Vanguard to Introduce Series of Target Retirement Funds

Funds Offer “Simple Solution” For IRA, Rollover, And Corporate Retirement Plan Investors


VALLEY FORGE, PA, August 5, 2003 – The Vanguard Group has filed a registration statement with the U.S. Securities and Exchange Commission for a series of low-cost, no-load targeted maturity funds. The six new Vanguard Target Retirement Funds, which are expected to be available in the fourth quarter, comprise up to four Vanguard stock index and bond funds in a range of asset mixes developed for investors in their 20s through 70s-plus.

Upon introduction, Vanguard Target Retirement Funds will offer the following asset allocations:           

 

Stocks

Bonds

Money Market

Target Retirement 2045 Fund

90%

10%

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Target Retirement 2035 Fund

80%

20%

---

Target Retirement 2025 Fund

60%

40%

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Target Retirement 2015 Fund

50%

50%

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Target Retirement 2005 Fund

35%

65%

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Target Retirement Income Fund

20%

75%

5%


To obtain a well-balanced, broadly diversified investment program, an investor will simply select the Vanguard Target Retirement Fund that best matches his or her expected retirement year. Over time, each fund will be re-allocated to gradually reduce the level of risk as the retirement date approaches.

“Vanguard Target Retirement Funds reflect our strong belief that balance, diversification, and low-cost are keys to investment success,” said Vanguard Chairman John J. Brennan. “The funds are designed for investors seeking a simple solution to their retirement investing needs – whether they are in the accumulation, transition, or withdrawal phase.”

Unlike most fund-of-funds sponsors, Vanguard will not levy an additional layer of charges for managing the funds. Vanguard Target Retirement Funds will pay a share of the expenses of the underlying funds. In aggregate, these “indirect” expense ratios will range from an estimated 0.21% to 0.23% of net assets, which amount to one-third to one-quarter the expense ratios charged by comparable targeted maturity funds. The expense advantage is derived from the low costs of the component funds, which include: Vanguard Total Stock Market Index (0.20% expense ratio), Vanguard European Stock Index Fund (0.33%), Vanguard Pacific Stock Index Fund (0.40%), Vanguard Total Bond Market Index Fund (0.22%), Vanguard Inflation-Protected Securities Fund (0.22%), and Vanguard Prime Money Market Fund (0.33%).

The portfolio construction of Vanguard Target Retirement Funds is derived from the disciplined investment methodology developed by Vanguard’s Investment Counseling and Research Group for investment advice programs of Vanguard’s Personal Financial Planning Service, Asset Management & Trust Services, and Fiduciary Services. These customized advisory services have been available to Vanguard shareholders and institutional clients since the mid-1990s.

Vanguard expects the new funds to appeal to a broad range of investors seeking a single choice option, including younger individuals just starting their retirement programs, as well as those looking for an ideal vehicle for their IRA or company retirement plan rollover. Sponsors of defined contribution and other corporate retirement plans may also find the funds serve as a ready-made menu of simple, prudent alternatives for their participants.

The minimum initial investment for Vanguard Target Retirement Funds is $3,000; $1,000 for IRAs. Shares will be offered on a no-load basis, without redemption and 12b-1 fees.

Vanguard was among the innovators of the fund-of-funds concept with the 1985 introduction of Vanguard STAR Fund.  STAR Fund invests in ten actively managed Vanguard funds and has nearly $8 billion in net assets. In 1994, Vanguard expanded its fund-of-funds line-up with the Vanguard LifeStrategy Funds, a series of four portfolios that invest a fixed percentage in up to three Vanguard index funds, along with Vanguard Asset Allocation Fund and Vanguard Short-Term Corporate Fund. The LifeStrategy Funds have $12 billion in net assets.

The Vanguard Group, headquartered in Valley Forge, Pennsylvania, is the nation's second largest mutual fund firm and a leading provider of employer sponsored-retirement plan services. Vanguard serves some 17 million shareholder accounts and manages more than $620 billion in U.S. mutual fund assets, including more than $170 billion in participant-directed defined contribution retirement plans. Vanguard offers 112 funds to U.S. investors and 35 additional funds in foreign markets.

Notes:

A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

For more information, including risks, charges and expenses, about any Vanguard® fund, obtain its prospectus, and read it carefully before you invest or send money. Copies of the final prospectus, which is subject to change, can be obtained from The Vanguard Group, 1-800-662-7447. (Vanguard Marketing Corporation, Distributor)