Taxes and Mutual Funds

plain talk®
Taxes and Mutual Funds
How taxes can affect your investments

Why Plain Talk?
At The Vanguard Group—a leading proponent of investor education in
the mutual fund industry—we believe that knowledge is one of the
keys to investment success. To that end, we have developed our Plain
Talk Library, a series of candid, concise, and easy-to-understand
publications on a wide variety of investment topics.
To request a free copy of any of these brochures, call us at
1-800-662-7447 on business days from 8 a.m. to 10 p.m. and
on Saturdays from 9 a.m. to 4 p.m., Eastern time. You can also
read or order them online at www.vanguard.com.
We hope you find the information in the Plain Talk Library helpful as
you chart your investment course with us.
■ Mutual Fund Basics
■ The Vanguard Investment Planner
■ Women and Investing
■ Financing College
■ Preparing to Retire
■ Investing During Retirement
■ Estate Planning Basics
■ How to Select a Financial Adviser
■ Measuring Mutual Fund Performance
■ Bear Markets
■ Bond Fund Investing
■ Index Investing
■ International Investing
■ Taxes and Mutual Funds
■ Dollar-Cost Averaging
■ Why Vanguard?

Taxes and Mutual Funds
Taxes are an important consideration for investors. Unless
you pay careful attention to the tax implications of your
mutual fund investments, taxes can sharply reduce the
earnings you are actually able to keep. Fortunately, you don’t
need an accounting or law degree to understand the basics of
taxes and mutual funds.
This Plain Talk brochure explains how mutual fund investments
are taxed. The focus is on mutual funds in taxable accounts, but
we will also note how you can delay or even completely avoid
taxes by using tax-deferred or tax-exempt accounts.
Though this brochure is not meant to serve as a complete guide
for all tax questions, it can help you make sound investment
decisions, choose funds that are appropriate for you, and
minimize the impact of taxes on your investment returns.
Note that a glossary appears at the back of this brochure. Terms
that may be new to readers are printed in blue (for example, cost
basis) the first time they occur.

Contents
How Your Mutual Fund Investments Are Taxed ....................................... 1
How a Fund’s Investment Strategy Can Affect Taxes ............................... 8
Calculating and Reporting Your Taxes ...................................................... 12
The Impact of Taxes on Your Investment Returns .................................... 17
What to Do About Taxes ........................................................................... 19
Tax-Efficient Vanguard Funds ................................................................... 24
Vanguard’s Tax Information Services ........................................................ 26
A Vanguard Invitation ............................................................................... 28
Glossary .................................................................................................... 30

H OW YOUR M UTUAL F UND
I NVESTMENTS A RE TAXED
Since your goal as an investor should be to keep as much as
possible of what you earn from mutual fund investments, you
can’t look past the inescapable reality that taxes take a big bite
out of bottom-line returns.
As a mutual fund investor, you can incur income taxes in three
ways: when the fund distributes income dividends, when the
fund distributes capital gains from the sale of securities, and
when you sell or exchange fund shares at a profit. First we’ll
explain how a fund’s earnings are taxed—then we’ll show how
your sales or exchanges of shares can trigger taxes.
Owning shares and paying taxes
A mutual fund is not taxed on the income or profits it earns
on its investments as long as it passes those earnings along
to shareholders. The shareholders, in turn, pay any taxes due.
Two common types of distributions that mutual funds make
are income distributions and capital gains distributions.
■ Income distributions represent all interest and dividend income
earned by securities—whether cash investments, bonds, or
stocks—after the fund’s operating expenses are subtracted.
■ Capital gains distributions represent the profit a fund makes
when it sells securities. When a fund makes such a profit, a
capital gain is realized. When a fund sells securities at a price
lower than it paid, it realizes a capital loss. If total capital gains
exceed total capital losses, the fund has net realized capital gains,
which are distributed to fund shareholders. Net realized capital
losses are not passed through to shareholders but are retained
by the fund and may be used to offset future capital gains.
1

