Vanguard to Change Target Benchmarks for 22 Index Funds

  Vanguard to Change Target Benchmarks for 22 Index Funds

Business Wire

VALLEY FORGE, Pa. -- October 02, 2012

Vanguard plans to transition six international stock index funds to FTSE
benchmarks and 16 U.S. stock and balanced index funds to new benchmarks
developed by the University of Chicago's Center for Research in Security
Prices (CRSP). The transition from the current MSCI benchmarks for the 22
funds is expected to result in considerable savings for the funds’
shareholders over time.

“The indexes from FTSE and CRSP are well constructed, offer comprehensive
coverage of their respective markets, and meet Vanguard’s ‘best practice’
standards for market benchmarks,” said Vanguard Chief Investment Officer Gus
Sauter. “Equally important, and with our clients’ best interests in mind, we
negotiated licensing agreements for these benchmarks that we expect will
enable us to deliver significant value to our index fund and ETF shareholders
and lower expense ratios over time.” In an environment in which index
licensing fees, in general, have represented a growing portion of the expenses
that investors pay to own index funds and ETFs, Mr. Sauter noted that the
long-term agreements with FTSE and CRSP will provide cost certainty going
forward with these two index providers.

“Vanguard is the mutual fund industry’s only client-owned firm that manages
its funds and ETFs at cost*,” said Mr. Sauter. “Our structure, along with our
ongoing commitment to keep operating costs at the lowest reasonable levels,
leads to low expenses that are enduring in nature.”

Vanguard pioneered the first index mutual fund for individual investors in
1976 with the introduction of Vanguard 500 Index Fund and has continually
sought and contributed to improvements and innovations in benchmark
construction. During his 25-year career, Mr. Sauter has been in the forefront
of cutting-edge index construction methodology. For instance, in 2003,
Vanguard was the first to adopt benchmarks incorporating objective rules,
float-adjustment, and overlapping market capitalization buffer zones that are
now standard in the mutual fund industry.

FTSE: A Global Index Leader

Vanguard has used FTSE indexes since 2003 and now employs the firm’s
benchmarks for more than 20 index portfolios around the world, representing
$26 billion in aggregate assets. “Vanguard is very pleased to expand our deep
relationship with FTSE and looks forward to adopting its benchmarks for our
largest and most widely held international funds and ETFs,” said Mr. Sauter.
“The benchmarks offer comprehensive and diversified coverage of the
international developed and emerging markets.”

Six Vanguard international index funds with aggregate assets of $170 billion
will transition to benchmarks in the FTSE Global Equity Index Series,
including the $67 billion Vanguard Emerging Markets Stock Index Fund. This
fund and its ETF Shares (ticker: VWO), the world’s largest emerging markets
ETF (source: Strategic Insight, as of 7/31/12), will move from the MSCI
Emerging Markets Index to the FTSE Emerging Index. While the two indexes are
generally comparable, the FTSE Emerging Index classifies South Korea as a
developed market.

With Vanguard’s move to the new benchmarks, FTSE will become the third-largest
equity exchange-traded index benchmark provider globally.

“Today’s agreement with Vanguard represents another significant step forward
in building our presence in North America and in making FTSE a household name
in the marketplace,” said Mark Makepeace, chief executive of FTSE. “Our
strategy for the FTSE brand is a global one, and we are committed to building
long-term, sustainable relationships with all of our clients globally to bring
real value to investors.”

CRSP: An Index Innovator

CRSP is one of 11 research centers at the University of Chicago Booth School
of Business. The research organization pioneered the development of U.S. stock
market data in 1960 that are widely used in academic and investment research.

In 2009, CRSP engaged with Vanguard to create a new series of investable
indexes, the CRSP Indexes. Vanguard will be the first investment management
firm to track CRSP’s broadly diversified benchmarks that cover the broad U.S.
market, market capitalization segments, and styles.

CRSP’s capitalization-weighted methodology introduces the unique concept of
“packeting,” which cushions the movement of stocks between adjacent indexes
and allows holdings to be shared between two indexes of the same family. This
approach maximizes style purity while minimizing index turnover.

“CRSP is highly regarded and experienced in the creation of market databases,
and its innovative packeting methodology is expected to minimize transaction
costs during periodic index rebalancing,” said Mr. Sauter.

Sixteen Vanguard stock and balanced index funds, with aggregate assets of $367
billion, will track CRSP benchmarks, including Vanguard’s largest index fund,
the $197 billion Vanguard Total Stock Market Index Fund. The fund and its ETF
Shares (ticker: VTI) will transition from the MSCI U.S. Broad Market Index to
the CRSP US Total Market Index.

