News release

Vanguard Funds File Preliminary Proxy Statement Seeking Shareholder Election Of Trustees And Approval Of Policy Changes

Former U.S. Deputy Treasury Secretary and Guardian Life Insurance CEO Nominated as Trustees

VALLEY FORGE, PA (July 13, 2017)—The Vanguard funds filed a preliminary proxy statement today with the U.S. Securities and Exchange Commission (SEC). The filing is the first step in seeking shareholder election of a board of trustees for all funds and approval of several fund policy changes.

“We encourage Vanguard fund shareholders to vote on these important proposals, which will put in place the people and policies to enable us to continue to lower the cost of investing and enhance the management of our funds with the ultimate goal of improving client outcomes,” said Vanguard CEO Bill McNabb.

The proposals are summarized below. The preliminary proxy document can be accessed at the SEC’s website. 

Election of trustees

Vanguard is asking shareholders of each fund to elect a board of trustees. In selecting trustee candidates, the independent nominating committee considers the overall composition of the funds’ board to ensure it reflects an optimal combination of professional experience and expertise.

The trustees are responsible for setting broad policies for the funds; monitoring fund operations, performance, regulatory compliance, risk management, and costs; reviewing and approving advisory contracts; nominating and selecting new trustees; and selecting fund officers.

The nominees include Vanguard Chairman Bill McNabb, newly elected President Tim Buckley, and eight current independent trustees: Lead Independent Trustee Mark Loughridge, Emerson U. Fullwood, Amy Gutmann, JoAnn Heffernan Heisen, F. Joseph Loughrey, Scott C. Malpass, André F. Perold, and Peter F. Volanakis. The nominee slate also includes two new trustee candidates: Sarah Bloom Raskin, former Deputy Secretary of the U.S. Treasury and Deanna Mulligan, president and CEO of The Guardian Life Insurance Company of America.

Standardizing external advisory arrangement policy

The trustees of the Vanguard Funds are seeking shareholder approval of a proposal that would give the funds the ability to retain external firms as investment advisors without expending the considerable time and expense to obtain shareholder approval via proxy solicitation.

Shareholders approved a similar proposal in 1993. Currently, 48 funds have this ability to enter into or amend advisory agreements.

The proposal, if approved, will standardize this policy across Vanguard’s entire line-up. While there are no current plans to employ the policy on Vanguard managed funds, it enables the trustees to retain an advisory firm to diversify a fund’s management team or ensure management continuity in the event of a contingency.

Ability to retain affiliates as advisors

The trustees are seeking shareholder approval of a proposal that would enable the funds to retain Vanguard affiliated subsidiaries as investment advisors without the time and expense of a proxy solicitation to gain shareholder approval.

Vanguard employs in-house investment teams, including the firm’s Fixed Income and Equity Index Groups, to manage a significant portion of its U.S. funds. Vanguard affiliated subsidiaries manage Vanguard’s non-U.S. domiciled funds and exchange-traded funds (ETFs). Vanguard has invested considerable resources in technology and talent to globalize its investment management function, and the firm’s subsidiaries follow the same disciplined approach and proprietary trading strategies employed domestically.

Vanguard believes that there are considerable benefits for its affiliates to act as investment advisors on U.S. funds, particularly those with international exposure. Vanguard requested related exemptive relief from the SEC in February.

With shareholder approval of these two advisor-related proposals, all Vanguard funds could operate under the “manager of managers” structures that are widely used in the mutual fund industry. Since 1995, the SEC has issued more than 200 such orders, enabling other prominent mutual fund firms to enter into such advisory relationships to realize efficiencies while protecting shareholders’ interests.

New objective for REIT Index Funds

The trustees are seeking shareholder approval to change the investment objective for Vanguard REIT Index Fund and Vanguard Variable Insurance Fund - REIT Index Portfolio, which would result in a change in the benchmark. This change aligns the funds with the updated Global Industry Classification Standard (GICS) methodology, an industry-recognized approach to classifying global market sectors. Vanguard’s 10 other sector index funds currently seek to track MSCI benchmarks under this methodology.

The proposed benchmark is the MSCI US Investable Market Real Estate 25/50 Index, which includes real estate management and development companies in addition to real estate investment trusts (REITs), thereby offering broader exposure to the real estate market. The funds currently seek to track the performance of the MSCI US REIT Index, which solely comprises publicly traded equity REITs.

Vanguard is also proposing to reclassify the REIT Index Fund from “diversified” to “nondiversified” as defined by securities laws. The change will enable the fund to better replicate its target benchmark by holding securities in their appropriate weight. Many of Vanguard’s other equity sector funds are currently classified as nondiversified.

Separately, Vanguard filed a registration statement with the SEC for Vanguard REIT II Index Fund, which will seek to track the same benchmark as the REIT Index Fund. The new fund will be available for investment to the REIT Index Fund and other Vanguard funds, along with certain Vanguard institutional clients.

In addition to aligning the funds with other Vanguard sector funds and broadening the funds’ mandates, these related actions are designed to provide additional investment capacity while ensuring continued compliance with SEC and Internal Revenue Code diversification requirements.

Two funds propose to adopt standard service agreement

Vanguard is asking shareholders of Vanguard Institutional Index Fund and Vanguard Institutional Total Stock Market Index Fund to approve the Funds’ Service Agreement under which all other Vanguard U.S. mutual funds operate. This is an agreement between the funds and Vanguard to provide investment advisory, administrative, and distribution services. If approved, this arrangement will then be standardized across Vanguard’s entire U.S. mutual fund line-up.  

Approval of this proposal is expected to reduce expense ratios of the Institutional Shares of the Institutional Index and Institutional Total Stock Market funds to 0.035% from 0.04%. In addition, minimum initial investment requirements will be reduced for three of the four share classes of the two funds, aligning the investment minimums to the standards of other Vanguard funds.

Shareholder proposals

Shareholders of certain funds submitted two proposals. The first calls for two Vanguard funds to separately disclose their votes on climate change proposals. The second seeks to prescribe specific investment limitations on several funds.

Shareholder voting and meeting

Like other U.S. investment companies, Vanguard holds a proxy when shareholder approval is needed for certain fund matters. Vanguard last conducted enterprise-wide proxies in 2002 and 2009. Following the SEC’s review, the fund proxy materials will be sent to Vanguard fund shareholders for voting online, by phone, or by mail. Vanguard encourages online voting for shareholder convenience and associated cost savings. The shareholders meeting is scheduled for November 15, 2017, in Scottsdale, Arizona.


About Vanguard Vanguard is one of the world’s largest investment management companies. As of June 30 2017, Vanguard managed $4.4 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 369 funds to its more than 20 million investors worldwide. For more information, visit


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  • Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.


A registration statement relating to Vanguard REIT II Index Fund 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.

The Global Industry Classification Standard ("GICS") was developed by and is the exclusive property and a service mark of MSCI Inc. ("MSCI") and Standard and Poor's, a division of McGraw-Hill Companies, Inc. ("S&P") and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

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 or any index on which such funds or securities are based.  The preliminary proxy statement the Vanguard funds filed with the SEC contains a more detailed description of the limited relationship MSCI has with The Vanguard Group, Inc. and any related funds.

For more information about Vanguard funds, visit or call 800-523-1036 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. Please note that a preliminary prospectus is subject to change.

2017 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.