Occasionally distributions from mutual funds may include a
return of capital. Returns of capital are not taxed (unless they
exceed your original cost basis) because they are considered
a portion of your original investment being returned to you.
Generally, income dividend and capital gains distributions are
subject to federal income taxes (and often state and local taxes as
well). You must pay taxes on distributions regardless of whether
you receive them in cash or reinvest them in additional shares.
The exceptions to the general rule are:
■ U.S. Treasury securities, whose interest income is exempt from
state income taxes.
■ Municipal bond funds, whose interest income is exempt from
federal income tax and may be exempt from state taxes as well.
However, any capital gains on U.S. Treasury securities or
municipal bond funds are generally taxable.
While the amount of income and capital gains you receive from a
mutual fund affects the taxes you pay, another important factor is
the holding period—that is, how long the fund held the securities
before they were sold. Securities held for one year or less before
being sold are categorized as short-term capital gains (or losses).
Short-term capital gains are taxed at your ordinary income tax
rate, as shown in Figure 1. But long-term capital gains—gains on
Figure 1
Federal Income Tax Rates
Rates applied to taxable income in 2001
15% 28% 31% 36% 39.6%
Single Up to $ 27,051 to $ 65,551 to $136,751 to $297,351
$27,050 $ 65,550 $136,750 $297,350 and up
Married, Up to $ 45,201 to $109,251 to $166,501 to $297,351
Filing Jointly $45,200 $109,250 $166,500 $297,350 and up
Married, Up to $ 22,601 to $ 54,626 to $ 83,251 to $148,676
Filing Separately $22,600 $ 54,625 $ 83,250 $148,675 and up
Note: Income brackets are adjusted annually for inflation.
Source: Internal Revenue Service.
2

New tax rates on certain capital gains
Federal income tax rates have been reduced on certain capital gains known
as “qualified five-year gains.”
■ For taxpayers in the 15% bracket, the tax rate on capital gains from the
sale of assets that have been held longer than five years has dropped
from 10% to 8%. Tax rates on capital gains from the sale of assets held
five years or less are unchanged.
■ For taxpayers in the higher brackets (28%, 31%, 36%, and 39.6%), the tax
rate on capital gains from the sale of assets purchased after January 1,
2001, and held longer than five years (that is, the assets are not sold until
2006 or later) has dropped from 20% to 18%. Tax rates on capital gains
from the sale of assets held five years or less are unchanged.
Taxpayers in the higher brackets (28% or higher) can make assets they own
eligible for the 18% rate (rather than the 20% rate) in 2006 or later by treating
those assets as having been sold and reacquired at their closing prices on
January 2, 2001. By “marking assets to market” in this way, a taxpayer can
recognize capital gains (but not losses). The gains as of January 2 are taxed
currently at the old rate of 20% (or a higher rate if it’s a short-term gain) and
must be reported to the IRS in a letter filed with the investor’s tax return for the
tax year that includes January 1, 2001. If the asset is then sold in 2006 or later,
increases in the value of that asset are taxed at the 18% rate.
Example: An investor bought 100 shares of a company for $1,000, or $10
a share, in 1996. On January 2, 2001, the shares closed at $20 each. The
investor marks them to market and pays a 20% tax on her $1,000 profit—a
total of $200 in tax. In 2006, she sells the shares for $3,000, or $30 a share,
so she has a five-year gain of another $1,000 that is taxable at 18% ($180).
Her total tax bill is $380—$200 paid in 2001 and $180 paid in 2006. If she
had not marked the shares to market, her total tax bill would have been $400
in 2006—so she saved $20. However, the $200 paid in taxes in 2001 could
have been invested from 2001 to 2006, possibly earning more than $20.
We recommend that you consult a tax or financial adviser about whether
marking to market would be beneficial in your individual situation. Be sure
to consider state and local income taxes in making your decision.
3

