

(reflect no deduction for fees or expenses)

 

 

 

 

 

 

 

Bloomberg Barclays U.S. Aggregate Bond Index

8.72%

3.05%

3.75%

 

 

 

 

Bloomberg Barclays U.S. Aggregate Float Adjusted Index

8.87

3.07

3.78

 

 

 

 

Dow Jones U.S. Total Stock Market Float Adjusted Index

30.90

11.18

13.43

 

 

 

 

Moderate Growth Composite Index

19.67

7.01

8.33

 

 

 

 

Investment Advisor

The Fund does not employ an investment advisor but benefits from the investment advisory services provided to the underlying funds in which it invests. The investment advisor to the underlying funds is The Vanguard Group, Inc. (Vanguard).

Portfolio Manager

The Fund does not employ a portfolio manager. Rather, the Fund's board of trustees decides how to allocate the Fund's assets among the underlying funds.

Tax Information

The tax consequences of your investment in the Fund depend on the provisions of the income annuity program through which you invest. For more information on taxes, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

Payments to Financial Intermediaries

The Fund does not pay financial intermediaries for sales of Fund shares.

15

Vanguard LifeStrategy Growth Fund

Investment Objective

The Fund seeks to provide capital appreciation and some current income.

Fees and Expenses

The following table describes the fees and expenses you may pay if you buy and hold shares of the Fund.

Shareholder Fees

(Fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases

None

Purchase Fee

None

 

 

Sales Charge (Load) Imposed on Reinvested Dividends

None

 

 

Redemption Fee

None

 

 

Annual Fund Operating Expenses

 

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

 

 

 

Management Fees

None

 

 

12b-1 Distribution Fee

None

 

 

Other Expenses

None

 

 

Acquired Fund Fees and Expenses

0.14%

 

 

Total Annual Fund Operating Expenses

0.14%

 

 

16

Example

The following example is intended to help you compare the cost of investing in the Fund (based on the fees and expenses of the acquired funds) 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 Fund provides a return of 5% each year and that total annual fund operating expenses of the Fund and its underlying funds 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:

1 Year

3 Years

5 Years

10 Years

$14

$45

$79

$179

 

 

 

 

This example does not include fees associated with the income annuity program through which you invest. Detailed information about the annuity program fees is presented in the "Fee Table" section of the accompanying prospectus of the insurance company that offers your annuity program.

Portfolio Turnover

The Fund may pay transaction costs, such as purchase fees, 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 6% of the average value of its portfolio.

Principal Investment Strategies

The Fund invests in other Vanguard mutual funds according to a fixed formula that reflects an allocation of approximately 80% of the Fund's assets to common stocks and 20% to bonds. The targeted percentage of the Fund's assets allocated to each of the underlying funds is:

• Vanguard Total Stock Market Index Fund

48%

Vanguard Total International Stock Index Fund

32%

• Vanguard Total Bond Market II Index Fund

14%

Vanguard Total International Bond Index Fund

6%

17

The Fund's indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks. The Fund's indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and investment-grade U.S. corporate bonds; mortgage-backed and asset-backed securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize foreign currency exposure).

Principal Risks

The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money. However, because stocks usually are more volatile than bonds and because the Fund invests most of its assets in stocks, the Fund's overall level of risk should be moderate to high.

With a target allocation of approximately 80% of its assets in stocks, the Fund is proportionately subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. The Fund is also subject to the following risks associated with investments in foreign stocks: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value of securities issued by companies in foreign countries or regions; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.

With a target allocation of approximately 20% of its assets in bonds, the Fund is

proportionately subject to bond risks, including the following: interest rate risk, which is the chance that bond prices will decline because of rising interest rates; credit risk, which is the chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline, thus reducing an underlying fund's return; and income risk, which is the chance that an underlying fund's income will decline because of falling interest rates. If an underlying fund holds securities that are callable, the underlying fund's income may decline because of call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund's income. The Fund is also subject to the following risks associated with investments in currency-hedged foreign bonds: country/regional risk, which is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or liquidity of securities issued by foreign governments, government agencies, or

18

companies; and currency hedging risk, which is the chance that the currency hedging transactions entered into by the underlying international bond fund may not perfectly offset the fund's foreign currency exposure.

