Vanguard Announces Third Round of Expense Ratio Reductions; Brings $142 Million in Combined Savings to Investors

Vanguard international ETFs and target-risk funds among funds reporting reductions

VALLEY FORGE, PA (February 26, 2016)—Vanguard investors saved nearly $55 million as a result of lower expense ratios reported today for 42 individual mutual fund shares, including seven exchange-traded fund shares (ETFs) and four target-risk funds.1 This marks the third round of Vanguard funds to report expense ratio changes for fiscal year 2015, resulting in aggregate savings of nearly $142 million to date for investors in 130 fund shares.2

“The continued adoption of the Vanguard way of investing, coupled with asset growth related to favorable financial markets, enables us to reduce the cost of investing for all our investors from financial advisors and institutional investors to IRA savers and 529 plan holders,” said Vanguard CEO Bill McNabb. “While Vanguard has some of the lowest-cost mutual funds and ETFs in the industry, low costs have not come at the expense of providing competitive investment performance, a broad array of funds and other services, and a high level of client service.”

The reported expense ratio reductions span a range of fund share classes (Investor, Admiral, ETF, Institutional, and Institutional Plus) for the 12 months ended October 2015, across seven fund categories: international stock index, international actively managed stock, international bond index, domestic stock index, actively managed domestic stock, target-risk, and tax-exempt money market.

Helping advisors build low-cost portfolios

Six Vanguard international ETFs and one domestic equity ETF (the $11.3 billion Vanguard High Dividend Yield Index ETF; ticker: VYM) reported lower expense ratios. The following ETFs reported reductions, which will better enable advisors to incorporate broad-based international exposure into their clients’ investment portfolios at a low cost:

- The $12.4 billion Vanguard FTSE All-World ex-US Index ETF (ticker: VEU) reported an expense ratio reduction of 1 basis point, to 0.13%.

- The $5.4 billion Vanguard Total World Stock Index ETF (ticker: VT) reported an expense ratio reduction of 3 basis points, to 0.14%.

- The $4.9 billion Vanguard Total International Stock Index ETF (ticker: VXUS) reported an expense ratio reduction of 1 basis point, to 0.13%.

- The $4.5 billion Vanguard Total International Bond Index ETF (ticker: BNDX) reported an expense ratio reduction of 4 basis points, to 0.15%.

- The $2.9 billion Vanguard Global ex-U.S. Real Estate Index ETF (ticker: VNQI) reported an expense ratio reduction of 6 basis points, to 0.18%.

- The $2.3 billion Vanguard FTSE All-World ex-US Small-Cap Index ETF (ticker: VSS) reported an expense ratio reduction of 2 basis points, to 0.17%.

Seven funds with Admiral Shares, which are available to advisors without a minimum initial investment, also reported expense ratio reductions. Among these funds were a number of actively managed funds, including the $42.5 billion Vanguard Windsor II Fund and the $10 billion Vanguard Explorer Fund.

Enabling plan sponsors to lower costs for participants

Vanguard’s institutional clients, including defined contribution and defined benefit plans and their participants, as well as endowments, foundations, and other non-profit organizations, will also benefit from lower expense ratios. Seven Institutional and two Institutional Plus Shares across a range of Vanguard funds, including international stock and bond index funds, reported expense reductions. These reductions follow lower expense ratios announced last month for the firm’s series of 12 Vanguard Target Retirement Funds.

Vanguard is the largest manager of defined contribution assets in the industry and the second-largest manager of endowment and foundation assets.3 The firm recently achieved top scores among institutional investors managing at least $250 million, according to Cogent Reports’ most recent U.S. Institutional Investor Brandscape. Institutional investors surveyed said they are more likely to consider Vanguard for future mandates than any other asset manager. Additionally, the firm achieved the highest client satisfaction rating among 51 asset managers.

Giving individuals a better chance of success

Nearly 20 fund shares available to individual investors with a low minimum investment (generally $3,000) announced expense ratio reductions. Included in this category are four Vanguard LifeStrategy Funds, which reported expense ratio reductions of two basis points each. Already among the lowest-cost options available to individual investors seeking a target-risk fund, these funds now have expense ratios that range from 0.12% to 0.15%. The LifeStrategy Funds are broadly diversified, all-index funds that use a fixed allocation approach designed to provide a complete portfolio in a single fund.

The $17.4 billion Vanguard Tax-Exempt Money Market Fund also reported an expense ratio reduction of 1 basis point to 0.15%. Among the largest tax-exempt money market funds, the fund is popular with individual investors in higher tax brackets as a cash management account.

Clients of Vanguard Personal Advisor Services will also experience savings. Admiral Shares of both Vanguard Total International Stock Index Fund and Vanguard Total International Bond Index Fund reported lower expense ratios of 2 basis points to 0.12% and 5 basis points to 0.14%, respectively. These two funds are used in Personal Advisor Services as part of a globally diversified allocation. Personal Advisor Services combines an ongoing relationship with an advisor, sophisticated investment modeling technology, and a user-friendly online experience for investors with $50,000 or more in assets for a low cost of 0.30%. Introduced in May 2015, the service now oversees $31 billion in Vanguard client assets.

Incentive payment results in expense ratio increase

The $2.8 billion Vanguard International Explorer Fund, $7.3 billion Vanguard International Value Fund, and Investor and Admiral shares of the $15.7 billion Vanguard Windsor Fund reported increases of 2 basis points to 0.42%, 2 basis points to 0.46%, 1 basis point to 0.39%, and 1 basis point to 0.29%, respectively. The changes are largely the result of an incentive fee paid to the fund’s advisors.

Vanguard aligns the interests of its external investment advisory firms with those of shareholders by using incentive/penalty arrangements. Under the majority of Vanguard fund advisory agreements, an external advisor’s base advisory fee can be adjusted up or down to reflect the fund’s investment performance relative to the total return of an appropriate market benchmark over a 36- or 60-month period. In effect, the advisor is rewarded for outperforming a market benchmark and penalized for underperforming it. Vanguard is one of the few firms in the industry to employ performance incentive/penalty arrangements.

The accompanying fact sheet provides a complete list of the fund and ETF shares reporting expense ratio changes. Any additional changes will be reported as fund prospectuses are published. Expense ratios are reported on an annual basis and represent actual operating expenses for the prior fiscal year.

About Vanguard

Vanguard is one of the world’s largest investment management companies. As of January 31, 2015, Vanguard managed more than $3.2 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 315 funds to its more than 20 million investors worldwide. For more information, visit

# # #

1 Vanguard calculation based on average fund assets over a 12-month period and the change in expense ratios through fiscal year September 2015.

2 Vanguard calculation based on average fund assets over a 12-month period and the change in expense ratios through fiscal year August 2015, September 2015, and October 2015.

3 Pensions & Investments 2015 Special Report on Money Managers, May 18, 2015.

All asset figures are as of January 31, 2016, unless otherwise stated.

For more information about Vanguard funds and ETFs, visit or call 800-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund 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 very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. 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.

Advice Services are provided by Vanguard Advisers, Inc., a registered investment adviser.

Past performance is no guarantee of future results.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the Fund name refers to the approximate year (the target date) when an investor in the Fund would retire and leave the work force. The Fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in the Target Retirement Fund is not guaranteed at any time, including on or after the target date.

All investments are subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

Investments in securities issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

Vanguard Marketing Corporation, Distributor.