securities the fund held for longer than one year before being sold—
are taxed at a maximum rate of 20%. (The long-term capital gains
rate is a maximum rate of 10% for taxpayers in the lowest income
tax bracket.)
Your mutual fund will tell you the category of any capital gains
it distributes. This is determined by how long the fund held the
securities it sold, not by how long you have owned your shares.
For example, say you first bought shares in a fund last month and
today the fund is making a capital gains distribution as a result
of selling securities it owned for five years. That distribution is
a long-term capital gain because the fund’s holding period was
longer than one year. On the other hand, say you bought shares
in a mutual fund ten years ago. The fund makes a capital gains
distribution because it sold securities it had held for six months.
That distribution is a short-term capital gain for you because
the fund’s holding period was less than one year.
These are key distinctions simply because not all investment income
is treated equally. Income (such as interest and dividends) and shortterm
capital gains are taxed as ordinary income at your marginal tax
rate (which can range from 15% to 39.6%, as shown in Figure 1 on
page 2). Net capital gains on securities held longer than one year
are taxed at a maximum rate of 20% (a maximum rate of 10% for
taxpayers in the lowest tax bracket).
Internal Revenue Service Form 1099-DIV, which your mutual
fund usually sends in January for the previous tax year, details fund
distributions you must report on your federal income tax return,
including both income distributions and capital gains distributions
from your funds. You won’t receive a Form 1099-DIV for mutual
funds that distribute tax-exempt interest dividends (such as
municipal bond funds) or for funds on which you earned less
than $10 in dividends. (However, you still owe taxes on all taxable
distributions, regardless of their size.) For more information,
see Calculating and Reporting Your Taxes on page 12.
4

Taxes on sales or exchanges of shares
You can trigger capital gains taxes on mutual fund investments by
selling some or all of your shares at a profit, or by exchanging shares
of one fund for shares of another. The length of time you hold
shares and your tax bracket determine the tax rate on any gain.
Three important notes:
■ All capital gains from your sale of mutual fund shares are
taxable, even those from the sale of shares of a tax-exempt fund.
■ Exchanging shares between funds is considered a sale, which
may lead to capital gains. (An exchange involves selling shares of
one fund to buy shares in another.)
■ Writing a check against an investment in a mutual fund
with a fluctuating share price (all funds except money market
funds) also triggers a sale of shares and may expose you to
tax on any resulting capital gains.
Timing affects your taxes
Here’s an example of how timing may affect taxes on the sale of mutual fund
shares: If you buy 100 shares of mutual fund ABC for $20 a share and sell
them six months later for $22 a share, you owe taxes on your $200 shortterm
capital gain. If you’re in the 31% marginal tax bracket, that’s $62.
However, if you hold on to the shares for more than 12 months after the
original purchase, your profit is considered a long-term gain. Therefore, it is
taxed at a maximum capital gains rate of 20% (for a maximum total tax of
$40 on the $200 capital gain).
Real-life calculations often aren’t so tidy, especially for investors who buy
mutual fund shares at different times and at different prices. In Calculating
and Reporting Your Taxes (pages 12–16), we’ll explain how to figure gains or
losses on sales of mutual fund shares.
5

Don’t buy a tax bill with your fund shares
The tax owed on mutual fund investments may also depend in part
on when you buy the shares. Mutual fund distributions, whether
from income dividends or capital gains, are taxed in the year they
are made. However, under certain circumstances, distributions
declared during the last three months of a year and paid the
following January are taxable in the year they were declared.
If you hold shares in mutual funds that declare dividends daily
—such as money market and bond funds—you are entitled to
a dividend for each day you own shares in the fund. For other
funds, such as stock and balanced funds, dividend and capital
gains distributions are not declared daily but according to a
regular schedule (monthly, quarterly, semiannually, or annually).
When a mutual fund makes a distribution, its share price (or net
asset value) falls by the amount of the distribution. For example,
let’s say you own 1,000 shares of Fund X worth $10,000, or
$10 a share. The fund distributes $1 a share in capital gains, so
its share price drops to $9 a share on the fund’s reinvestment
date (not counting market activity). You’ll still have $10,000
(1,000 x $9 = $9,000, plus the $1,000 distribution). But you’ll
owe tax on the $1,000 distribution, even if you reinvest it to buy
more shares.
So when considering a purchase of fund shares, ask the fund
company about the fund’s next distribution—when it will take
place and how large it is expected to be. If you own shares on
the fund’s record date, you will receive the distribution. That
means if you purchase shares shortly before the record date,
you are “buying the distribution”—you’ll owe taxes on the
capital gains that were reflected in the share price when you
bought shares. In effect, a portion of your investment is being
“returned” to you as a taxable capital gain.
6