"For more than 50 years, CRSP has been providing research-quality market and
index data. The new CRSP Indexes are a logical extension of our core products
and demonstrate not only our innovative thinking, but also the depth of our
commitment to positively influence practices in the financial arena. The index
licensing agreement we have entered into with Vanguard strongly validates our
efforts by one of the leading financial services providers in the world,” said
David Barclay, chief operating officer of CRSP.

Additional Transition Details

The benchmark changes will encompass all share classes of the 22 funds,
including ETFs. The transitions will be staggered and are expected to occur
collectively over a number of months. No changes are planned for Vanguard U.S.
stock index funds seeking to track Russell and Standard and Poor’s benchmarks,
or the 11 Vanguard sector equity funds currently seeking to track MSCI

The benchmarks for Vanguard’s Target Retirement, LifeStrategy, and Managed
Payout Funds and other funds of funds will also change. The MSCI All Country
World ex USA Investable Market Index and MSCI US Broad Market Index components
will be replaced by the FTSE Global All Cap ex US Index and CRSP US Total
Market Index. The asset allocations of the funds will not change.

The transition to the new benchmarks is not expected to result in capital
gains distributions to the funds’ shareholders, according to Vanguard analysis
based on current market conditions. Each of the index funds currently
possesses realized capital losses, which can be used to offset any realized
gains. The transition will require some turnover of holdings and result in
transaction costs. However, Vanguard Equity Investment Group, manager of the
index funds, will seek to minimize trading impact through the use of efficient
portfolio trading and other strategies developed over many years and used
during the periodic rebalancing of indexes.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s
largest investment management companies and a leading provider of
company-sponsored retirement plan services. Vanguard managed nearly $1.95
trillion in U.S. mutual fund assets as of September 30, 2012. The firm offers
more than 170 index funds, active funds and ETFs to U.S. investors and more
than 70 additional funds and ETFs in non-U.S. markets. For more information,

About FTSE Group

FTSE Group (FTSE) is a world leader in the provision of global index and
analytical solutions. FTSE calculates indexes across a wide range of asset
classes, on both a standard and custom basis. FTSE indexes are used
extensively by investors worldwide for investment analysis, performance
measurement, asset allocation, portfolio hedging and the creation of a wide
range of index derivatives, funds, ETFs, and other structured products. For
more information, visit

About The Center for Research in Security Prices (CRSP)

The Center for Research in Security Prices at the University of Chicago Booth
School of Business has been an integral part of the academic and commercial
world of financial and economic research since 1960. CRSP’s portfolio of
historical databases for common stocks, mutual funds, Treasuries, REITs and
research indexes is relied on by more than 435 leading academic institutions
in 31 countries. It is also widely used for research in the commercial and
governmental sectors. For more information, visit

*Vanguard fund shareholders own the funds, which own Vanguard.

All asset figures are as of August 31, 2012, except where noted.

For more information on Vanguard funds, visit, or call
800-662-7447 to obtain a prospectus. Visit our website, call 800-662-7447, or
contact your broker to obtain a prospectus for Vanguard ETF Shares. Investment
objectives, risks, charges, expenses, and other important information are
contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in
Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF
Shares in the secondary market with the assistance of a stockbroker. In doing
so, the investor may incur brokerage commissions and may pay more than net
asset value when buying and receive less than net asset value when selling.

Mutual funds and ETFs are subject to risks, including possible loss of
principal. Investments in bond funds are subject to interest rate, credit, and
inflation risk. Foreign investing involves additional risks including currency
fluctuations and political uncertainty. Stocks of companies in emerging
markets are generally more risky than stocks of companies in developed
countries. Diversification does not ensure a profit or protect against a loss
in a declining market.

The Vanguard Emerging Markets Stock Index Fund has been developed solely by
Vanguard. The FTSE Emerging Index (the “Index”) is calculated by FTSE
International Limited (“FTSE”) or its agent. All rights in the Index vest in
FTSE. “FTSE®” is a trademark of the London Stock Exchange Group companies and
is used by FTSE under licence.

The funds or securities referred to herein are not sponsored, endorsed, or
promoted by MSCI, and MSCI bears no liability with respect to any such funds
or securities. The prospectus or the Statement of Additional Information
contains a more detailed description of the limited relationship MSCI has with
Vanguard and any related funds.

Vanguard Marketing Corporation, Distributor.


For a full list of the impacted funds and more information, contact Vanguard
Public Relations at 610-669-5002.
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