The Fund is also subject to asset allocation risk, which is the chance that the selection of underlying funds, and the allocation of a high percentage of assets to a relatively few number of underlying funds, may cause the Fund to be hurt disproportionately by the poor performance of any one underlying fund or to underperform other funds with a similar investment objective.

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 has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the Fund compare with those of relevant market indexes and a composite stock/bond index, which have investment characteristics similar to those of the Fund. The bar chart and table do not reflect additional fees and expenses that are deducted by the income annuity program through which you invest. If such fees and expenses were included in the calculation of the Fund's returns, the returns would be lower. Keep in mind that the Fund's past performance 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 LifeStrategy Growth Fund Investor Shares

 

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

 

 

60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40%

15.06

 

 

 

 

21.20

 

 

 

 

 

 

19.21

 

 

23.13

 

 

20%

 

 

14.38

7.18

 

 

8.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-20%

 

 

-2.28

 

 

 

 

 

 

-1.17

 

 

 

 

-6.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the periods shown in the bar chart, the highest return for a calendar quarter was 11.21% (quarter ended September 30, 2010), and the lowest return for a quarter was –13.85% (quarter ended September 30, 2011).

19

Average Annual Total Returns for Periods Ended December 31, 2019

 

1 Year

5 Years

10 Years

Vanguard LifeStrategy Growth Fund Investor Shares

23.13%

7.91%

9.35%

 

 

 

 

Comparative Indexes

 

 

 

(reflect no deduction for fees or expenses)

 

 

 

 

 

 

 

Dow Jones U.S. Total Stock Market Float Adjusted Index

30.90%

11.18%

13.43%

 

 

 

 

FTSE Global All Cap ex US Index

21.80

5.84

5.39

 

 

 

 

Growth Composite Index

23.46

8.12

9.60

 

 

 

 

Investment Advisor

The Fund does not employ an investment advisor but benefits from the investment advisory services provided to the underlying funds in which it invests. The investment advisor to the underlying funds is The Vanguard Group, Inc. (Vanguard).

Portfolio Manager

The Fund does not employ a portfolio manager. Rather, the Fund's board of trustees decides how to allocate the Fund's assets among the underlying funds.

Tax Information

The tax consequences of your investment in the Fund depend on the provisions of the income annuity program through which you invest. For more information on taxes, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

Payments to Financial Intermediaries

The Fund does not pay financial intermediaries for sales of Fund shares.

20

Investing in Vanguard LifeStrategy Funds

This prospectus provides information about the Vanguard LifeStrategy Funds, a group of mutual funds that separately invest fixed percentages of assets in four other Vanguard stock and bond mutual funds. Because the Funds invest in other funds, rather than in individual securities, each Fund is considered a fund of funds.

The LifeStrategy Funds offer four distinct choices for different investment styles and life stages. Because an investor's risk tolerance, investment goals, investment time horizon, and financial circumstances are subject to change over time, the LifeStrategy Funds offer different strategies for attaining capital growth and income. The allocation to stocks and bonds in each LifeStrategy Fund reflects its greater or lesser emphasis on pursuing current income or growth of capital.

21

More on the Funds

This prospectus describes the principal risks you would face as an investor in these Funds. 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 symbol throughout the prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund investor. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk® explanations along the way. Reading the prospectus will help you decide whether a Fund is the right investment for you. We suggest that you keep this prospectus for future reference.

This prospectus is intended for investors who would like to open an income annuity (also referred to as an immediate annuity) account through a contract offered by an insurance company. Another version—for investors who would like to open a personal investment account—can be obtained by visiting our website at vanguard.com or by calling Vanguard at 800-662-7447.

A Note About Investing in the Funds

Each Fund is a mutual fund used as an investment option for income annuity programs offered by insurance companies and for personal investment accounts. When investing through an insurance company, you cannot purchase shares of a Fund directly, but only through a contract offered by the insurance company.

The Funds' income annuity accounts' performance will differ from the performance of personal investment accounts because of administrative and insurance costs associated with the income annuity programs.