Tax-deferred and tax-exempt accounts
The rules explained in this brochure apply only to taxable investments, not
to tax-deferred investments such as those in employer-sponsored retirement
plans (401(k) and 403(b) plans), individual retirement accounts (traditional
IRAs), or variable annuities. Nor do these rules apply to Roth IRAs, which
can be tax-free at withdrawal.
Usually people are not taxed on the earnings in tax-deferred accounts
until they start withdrawing money from the accounts—typically during
retirement. Whether the withdrawals take the form of a lump sum or an
installment payment, the taxable portion is always considered ordinary
income (as opposed to capital gains) and thus taxed at the taxpayer’s
marginal rate for the years when the withdrawals occur. IRA withdrawals
taken before age 591 /2 are generally taxable and subject to an additional
10% penalty tax. (Note, however, that distributions from Roth IRAs after a
taxpayer reaches age 591 /2 will be tax-free if the Roth IRA has been held
longer than five years.)
Some tax-deferred investments offer added tax advantages. For example,
you may be able to contribute wages or salary on a pre-tax basis. In a 401(k)
plan, for example, money you contribute to the plan is deducted from your
pay before it is taxed, which reduces your taxable wages. Similarly, many
investors can deduct some or all of their contributions to traditional IRAs,
which also reduces their taxable income. (Contributions to Roth IRAs are
never deductible.)
In retirement plans that allow pre-tax contributions (for example, 401(k)
plans and traditional IRAs), withdrawals from the account are taxed as
ordinary income. But for after-tax contributions to tax-deferred accounts
(for example, if you invest $1,000 of take-home pay in a variable annuity
or a nondeductible traditional IRA), you pay taxes only on earnings that
accumulate in the account, because the contribution has already been taxed.
7

H OW A F UND’ S I NVESTMENT S TRATEGY
CAN A FFECT TAXES
The likelihood that a mutual fund will pass along taxable
distributions is heavily influenced by two factors: the kinds of
securities the fund invests in and the fund’s investment policies.
Security holdings
Money market funds
Most money market funds pay dividends that are fully taxable.
(Some funds—those that invest in municipal securities—earn
interest that is generally not subject to federal income tax and
that often is exempt from state and local taxes as well.*) However,
because these funds are designed to maintain a constant value
of $1 per share,** they do not ordinarily generate capital gains or
losses, either within the fund or as the result of sales or exchanges
you make.
Bond funds
Ordinarily, bond funds produce relatively high levels of taxable
income. Over long periods, almost all the return from bond funds
comes from dividend payments. However, because the prices of
bonds and bond funds fluctuate in response to changing interest
rates, it is possible to have taxable capital gains from investing in
bond funds, even tax-exempt bond funds. Sometimes a fund will
generate taxable capital gains distributions by selling bonds at
a profit. Alternatively, a shareholder can trigger a capital gain
by selling shares in a bond fund for a price higher than the
original cost.
8
*For some investors, however, a portion of the fund’s income may be subject to the
alternative minimum tax.
**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.

Stock funds
Stock funds may pass along income from dividends paid by
stocks held in the fund as well as from capital gains from the
sale of stocks. Over time, however, most of the return from
stocks comes from appreciation in stock prices. Because stock
prices fluctuate considerably, you are generally more likely to
realize a capital gain or loss when selling shares of a stock mutual
fund than when selling shares of bond funds or money market
funds. If you sell shares that have fallen in value, you won’t owe
taxes on the transaction; indeed, you may be able to take a
deduction for a capital loss.
But to gauge the tax impact, it’s not enough merely to know
that a fund owns stocks. You must know what kind of stocks
it owns. Carefully study a stock fund’s objective to learn whether
it emphasizes income or capital appreciation. Also determine
whether it concentrates on value stocks (which generally pay
higher dividend yields) or growth stocks (which seek long-term
capital growth rather than current income). The annualized rate
at which a stock earns income (known as the dividend yield, which
can be found in a fund’s annual report) serves as one indication
of whether a fund takes a value or growth approach.
Large, well-established companies are more likely to pay dividends
than smaller companies, which generally reinvest any profits back
into the company to pay for growth. Consequently, funds that
emphasize large-company (“blue chip”) stocks tend to generate
more taxable dividend income than funds that emphasize smallcompany
stocks.
Investment policies
How a mutual fund’s adviser manages the fund’s securities can
also affect the taxes of shareholders in the fund. Because capital
gains distributions result from the profitable sale of securities in
the fund, frequent selling within a fund makes the fund more likely
to produce taxable distributions than a fund that follows a strategy
of “buy and hold.”
9

