SEG VANGUARD FUNDS W/* Connect with Vanguard at: Vanguard.com 000021-Wellington Fund Investor Shares (VWELX) The fund invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of fund assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities. PRODUCT SUMMARY - Founded in 1929, Wellington Fund is Vanguard s oldest mutual fund and the nation s oldest balanced fund. It offers exposure to stocks (about two-thirds of the portfolio) and bonds (one-third). Another key attribute is broad diversification the fund invests in stocks and bonds across all economic sectors. This is important because one or two holdings should not have a sizeable impact on the fund. Investors with a long-term time horizon who want growth and are willing to accept stock market volatility may wish to consider this as a core holding in their portfolio. 1
000023-U.S. Growth Fund Investor Shares (VWUSX) The fund invests mainly in large-capitalization stocks of U.S. companies considered to have above-average earnings growth potential and reasonable stock prices in comparison with expected earnings. The fund uses multiple investment advisors. PRODUCT SUMMARY - Vanguard s oldest growth fund focuses on well-known blue-chip companies that tend to hold strong positions in their respective industries. The fund s investment advisors believe these companies have the ability to deliver positive earnings growth and superior returns over the long term. The fund is typically invested in a diversified portfolio of primarily large-capitalization stocks. Investors with a long-term investment horizon who want exposure to large growth companies may wish to consider this fund. 000024-Explorer Fund Investor Shares (VEXPX) The fund invests mainly in the stocks of small companies. These companies tend to be unseasoned but are considered by the fund s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. The fund uses multiple investment managers. PRODUCT SUMMARY - This fund seeks to identify small U.S. companies with growth potential. Because it focuses on smaller companies, the fund tends to be more unpredictable than stock funds that focus on larger companies. However, the fund s use of multiple advisors with diverse strategies, and its broad exposure to more than 600 stocks, can help reduce but not eliminate risk that may come from investing in this often-volatile segment of the market. This fund may be considered complementary to a well-diversified, long-term portfolio. 2
000027-Wellesley Income Fund Investor Shares (VWINX) The fund invests approximately 60% to 65% of its assets in investment-grade corporate, U.S. Treasury, and government agency bonds, as well as mortgagebacked securities. The remaining 35% to 40% of fund assets are invested in common stocks of companies that have a history of above-average dividends or expectations of increasing dividends. PRODUCT SUMMARY - This 40 year-old, income-oriented balanced fund offers exposure to stocks and investment-grade bonds. Balanced funds typically offer a higher allocation to stocks; however, this fund is unique in allocating about one-third to stocks and two-thirds to bonds. The fund s stock holdings are focused on companies that have historically paid a larger-than-average dividend or that have expectations of increasing dividends. This focus may provide a higher quarterly income distribution than non-income focused balanced funds. Investors with a medium- or long-term time horizon who have a goal of steady income and who are willing to accept modest movement in share price may wish to consider this fund as a core holding in their portfolio. 000030-Prime Money Mkt Fund (VMMXX) The fund invests in high-quality, short-term money market instruments, including certificates of deposit, banker s acceptances, commercial paper, and other money market securities. To be considered high-quality, a security generally must be rated in one of the two highest credit-quality categories for short-term securities by at least two nationally recognized rating services (or by one, if only one rating service has rated the security). If unrated, the security must be determined by Vanguard to be of quality equivalent to those in the two highest credit-quality categories. The fund will invest more than 25% of its assets in securities issued by companies in the financial services industry. The fund will maintain a dollar-weighted average maturity of 90 days or less. PRODUCT SUMMARY - Vanguard Prime Money Market Fund seeks to provide current income and preserve shareholders principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term, high-quality securities, the amount of income that a shareholder may receive will be largely dependent on the current interest-rate environment. Investors who have a short-term savings goal and seek a competitive yield may wish to consider this option. 3