Plain Talk About Costs of Investing

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

22

The following sections explain the principal investment strategies and policies that each Fund uses in pursuit of its objective. The Funds' board of trustees, which oversees each 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. As funds of funds, the LifeStrategy Funds achieve their investment objectives by investing in other Vanguard mutual funds. Through its investments in underlying funds, each LifeStrategy Fund indirectly owns a diversified portfolio of stocks and bonds.

Asset Allocation Framework

Asset allocation—that is, dividing your investment among stocks and bonds—is one of the most critical decisions you can make as an investor. The best mix for you will depend on your personal investment objective, time horizon, and risk tolerance. The LifeStrategy Funds offer four preset asset allocation strategies, and so provide shareholders with a simple way to meet typical investment needs at different stages of life.

Each Fund invests in four underlying Vanguard funds to pursue a target allocation of stocks and bonds. The following table illustrates the targeted asset allocation for each Fund:

 

Stocks

Bonds

LifeStrategy Income Fund

20%

80%

 

 

 

LifeStrategy Conservative Growth Fund

40%

60%

 

 

 

LifeStrategy Moderate Growth Fund

60%

40%

 

 

 

LifeStrategy Growth Fund

80%

20%

 

 

 

Market Exposure

Each LifeStrategy Fund invests in a different proportion of four Vanguard funds—two equity funds and two bond funds. Designed as a balanced fund of funds for long-term investors, each Vanguard LifeStrategy Fund is diversified in terms of both asset class and investment style.

Stocks

By owning shares of two Vanguard stock mutual funds, each LifeStrategy Fund indirectly invests, to varying degrees, in U.S. stocks, with an emphasis on large-cap stocks. To a lesser extent, each LifeStrategy Fund also invests in mid- and small-cap U.S. stocks and foreign stocks.

23

Each Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. Each Fund's investments in foreign stocks can be riskier than U.S. stock investments. Foreign stocks may be more volatile and less liquid than U.S. stocks. The prices of foreign stocks and the prices of U.S. stocks may move in opposite directions.

Historically, mid- and small-cap stocks have been more volatile than—and at times have performed quite differently from—large-cap stocks. This volatility is the result of several factors, including the fact that smaller companies often have fewer customers and financial resources than larger firms. These characteristics can make mid-size and small companies more sensitive to economic conditions, leading to less certain growth and dividend prospects.

Stocks of publicly traded companies are often classified according to market value, or market capitalization, which is the market value of a company's outstanding shares. These classifications typically include small-cap, mid-cap, and large-cap. It is important to understand that there are no "official" definitions of small-, mid-, and large-cap, even among Vanguard fund advisors, and that market capitalization ranges can change over time. As of the calendar year ended December 31, 2019, the stocks in the underlying domestic equity fund had an asset-weighted median market capitalization of approximately $83 billion. The stocks in the underlying international equity fund had an asset-weighted median market capitalization of approximately $29 billion.

By owning shares of Vanguard Total International Stock Index Fund, each LifeStrategy Fund is subject to risks associated with investments in foreign stocks.

Each Fund is subject to country/regional risk and currency risk. Country/regional risk is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value of securities issued by companies in foreign countries or regions. Currency risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates. Country/regional risk and currency risk are especially high in emerging markets.

24

Plain Talk About International Investing

U.S. investors who invest in foreign securities will encounter risks not typically associated with U.S. companies because foreign stock and bond markets operate differently from the U.S. markets. For instance, foreign companies and governments may not be subject to the same or similar accounting, auditing, legal, tax, and financial reporting standards and practices as U.S. companies and the U.S. government, and their stocks and bonds may not be as liquid as those of similar U.S. entities. In addition, foreign stock exchanges, brokers, companies, bond markets, and dealers may be subject to less government supervision and regulation than their counterparts in the United States. These factors, among others, could negatively affect the returns U.S. investors receive from foreign investments.

Bonds

By owning shares of two Vanguard bond mutual funds, each LifeStrategy Fund indirectly invests, to varying degrees, in U.S. government, agency, and corporate bonds; mortgage-backed and asset-backed securities; and currency-hedged foreign bonds.