A common measure of a mutual fund’s trading activity is its
turnover rate, which is expressed as a percentage of the fund’s
average net assets. For example, a fund with a 50% turnover rate
has (over the course of a year) sold and replaced securities with a
value equal to 50% of the fund’s average net assets. This means
that, on average, the fund holds securities for two years. (The
average turnover rate for U.S. stock mutual funds is about
113%.*) Turnover rates can’t be used to forecast a fund’s taxable
distributions, but they can help you compare the trading policies
among funds. Assuming that a fund’s holdings will increase in
value over time, you need to consider how much of that increase
in value will be passed along to you as a taxable capital gains
distribution. The fund’s turnover rate bears directly on this point.
A capital gain on the sale of securities is a realized gain. In
contrast, an unrealized (“paper”) gain has not yet been locked in
by the sale of securities. For example, a fund may have bought
stock in XYZ Inc. for $5 per share three years ago. If the stock’s
price rises to $15, the fund has an unrealized capital gain of $10
per share on XYZ’s stock. As long as the fund continues to hold
the XYZ shares, there is no taxable gain. But if the fund actually
sells the stock at $15 per share, shareholders will usually have to
pay taxes on the $10 per share of realized capital gains,
regardless of whether the shareholders owned their own shares
in the mutual fund for a month or for a decade. Thus, all
unrealized capital gains have the potential to be converted
eventually into realized capital gains.
This means that you should consider both a fund’s realized and
unrealized gains (information that is available through your
mutual fund company) and also its turnover rate to determine
the potential tax implications of your investment.
*Source: Lipper Inc.
10

When the markets move
The financial markets also play a part in determining the taxable
distributions a fund may pass along to you. Generally, rising
markets lead to bigger gains and higher tax liabilities. (Rising
markets are no cause for concern—after all, strong returns are
undoubtedly the goal of every mutual fund investor.)
All these factors—security holdings, investment policies, and
market movements—cannot reliably predict your annual tax
bill. Taken together, however, they should give you a sense of
whether a fund may add to that bill. The information in Figure 2
may also help.
Figure 2
Assessing Types of Mutual Funds for Tax Friendliness
Potential for Potential for
Type of Fund Taxable Income Capital Gains
Taxable money market High None
Tax-exempt money market Very Low None
Taxable bond High Low
Tax-exempt bond Very Low Low
State tax-exempt bond Very Low Low
Balanced (stocks and bonds) Medium to High Medium
Growth and income stock Medium Medium to High
Growth stock Low High
International stock Low High
Tax-managed Low Low
11

CALCULATING AND REPORTING YOUR TAXES
Your mutual fund company will provide a variety of forms to help
you complete your tax returns accurately. This information is also
provided to the IRS. Here is a list of the various forms and how
they can be used.
■ IRS Form 1099-DIV, which is typically mailed by fund
companies by late January of each year, lists the ordinary
dividends and capital gains distributed by your funds. “Ordinary
dividends” reported on Form 1099-DIV include both taxable
dividends and any short-term capital gains. Form 1099-DIV
may also include return-of-capital distributions and foreign
taxes paid.*
■ IRS Form 1099-B serves as a record of all sales of shares. Mailed
in January, this form lists all of your sales of shares, checkwriting
activity, and exchanges between funds. It is essential to
determining capital gains or losses. If you realize capital gains
or losses from the sale or exchange of mutual fund shares (or
other capital assets), you must report them on your tax return.
■ IRS Form 1099-R summarizes all distributions from retirement
accounts such as IRAs, 401(k) plans, and annuities. Mailed in
January, this form lists total distributions, the taxable amount,
and any federal tax withheld.
If you own shares of funds that hold U.S. Treasury securities, you
may receive a United States Government Obligation listing with
your Form 1099-DIV.** This provides the percentage of a fund’s
income that came from U.S. government securities—and thus
the percentage of income dividends that may be exempt from
state income taxes.
*Mutual funds that invest in foreign securities may elect to pass through foreign
taxes paid by the fund to its shareholders. Shareholders may be able to claim a tax
credit or deduction for their portion of foreign taxes paid.
**Vanguard shareholders receive the United States Government Obligation listing.
12