000040-500 Index Fund Investor Shares (VFINX) The fund employs a passive management or indexing investment approach designed to track the performance of the Standard & Poor s 500 Index, a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. PRODUCT SUMMARY - As the industry s first index fund for individual investors, the 500 Index Fund is a low cost way to gain diversified exposure to the U.S. equity market. The fund invests in 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. stock market s value. The key risk for the fund is the volatility that comes with its full exposure to the stock market. Because the 500 Index Fund is broadly diversified within the large-capitalization market, it may be considered a core equity holding in a portfolio. 000048-Small-Cap Index Fund Investor Shares (NAESX) The fund employs a passive management or indexing investment approach designed to track the performance of the MSCI US Small Cap 1750 Index, a broadly diversified index of stocks of smaller U.S. companies. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. PRODUCT SUMMARY - This low-cost index fund provides broad exposure to the smallcapitalization U.S. equity market. The fund seeks to track an index of small-sized companies. One of the fund s primary risks is its focus on the small-cap arena, which is an often-volatile segment of the market. Investors looking to add a small-cap equity allocation to an already diversified portfolio may wish to consider this option. 4
000051-Energy Fund Investor Shares (VGENX) The fund invests at least 80% of its assets in the common stocks of companies principally engaged in energy-related activities, such as production and transmission of energy or energy fuels, the making of component products for such activities, energy research, and energy conservation or pollution control. The fund may invest up to 100% of its assets in foreign stocks. The fund uses multiple investment advisors to manage its portfolio. PRODUCT SUMMARY - This actively managed fund offers investors low-cost exposure to U.S. and non-u.s. companies that are engaged in various aspects of the energy business. Unlike similar funds, which may invest in companies that explore for and distribute additional commodities, this fund focuses purely on energy, such as oil, natural gas, and coal. The fund is narrow in scope, investing solely within the energy sector. In addition, the fund may be invested up to 100% in foreign securities, which can be more volatile than domestic holdings. Returns may vary widely from year-to-year, so this fund may be considered complementary to an already diversified portfolio with a long-term time horizon. 000052-Health Care Fund Investor Shares (VGHCX) The fund invests at least 80% of its assets in the stocks of companies principally engaged in the development, production, or distribution of products and services related to the health care industry. These companies include, among others, pharmaceutical firms, medical supply companies, and businesses that operate hospitals and other health care facilities. The fund also considers companies engaged in medical, diagnostic, biochemical, and other research and development activities. The fund s advisor strives for a balanced representation of the health care field, searching for the best values in the various subsectors of the industry. The fund may invest up to 50% of its assets in foreign stocks. PRODUCT SUMMARY - For more than 25 years, this actively managed fund has offered investors lowcost exposure to domestic and foreign companies involved in various aspects of the health care industry, such as pharmaceutical firms, medical supply companies, and research firms. The fund tends to be more geographically diverse and exhibit lower turnover than other health care funds. Still, one risk to note is the fund s narrow scope, investing solely within the health care sector. Returns may vary widely from year to year, so this fund should be considered complementary to an already diversified portfolio with a long-term time horizon. 5
000059-PRIMECAP Fund Investor Shares (VPMCX) Vanguard PRIMECAP Fund seeks long-term capital appreciation, using a fundamental approach to invest in growth-oriented companies at attractive valuation levels. The fund has flexibility to invest across all industry sectors and market capitalizations, although holdings are generally large- and mid-cap stocks. The fund tends to focus on out-of-favor companies or industries, seeking to identify companies with long-term growth potential overlooked by the market. The fund s managers rely almost exclusively on independent research. Each manager is responsible for a separate subportfolio and has autonomy to implement his best ideas. The managers anticipate holding companies for at least three to five years, resulting in low turnover. The portfolio may be relatively concentrated, with the top ten holdings often representing 30% 40% of assets. PRODUCT SUMMARY - This large- and mid-capitalization growth fund is managed with a long-term perspective, extremely low turnover, and a well-established investment strategy. Since the fund s inception in 1984, PRIMECAP Management Company, the advisor, has followed an approach in which multiple portfolio managers independently manage a portion of the fund, which provides diversification of thought. One risk to note is that the fund may become concentrated in a few sectors, notably technology and health care. Short-term performance may be volatile when these sectors are strongly in or out of favor. This fund may be considered a complement to an already diversified portfolio with a long-term time horizon. 6