Each Fund is subject to interest rate risk, which is the chance that bond prices will decline because of rising interest rates. Interest rate risk should be low for short-term bonds, moderate for intermediate-term bonds, and high for long- term bonds.

Although bonds are often thought to be less risky than stocks, there have been periods when bond prices have fallen significantly because of rising interest rates. For instance, prices of long-term bonds fell by almost 48% between December 1976 and September 1981.

To illustrate the relationship between bond prices and interest rates, the following table shows the effect of a 1% and a 2% change (both up and down) in interest rates on the values of three noncallable bonds (i.e., bonds that cannot be redeemed by the issuer) of different maturities, each with a face value of $1,000.

25

How Interest Rate Changes Affect the Value of a $1,000 Bond1

 

After a 1%

After a 1%

After a 2%

After a 2%

Type of Bond (Maturity)

Increase

Decrease

Increase

Decrease

 

 

 

 

 

Short-Term (2.5 years)

$977

$1,024

$954

$1,049

 

 

 

 

 

Intermediate-Term (10 years)

922

1,086

851

1,180

 

 

 

 

 

Long-Term (20 years)

874

1,150

769

1,328

 

 

 

 

 

1 Assuming a 4% coupon rate.

These figures are for illustration only; you should not regard them as an indication of future performance of the bond market as a whole or the Funds in particular.

Changes in interest rates can affect bond income as well as bond prices.

Plain Talk About Bonds and Interest Rates

As a rule, when interest rates rise, bond prices fall. The opposite is also true: Bond prices go up when interest rates fall. Why do bond prices and interest rates move in opposite directions? Let's assume that you hold a bond offering a 4% yield. A year later, interest rates are on the rise and bonds of comparable quality and maturity are offered with a 5% yield. With higher-yielding bonds available, you would have trouble selling your 4% bond for the price you paid—you would probably have to lower your asking price. On the other hand, if interest rates were falling and 3% bonds were being offered, you should be able to sell your 4% bond for more than you paid.

How mortgage-backed securities are different: In general, declining interest rates will not lift the prices of mortgage-backed securities—such as those guaranteed by the Government National Mortgage Association—as much as the prices of comparable bonds. Why? Because when interest rates fall, the bond market tends to discount the prices of mortgage-backed securities for prepayment risk— the possibility that homeowners will refinance their mortgages at lower rates and cause the bonds to be paid off prior to maturity. In part to compensate for this prepayment possibility, mortgage-backed securities tend to offer higher yields than other bonds of comparable credit quality and maturity. In contrast, when interest rates rise, prepayments tend to slow down, subjecting mortgage-backed securities to extension risk—the possibility that homeowners will repay their mortgages at slower rates. This will lengthen the duration or average life of mortgage-backed securities held by a fund and delay the fund's ability to reinvest proceeds at higher interest rates, making the fund more sensitive to changes in interest rates.

26

Plain Talk About Bond Maturities

A bond is issued with a specific maturity date—the date when the issuer must pay back the bond's principal (face value). Bond maturities range from less than 1 year to more than 30 years. Typically, the longer a bond's maturity, the more price risk you, as a bond investor, will face as interest rates rise—but also the higher the potential yield you could receive. Longer-term bonds are more suitable for investors willing to take a greater risk of price fluctuations to get higher and more stable interest income. Shorter-term bond investors should be willing to accept lower yields and greater income variability in return for less fluctuation in the value of their investment. The stated maturity of a bond may differ from the effective maturity of a bond, which takes into consideration that an action such as a call or refunding may cause bonds to be repaid before their stated maturity dates.

Each Fund is subject to call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. An underlying fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the underlying fund's income.

For mortgage-backed securities, the risk that borrowers (e.g., homeowners) may refinance their mortgages at lower interest rates is known as prepayment risk.

Because Vanguard Total Bond Market II Index Fund invests only a portion of its assets in callable bonds and mortgage-backed securities, call/prepayment risk for each Fund should be low to moderate.

Each Fund is subject to credit risk, which is the chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline, thus reducing the underlying fund's return.

The credit quality of most of the bonds held by the underlying funds is expected to be very high, and thus credit risk for the LifeStrategy Funds should be low.