If you own shares of a municipal bond fund, you may receive an
Income by State listing* that tells you the percentage of the fund’s
income that came from each state’s obligations. You can use this
information to exclude income from municipal bonds issued in
the state where you live.
You may also receive other tax-related information, depending
on the types of funds you own. For example, if you invest in an
international mutual fund, you may receive information that
you can use to take a credit for foreign taxes paid by the fund.
Capital gain or loss?
To determine the gain or loss when you sell (or exchange)
mutual fund shares, you must know both the price at which you
sold the shares and your cost basis (generally the original price
you paid for the shares). The sale price is the easy part. Figuring
your cost basis can be complicated, especially if you bought
shares at different times and at different prices.
An important note: Always count reinvested dividend and capital
gains distributions as part of your cost basis. This will raise your cost
basis and thus reduce the amount of your taxable gain when you
sell or exchange your shares. Because the size of the taxable gain
will be smaller, you will owe less in taxes.
When figuring your cost basis, keep in mind that any sales
charge or transaction fee you pay when you buy shares is part of
your cost basis. Any fees or charges paid when you sell shares
reduce the proceeds of the sale. In general, fees paid when you
buy or redeem shares reduce your taxable gain or increase your
capital loss. (Other fees charged by a mutual fund, such as
account maintenance fees, do not affect your cost basis.)
The IRS allows you to figure the gain or loss on sales or exchanges
of mutual fund shares by using one of four methods, each of which
has its own benefits and drawbacks. Once you begin using an
*Vanguard shareholders receive the Income by State listing.
13

average cost method for the sale of shares of a particular fund, the
IRS prohibits a switch to another method without prior approval.
However, you may employ different methods for different funds.
To determine which method is best for you, you may wish to
consult a tax professional.
First-in, first-out (FIFO)
This method assumes that the shares sold were the first shares
you purchased. While fairly easy to understand, this method
often leads to the largest capital gains, because the longer you
hold shares, the more time they have to rise in value. If you do
not specify a method for calculating your cost basis, the IRS
assumes that you use the FIFO approach.
14
The simple approach to
your cost basis
Vanguard uses the average cost
single category method to
calculate the tax basis of shares
redeemed from Vanguard fund
accounts. We will send you the
cost basis for each eligible
investment that you sell during the
year, updated on each statement
you receive. (This service is not
available for all accounts, such as
those established before 1986 or
some accounts acquired through a
transfer.) See page 26 for more
information on Vanguard’s average
cost service.
Average cost (single category)
This method considers the
cost basis of your mutual
fund investment to be the
average basis of all the shares
you own—a figure that
changes as you continue
investing in a fund. Most
mutual fund companies
(including Vanguard) use
this method to calculate
average cost. In determining
whether a sale generated a
short-term gain or a longterm
gain, the shares sold are
considered to be the shares
acquired first.
Average cost (double category)
This approach is similar to the single category method except
that you must separate your shares into two categories—shares
held for a year or less and shares held for longer than a year.

Selling short-term shares means basing the gain (which is
taxed at ordinary income rates of up to 39.6%) on the difference
between the average short-term basis and the sales price. By
contrast, the gain on the sale of long-term shares (which is taxed
at a maximum rate of 20%) is based on the difference between
the average long-term basis and the sales price. If you choose
this method, you must notify the fund company in advance of
which category of shares to sell.
Specific identification
This method provides the most flexibility and therefore the best
chance to minimize taxable gains. The first step is to identify the
specific shares you want to sell—in most cases, these would be
the shares bought at the highest price so that you can minimize
your gain. However, this method is not necessarily the best
choice because it can be complex and also imposes the heaviest
recordkeeping burden on shareholders. In addition, the shares
with the highest cost basis may be the ones you purchased most
recently—which could mean your having to pay taxes at a higher
rate if the gains that result are short-term.
Help from the IRS
More tax information is available from the Internal Revenue Service. Call the
IRS at 1-800-TAX-1040 to ask questions about specific tax matters. You can
order IRS forms and publications by calling 1-800-TAX-FORM. Among the
publications you may find helpful in understanding and reporting mutual fund
taxes are:
■ IRS Publication 17, Your Federal Income Tax
■ IRS Publication 564, Mutual Fund Distributions
■ IRS Publication 590, Individual Retirement Arrangements
■ IRS Publication 514, Foreign Tax Credit for Individuals
IRS forms and brochures are also available on the IRS website at
www.irs.gov.
15