000073-Windsor II Fund Investors Shares (VWNFX) The fund invests mainly in large- and mid-capitalization companies whose stocks are considered by an advisor to be undervalued. Undervalued stocks are generally those that are out of favor with investors and the advisor feels are trading at prices that are below average in relation to such measures as earnings and book value. These stocks often have above average dividend yields. The fund uses multiple investment advisors. PRODUCT SUMMARY - Like many individuals making a big purchase, Windsor II Fund s investment managers are mindful of price. While this large-cap value stock fund carries the same risk associated with the stock market, this value conscious approach may provide a less bumpy ride. That said, the fund may not keep up in a strong bull market. If you have a long-term investment goal and want less market volatility than might be present in a more aggressive investment, the fund could be a good fit for you. 000081-International Growth Investor Shares (VWIGX) The fund invests in the stocks of companies located outside the United States. In selecting stocks, the fund s advisors evaluate foreign markets around the world and choose companies with above-average growth potential. The fund uses multiple investment advisors to manage its portfolio. PRODUCT SUMMARY - The International Growth Fund focuses on non-u.s. companies with high growth potential. Created in 1981, the fund employs an aggressive approach that attempts to capitalize on global economic expansion. For example, an attractive investment opportunity could be a non-u.s. consumer-products company that is experiencing rapid earnings growth. Because it invests in non-u.s. stocks, including those in developed and emerging markets, the fund can be more volatile than a domestic fund. Investors may wish to consider investing in this fund as a complement to an already diversified stock portfolio. 7
000083-Long-Term Treasury Investor Shares (VUSTX) The fund invests at least 80% of its assets in U.S. Treasury securities, which include bills, bonds, and notes issued by the U.S. Treasury. The fund is expected to maintain a dollar-weighted average maturity of 15 to 30 years. PRODUCT SUMMARY - This fund invests in debt issued directly by the government in the form of longterm Treasuries. The two main features of the fund are its long average duration (approximately 15 years), making it considerably more susceptible to changes in interest rates than funds with shorter average durations, and its reduced risk of default, since the bonds in the portfolio are backed by the full faith and credit of the U.S. government. Investors who are looking for a fund that seeks to provide interest income and are able to tolerate significant interest rate risk may wish to consider this fund. 000084-Total Bond Market Index Fund (VBMFX) The fund employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Bond Index. This index measures 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 assetbacked securities, all with maturities of more than 1 year. The fund invests by sampling the index, meaning that it holds a range of securities that, in the aggregate, approximate the full index in terms of key risk factors and other characteristics. All of the fund s investments will be selected through the sampling process, and at least 80% of the fund s assets will be invested in bonds held in the index. PRODUCT SUMMARY - This fund is designed to provide broad exposure to U.S. investment grade bonds. Reflecting this goal, the fund invests about 30% in corporate bonds and 70% in U.S. government bonds of all maturities (short-, intermediate-, and long-term issues). As with other bond funds, one of the risks of the fund is that increases in interest rates may cause the price of the bonds in the portfolio to decrease pricing the fund s NAV lower. Because the fund invests in all segments and maturities of the fixed income market, investors may consider the fund their core bond holding. 8