Each Fund is subject to income risk, which is the chance that an underlying fund's income will decline because of falling interest rates. A fund holding bonds will experience a decline in income when interest rates fall because the fund then must invest new cash flow and cash from maturing bonds in lower- yielding bonds. Income risk is generally higher for funds holding short-term bonds and lower for funds holding long-term bonds.

27

To a limited extent, the Funds are also indirectly exposed to event risk, which is the chance that corporate fixed income securities held by the underlying funds will suffer a substantial decline in credit quality and market value because of a corporate restructuring.

By owning shares of Vanguard Total International Bond Index Fund, each LifeStrategy Fund is subject to risks associated with investments in currency-hedged foreign bonds.

Each Fund is subject to country/regional risk and currency hedging risk. Country/regional risk is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or liquidity of securities issued by foreign governments, government agencies, or companies. Currency hedging risk is the chance that the currency hedging transactions entered into by the underlying international bond fund may not perfectly offset the fund's foreign currency exposure.

Security Selection

Each Fund seeks to achieve its objective by investing in fixed percentages of four underlying Vanguard funds. The following table shows the targeted percentages for each Fund. As of the date of this prospectus, each Fund is invested in Investor Shares of each underlying Vanguard fund. Share class changes may be made without prior notice to shareholders.

 

 

LifeStrategy Fund

 

 

 

Conservative

Moderate

 

Underlying Vanguard Fund

Income

Growth

Growth

Growth

 

 

 

 

 

Total Stock Market Index Fund

12%

24%

36%

48%

 

 

 

 

 

Total International Stock Index Fund

8

16

24

32

 

 

 

 

 

Total Bond Market II Index Fund

56

42

28

14

 

 

 

 

 

Total International Bond Index Fund

24

18

12

6

 

 

 

 

 

Totals

100%

100%

100%

100%

 

 

 

 

 

The Vanguard LifeStrategy Funds' board of trustees allocates each Fund's assets among the underlying funds based on the Fund's investment objective and policies. The board may change these allocations from time to time without shareholder approval. The Funds' investments in the underlying funds may be affected by other factors as well. For example, an underlying fund may stop accepting or may limit additional investments, forcing the Funds to invest in a different underlying fund.

The following paragraphs briefly describe the underlying Vanguard funds in which the Funds invest.

28

Vanguard Total Stock Market Index Fund seeks to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The fund invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics.

Vanguard Total International Stock Index Fund seeks to track the performance of the FTSE Global All Cap ex US Index, a float-adjusted market-capitalization-weighted index designed to measure equity market performance of companies located in developed and emerging markets, excluding the United States. The Index includes approximately 7,125 stocks of companies located in 48 markets. The Index is most heavily weighted in Japan, the United Kingdom, China, France, Canada, and Switzerland.

Vanguard Total Bond Market II Index Fund seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index by investing in a representative sample of bonds included in the Index. The Index represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States—including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities—all with maturities of more than 1 year. The fund maintains a dollar-weighted average maturity consistent with that of the Index, which generally ranges between 5 and 10 years.

Vanguard Total International Bond Index Fund seeks to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged) by investing in a representative sample of securities included in the Index.

The Index provides a broad-based measure of the global, investment-grade, fixed-rate debt markets. The Index includes government, government agency, corporate, and securitized non-U.S. investment-grade fixed income investments, all issued in currencies other than the U.S. dollar and with maturities of more than 1 year. The fund maintains a dollar-weighted average maturity consistent with that of the Index, which generally ranges between 5 and 10 years. To minimize the currency risk associated with investment in bonds denominated in currencies other than the U.S. dollar, the fund will attempt to hedge its foreign currency exposure.

Through its investments in the underlying index funds, each LifeStrategy Fund is subject, to a limited extent, to index sampling risk. Index sampling risk is the chance that the securities selected for an underlying fund, in the aggregate, will not provide investment performance matching that of the underlying fund's target index.

Each Fund is subject to asset allocation risk, which is the chance that the selection of underlying funds, and the allocation of a high percentage of assets to a relatively few number of underlying funds, may cause a Fund to be hurt disproportionately by the poor performance of any one underlying fund or to underperform other funds with a similar investment objective.