To use the specific identification method, notify your mutual fund
company in writing and provide detailed instructions about which
shares you are selling each time you sell or exchange shares.
Making losses work for you
You can use losses on the sale of shares to offset other capital
gains. You can also use up to $3,000 of net capital losses
($1,500 for people who are married and filing separately) to
offset ordinary income (such as salary, wages, or investment
income) in any year.
For example, if you have a net capital loss of $2,000 (because of
unprofitable sales of mutual funds, for instance), that loss can be
used to reduce your taxable income. Losses that exceed $3,000
in one year can be carried forward for as long as you wish.
A few cautionary notes:
■ If you redeem shares at a loss and purchase shares in the
same fund within 30 days before, after, or on the day of the
redemption, the IRS considers the redemption a wash sale.
This means that you may not be allowed to claim some or all
of the loss on your tax return.
■ If you redeem shares at a loss from a tax-exempt municipal
bond fund by selling shares held for six months or less, a
portion of the loss may not be allowed. In this case, the
realized loss must be reduced by the tax-exempt income
you received from these shares.
■ If you realize a short-term capital loss on shares held six
months or less in an account that received long-term capital
gains distributions on those shares, the short-term loss you
realize from a sale of shares (up to the amount of the capital
gains distributions they earned) must be reported as a longterm
loss.
You may wish to consult with a tax adviser or tax preparer for
guidance in dealing with these situations.
16

T HE I MPACT OF TAXES ON
YOUR I NVESTMENT RETURNS
Understanding how mutual fund investments are taxed prepares
you for the critical next step, which is to understand the impact
that taxes can have on the overall performance of your investment
program. Ignoring their impact can be a serious error.
Along with such fundamental factors as risk, return, and cost,
taxes should be considered when deciding whether to invest in
a mutual fund. Here’s why: Minimizing taxes can substantially
boost the net returns you receive from mutual fund investments,
particularly if you’re in a high tax bracket.
According to one recent analysis, a significant portion of the pretax
returns on domestic stock mutual funds ultimately goes to pay
federal income tax on dividend and capital gains distributions—
especially for investors in high tax brackets. Specifically, for the
mutual funds included in the analysis, the average annual pre-tax
return (for ten years ended December 31, 2000) was 16.1%, but
the after-tax annual return was only 13.4%.* In other words, about
one-sixth of the pre-tax returns was consumed by federal income
tax. The amount lost to taxes for individual funds ranged from zero
(the pre-tax and after-tax returns were equal) to 9.3 percentage
points per year.
*Source: Vanguard analysis using data from Morningstar, Inc.
How Vanguard can help
You can learn more about the after-tax returns on most
Vanguard funds by using the After-Tax Returns Calculator
on our website.
This interactive tool calculates the fund’s after-tax returns based on your
marginal tax rate for any time period you choose. An advanced version of the
calculator can even factor in state and local income taxes.
To use the calculator, go to www.vanguard.com/?aftertax.
17

Over the long haul, efforts to minimize taxes can provide a
handsome payoff. Figure 3 below demonstrates the growth
of hypothetical taxable investments of $10,000 in two mutual
funds. Both funds have pre-tax total returns of 10% a year, but
their after-tax returns are different. Investors in one fund paid
taxes equal to 10% of their earnings (for an after-tax return of
9% a year), and investors in the other fund paid taxes equal to
30% of their earnings (for an after-tax return of 7% a year).
Though the advantage is not dramatic at first, it becomes huge
as earnings compound over time. After 30 years, the investment
with the smaller tax bite grows to almost $133,000 after taxes—
about 75% more than the $76,123 produced by the more heavily
taxed fund.
Figure 3
The Effect of Taxes Over the Long Term
$140000
120000
100000
18
80000
60000
40000
20000
0
$132,677
9% Annual Return
$76,123
7% Annual Return
5 10 15
Years
20 25 30
This example, which assumes original investments of $10,000 each, is for illustrative
purposes only and does not imply returns available on any particular investment.