000098-Extended Market Index Fund (VEXMX) The fund employs an indexing investment approach designed to track the performance of the Standard & Poor s Completion Index, a broadly diversified index of stocks of small and medium-size U.S. companies. The Standard & Poor s Completion Index contains all of the U.S. common stocks regularly traded on the New York and American Stock Exchanges, and the Nasdaq over-the-counter market, except those stocks included in the Standard & Poor s 500 Index. The fund invests all, or substantially all, of its assets in stocks of its target index, with nearly 80% of its assets invested in the 1,200 largest stocks in its target index (covering nearly 80% of the index s total market capitalization), and the rest of its assets in a representative sample of the remaining stocks. The fund holds a broadly diversified collection of securities that, in the aggregate, approximates the full index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures such as price/earnings ratio and dividend yield. PRODUCT SUMMARY - This fund offers investors a low-cost way to gain broad exposure to U.S. midand small-capitalization stocks in one fund. The fund invests in about 3,000 stocks, which span many different industries and account for about one-fourth of the market-cap of the U.S. stock market. One of the fund s risks is its full exposure to the mid- and small-cap markets, which tend to be more volatile than the large-cap market. The fund is considered a complement to Vanguard 500 Index Fund. Together they provide exposure to the entire U.S. equity market. 9
Vanguard Target Retirement Funds Vanguard Target Retirement Income Fund (0308) PRODUCT SUMMARY The Target Retirement Income Fund is designed for investors already in retirement. The fund seeks to provide current income and some capital appreciation by investing in 5 Vanguard index funds. The fund holds approximately 30% of assets in stocks and 70% in bonds. This is also the allocation that all Target Retirement Funds are expected to assume within seven years after their designated retirement dates. Investors in this fund should be willing to accept modest movement in share price and be able to tolerate the market risk that comes from the volatility of the stock and bond markets Vanguard Target Retirement Funds PRODUCE SUMMARY Vanguard Target Retirement Funds offer a diversified portfolio within a single fund that adjusts its underlying asset mix over time. The funds provide broad diversification while incrementally decreasing exposure to stocks and increasing exposure to bonds as each fund s target retirement date approaches. The funds continue to adjust for approximately seven years after that date until their allocations match that of the Target Retirement Income Fund. Investors in the funds should be able to tolerate the risks that come from the volatility of the stock and bond markets. 2015 (includes 2010) (0303) The 2020 fund invests in 5 Vanguard index funds, holding approximately 55% of assets in stocks and 45% in bonds. You may wish to consider this fund if you re planning to retire between 2018 and 2022. 2020 (0682) The 2020 fund invests in 5 Vanguard index funds, holding approximately 55% of assets in stocks and 45% in bonds. You may wish to consider this fund if you re planning to retire between 2018 and 2022. 2025 (0304) The 2025 fund invests in 4 Vanguard index funds, holding approximately 65% of assets in stocks and 35% in bonds. You may wish to consider this fund if you re planning to retire between 2023 and 2027. 10
2030 (0695) The 2030 fund invests in 4 Vanguard index funds, holding approximately 75% of assets in stocks and 25% in bonds. You may wish to consider this fund if you re planning to retire between 2028 and 2032. 2035 (0305) The 2035 fund invests in 4 Vanguard index funds, holding approximately 80% of assets in stocks and 20% in bonds. You may wish to consider this fund if you re planning to retire between 2033 and 2037. 2040 (0696) The 2040 fund invests in 4 Vanguard index funds, holding approximately 85% of assets in stocks and 15% in bonds. You may wish to consider this fund if you re planning to retire between 2038 and 2042. 2045 (0306) The 2045 fund invests in 4 Vanguard index funds, holding approximately 90% of assets in equities and 10% in bonds. You may wish to consider this fund if you re planning to retire between 2043 and 2047. 2050 (0699) The 2050 fund invests in 4 Vanguard index funds, holding approximately 90% of assets in stocks and 10% in bonds. You may wish to consider this fund if you re planning to retire between 2048 and 2052. 2055 (1487) The 2055 fund invests in 4 Vanguard index funds, holding approximately 90% of assets in equities and 10% in bonds. You may wish to consider this fund if you re planning to retire between 2053 and 2057. 2060 (1691) The 2060 fund invests in 4 Vanguard index funds, holding approximately 90% of assets in stocks and 10% in bonds. You may wish to consider this fund if you re planning to retire between 2058 and 2062 *Information found in this document was copied from the Vanguard site and is not meant to provide investment advice. For additional information on each fund listed is available on Vanguard.com. 11