29

Other Investment Policies and Risks

Each underlying fund may invest, to a limited extent, in derivatives. In addition, the LifeStrategy Funds may invest, to a limited extent, in equity and fixed income futures, which are types of derivatives. Each Fund will use futures both to facilitate the periodic rebalancing of the Fund's portfolio to maintain its target asset allocation and to allow the Fund to remain fully invested in accordance with its investment strategies. 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. Investments in derivatives may subject the Funds and underlying funds to risks different from, and possibly greater than, those of investments directly in the underlying securities or assets. The Funds and underlying funds will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.

Cash Management

Each 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, each 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.

Temporary Investment Measures

Each underlying fund may temporarily depart from its normal investment policies and strategies when the fund's 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 when the fund receives large cash flows that it cannot prudently invest immediately.

Frequent Trading or Market-Timing

Background. Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding 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

30

administrative costs. These costs are borne by all fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisor's ability to efficiently manage the fund.

Policies to address frequent trading. The Vanguard funds (other than money market funds and short-term bond funds, but including 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 a contract owner or annuitant from exchanging into a fund contract for

30 calendar days after the contract owner or annuitant has exchanged out of that fund contract.

Certain Vanguard funds charge shareholders purchase and/or redemption fees

on transactions.

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.

31

Turnover Rate

Although each Fund generally seeks to invest for the long term, it may sell shares of the underlying funds regardless of how long they have been held. The Financial Highlights section of this prospectus shows historical turnover rates for the Funds. A turnover rate of 100%, for example, would mean that a Fund had sold and replaced shares of the underlying funds 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 Funds and Vanguard

Each Fund is a member of The Vanguard Group, a family of over 200 funds. All of the funds that are members of The Vanguard Group (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.

According to an agreement applicable to the LifeStrategy Funds and Vanguard, the Funds' direct expenses may be offset for (1) the Funds' contributions to the costs of operating the underlying Vanguard funds in which the LifeStrategy Funds invest and

(2)certain savings in administrative and marketing costs that Vanguard expects to derive from the Funds' operation.

Accordingly, all expenses for services provided by Vanguard to the Funds and all other expenses incurred by the Fund are expected to be borne by the underlying funds. The Funds' shareholders bear the fees and expenses associated with the Funds' investment in the underlying Vanguard funds.

32

Plain Talk About Vanguard's Unique Corporate Structure

The Vanguard Group is owned jointly by the funds it oversees and thus indirectly by the shareholders in those funds. Most other mutual funds are operated by management companies that are owned by third parties—either public or private stockholders—and not by the funds they serve.

Investment Advisor

The LifeStrategy Funds do not employ an investment advisor. Rather, the Funds' board of trustees decides how to allocate each Fund's assets among the underlying funds. The investment advisor employed by each underlying fund is The Vanguard Group, Inc. (Vanguard), based in Valley Forge, Pennsylvania. Vanguard began operations in 1975 and as of October 31, 2019, served as advisor for approximately $4.7 trillion in assets.

For additional information on the underlying funds' investment advisor, please refer to each underlying fund's prospectus.

Under the terms of an SEC exemption, the Funds' 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 Funds' advisory arrangements will be communicated to shareholders in writing. Vanguard may 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 Funds have 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 Funds may rely on the new SEC relief.

Taxes

The tax consequences of your investment in a Fund depend on the provisions of the income annuity program through which you invest. For more information on taxes, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

33

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, the Fund reserves the right to treat such day as a business day and calculate NAVs 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 NAV per share is computed by dividing the total assets, minus liabilities, of each Fund by the number of Fund shares outstanding. On U.S. holidays or other days when the NYSE is closed, the NAV is not calculated, and the Funds do not sell or redeem shares. The underlying Vanguard funds in which the Funds invest also do not calculate their NAV on days when the NYSE is closed, but the value of their assets may be affected to the extent that they hold securities that change in value on those days (such as foreign securities that trade on foreign markets that are open).

