November 12, 2008

Vanguard Merges Two Bond Funds

International Explorer fund reopens; insured bond fund closes

Vanguard is planning to merge the $3.2 billion Vanguard Insured Long-Term Tax-Exempt Fund into the $2.8 billion Vanguard Long-Term Tax-Exempt Fund on December 12, 2008. In conjunction with the planned merger, Vanguard Insured Long-Term Tax-Exempt Fund has closed to new accounts. "The municipal bond market has changed to a point where insured bonds provide little, if any, additional benefit over high-quality uninsured credits. We concluded that a fund focused solely on insured bonds no longer provides tangible benefits," said Gus Sauter, Vanguard's CIO, in announcing the news. "Shareholders will be better served by merging the two portfolios to create a single, well-diversified, high-quality fund." Reid Smith will remain as portfolio manager for the merged Vanguard Long-Term Tax Exempt Fund. John Carbone, who currently oversees Vanguard Insured Long-Term Tax-Exempt Fund, will continue to manage three other municipal funds for Vanguard.

In other news, Vanguard also reopened two mutual funds that were long closed to new investors--the International Explorer Fund and the Precious Metals and Mining Fund. Vanguard closed the International Explorer Fund, which focuses on the stocks of small companies based outside the United States, in August 2004. It had $1.5 billion in assets as of October 31. The Precious Metals and Mining Fund invests in the stocks of foreign and U.S. companies engaged in the exploration, mining, and distribution of gold, silver, platinum, diamonds, and other precious metals and minerals. The fund, which has $3 billion in assets, was closed in February 2006. "The financial market environment has changed considerably since we closed the funds, which at current asset levels are in a position to accept additional cash flows," said Vanguard CEO William McNabb in a statement. The International Explorer Fund requires a minimum initial investment of $25,000 to open a new general, IRA, or custodial account. The minimum initial investment for all accounts in the Precious Metals and Mining Fund is $10,000.

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