Each Fund's NAV is calculated based upon the values of the underlying mutual funds in which the Fund invests. 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 held by a Fund are based on the market value of the shares. The prospectuses for the underlying funds explain the circumstances under which those funds will use fair-value pricing and the effects of doing so.

Each Fund's NAV is used to determine the annuity's unit value for the income annuity program through which you invest. For more information on unit values, please refer to the accompanying prospectus of the insurance company that offers your annuity program.

34

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.

Yields and total returns presented for each Fund are net of the Fund's operating expenses, but they do not take into account charges and expenses attributable to the income annuity program through which you invest. The expenses of the annuity program reduce the returns and yields you ultimately receive, so you should bear those expenses in mind when evaluating the performance of a Fund and when comparing the yields and returns of the Fund with those of other mutual funds.

35

LifeStrategy Income Fund

 

 

 

Year Ended October 31,

For a Share Outstanding Throughout Each Period

2019

2018

2017

2016

2015

 

 

 

 

 

 

Net Asset Value, Beginning of Period

$15.08

$15.56

$15.14

$14.86

$14.93

 

 

 

 

 

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.4251

.3761

.3321

.312

.309

 

 

 

 

 

 

Capital Gain Distributions Received

.0021

.0081

.012

.012

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss)

 

 

 

 

 

on Investments

1.284

(.470)

.422

.323

(.021)

 

 

 

 

 

 

Total from Investment Operations

1.709

(.092)

.762

.647

.300

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.435)

(.368)

(.334)

(.309)

(.309)

 

 

 

 

 

 

Distributions from Realized Capital Gains

(.114)

(.020)

(.009)

(.058)

(.061)

 

 

 

 

 

 

Total Distributions

(.549)

(.388)

(.343)

(.367)

(.370)

 

 

 

 

 

 

Net Asset Value, End of Period

$16.24

$15.08

$15.56

$15.14

$14.86

 

 

 

 

 

 

Total Return2

11.60%

–0.63%

5.12%

4.42%

2.03%

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$4,714

$4,012

$4,208

$3,814

$3,338

 

 

 

 

 

 

Ratio of Total Expenses to Average Net Assets

 

 

 

 

 

 

Acquired Fund Fees and Expenses

0.11%

0.11%

0.11%

0.12%

0.12%

 

 

 

 

 

 

Ratio of Net Investment Income to

 

 

 

 

 

Average Net Assets

2.72%

2.43%

2.18%

2.09%

2.08%

 

 

 

 

 

 

Portfolio Turnover Rate

6%

9%

4%

4%

14%

 

 

 

 

 

 

1 Calculated based on average shares outstanding.

2 Total returns do not include account service fees that may have applied in the periods shown.

36

LifeStrategy Conservative Growth Fund

 

 

 

Year Ended October 31,

For a Share Outstanding Throughout Each Period

2019

2018

2017

2016

2015

 

 

 

 

 

 

Net Asset Value, Beginning of Period

$19.29

$19.85

$18.55

$18.36

$18.86

 

 

 

 

 

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.5211

.4661

.4171

.389

.385

 

 

 

 

 

 

Capital Gain Distributions Received

.0021

.0081

.012

.018

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss)

 

 

 

 

 

on Investments

1.715

(.520)

1.332

.358

(.057)

 

 

 

 

 

 

Total from Investment Operations

2.236

(.052)

1.757

.759

.346

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.531)

(.457)

(.418)

(.387)

(.385)

 

 

 

 

 

 

Distributions from Realized Capital Gains

(.205)

(.051)

(.039)

(.182)

(.461)

 

 

 

 

 

 

Total Distributions

(.736)

(.508)

(.457)

(.569)

(.846)

 

 

 

 

 

 

Net Asset Value, End of Period

$20.79

$19.29

$19.85

$18.55

$18.36

 

 

 

 

 

 

Total Return2

11.94%

–0.33%

9.61%

4.24%

1.86%

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$10,473

$9,248

$9,365

$8,145

$7,599

 

 

 

 

 

 

Ratio of Total Expenses to Average Net Assets

 

 

 

 

 

 

Acquired Fund Fees and Expenses

0.12%

0.12%

0.12%

0.13%

0.13%

 

 

 

 

 

 

Ratio of Net Investment Income to

 

 

 

 

 

Average Net Assets

2.61%

2.34%

2.18%

2.13%

2.07%

 

 

 

 

 

 

Portfolio Turnover Rate

9%

11%

6%

9%

16%

 

 

 

 

 

 

1 Calculated based on average shares outstanding.

2 Total returns do not include account service fees that may have applied in the periods shown.

37

LifeStrategy Moderate Growth Fund

 

 

 

Year Ended October 31,

For a Share Outstanding Throughout Each Period

2019

2018

2017

2016

2015

 

 

 

 

 

 

Net Asset Value, Beginning of Period

$26.26

$26.90

$24.10

$24.08

$24.32

 

 

 

 

 

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.6731

.6161

.5561

.509

.501

 

 

 

 

 

 

Capital Gain Distributions Received

.0021

.0071

.010

.017

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss)

 

 

 

 

 

on Investments

2.403

(.622)

2.795

.398

(.099)

Total from Investment Operations

3.076

(.004)

3.358

.917

.419

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.684)

(.593)

(.547)

(.505)

(.501)

 

 

 

 

 

 

Distributions from Realized Capital Gains

(.362)

(.043)

(.011)

(.392)

(.158)

 

 

 

 

 

 

Total Distributions

(1.046)

(.636)

(.558)

(.897)

(.659)

 

 

 

 

 

 

Net Asset Value, End of Period

$28.29

$26.26

$26.90

$24.10

$24.08

 

 

 

 

 

 

Total Return2

12.20%

–0.08%

14.14%

3.96%

1.71%

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$17,282

$15,395

$15,729

$13,095

$12,276

 

 

 

 

 

 

Ratio of Total Expenses to Average Net Assets

 

 

 

 

 

 

Acquired Fund Fees and Expenses

0.13%

0.13%

0.13%

0.14%

0.14%

 

 

 

 

 

 

Ratio of Net Investment Income to

 

 

 

 

 

Average Net Assets

2.50%

2.26%

2.19%

2.16%

2.07%

 

 

 

 

 

 

Portfolio Turnover Rate

9%

12%

6%

9%

16%

 

 

 

 

 

 

1 Calculated based on average shares outstanding.

2 Total returns do not include account service fees that may have applied in the periods shown.

38

LifeStrategy Growth Fund

 

 

 

 

 

Year Ended October 31,

For a Share Outstanding Throughout Each Period

2019

 

2018

 

2017

 

2016

2015

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Period

$32.44

 

$33.11

 

$28.47

 

$28.74

$29.12

 

 

 

 

 

 

 

 

 

Investment Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

.789

1

.742

1

.673

1

.611

.598

 

 

 

 

 

 

 

 

 

Capital Gain Distributions Received

 

.001

1

.004

1

.006

.012

 

 

 

 

 

 

 

 

 

Net Realized and Unrealized Gain (Loss)

 

 

 

 

 

 

 

 

on Investments

3.029

 

(.685)

4.632

 

.354

(.207)

 

 

 

 

 

 

 

 

 

Total from Investment Operations

3.818

 

.058

 

5.309

 

.971

.403

 

 

 

 

 

 

 

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends from Net Investment Income

(.798)

(.714)

(.666)

(.603)

(.595)

 

 

 

 

 

 

Distributions from Realized Capital Gains

(.540)

(.014)

(.003)

(.638)

(.188)

 

 

 

 

 

 

Total Distributions

(1.338)

(.728)

(.669)

(1.241)

(.783)

 

 

 

 

 

 

 

 

 

Net Asset Value, End of Period

$34.92

 

$32.44

 

$33.11

 

$28.47

$28.74

 

 

 

 

 

 

 

 

 

Total Return2

12.34%

 

0.09%

 

18.91%

 

3.54%

1.35%

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets, End of Period (Millions)

$15,906

 

$14,140

 

$14,534

 

$11,919

$11,238

 

 

 

 

 

 

 

 

 

Ratio of Total Expenses to Average Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

Acquired Fund Fees and Expenses

0.14%

 

0.14%

 

0.14%

 

0.15%

0.15%