W HAT TO D O A BOUT TAXES
Because most mutual fund managers focus on maximizing
pre-tax returns (within a fund’s guidelines), the important task of
considering the tax effect of mutual fund investments is up to you.
Several approaches can help in crafting an investment program
that keeps taxes to a minimum:
■ Deferring taxes on your investments for as long as possible.
■ Selecting mutual funds that feature low turnover rates.
■ Choosing tax-exempt investments such as municipal bond
funds (for people in high tax brackets).
Deferring taxes
The most efficient investment strategy is to avoid taxes entirely—
at least for a while. For example, mutual funds held in tax-deferred
accounts (such as 401(k) and 403(b) plans, traditional IRAs, or
variable annuities) are exempt from current taxation. Generally,
withdrawals (both contributions and earnings) from these accounts
are taxable. However, non-deductible contributions to a traditional
IRA are usually not taxable when they are withdrawn.* The entire
amount withdrawn from a Roth IRA is generally exempt from
income taxes.
On the following page, Figure 4 demonstrates the long-term
benefit of delaying the payment of taxes. The “Taxable Account”
column shows the value of annual $1,000 investments in a regular
account on which taxes must be paid on the earnings every year.
The “Tax-Deferred Account Before Taxes” column shows the
value if the annual $1,000 investments are allowed to grow inside
a tax-deferred account. The last column, “Tax-Deferred Account
After Taxes,” shows the value of the tax-deferred account assuming
*A 10% penalty tax may be levied on IRA withdrawals made before age 59 1 ⁄2.
19

Figure 4
The Power of Long-Term Tax Deferral
Annual investments of $1,000
that the account balance is withdrawn and taxes paid at the end of
each period.
Though the advantage of tax deferral is evident early on, the
difference becomes increasingly impressive over longer periods.
The tax-deferred account grows to more than $122,000 after
30 years—nearly $48,000 more than the value of the taxable
account over the same period. Even after taxes are paid at the
end of the 30-year period, the tax-deferred account maintains an
advantage of more than $17,000 over the taxable account—more
than half the total investment of $30,000 over the 30-year period.
The benefit of tax deferral is even greater on investments that
offer additional tax advantages (such as 401(k) or 403(b) accounts,
which permit pre-tax contributions). For example, in a taxable
account, you would have to earn nearly $1,500 for every $1,000 of
take-home pay that you plan to invest (assuming a 33% combined
federal and state tax bracket). Therefore, by participating in a plan
that allows pre-tax contributions, you could invest $1,500 without
digging any deeper into your pocket than you would if you made
a $1,000 investment after taxes.
20
Year-End Values
Tax-Deferred Tax-Deferred
Number of Taxable Account Account
Years Invested Account Before Taxes After Taxes
10 $13,477 $ 15,645 $13,782
15 23,361 29,324 24,597
20 36,194 49,423 39,713
25 52,854 78,954 61,149
30 74,485 122,346 91,872
Assumes an 8% annual rate of return and a 33% tax rate (federal and state combined). This
chart should not be viewed as indicative of future investment performance. These data
represent historical investment performance, which cannot be used to predict future returns.

The concept is similar for tax-deferred investments on which you
may take a tax deduction, such as contributions to a traditional IRA
(if you meet certain income limits). Receiving a tax deduction
reduces the taxes that would otherwise be payable.
Seeking low turnover
Though most funds are not managed to keep taxes low, some
types of mutual funds are tax-friendly by nature, especially those
that keep turnover (the buying and selling of securities) low. As
discussed earlier, a fund that buys and holds securities is likely to
realize fewer gains than a fund that engages in active trading and
is thus less likely to pass along taxable gains to investors. Such
funds are sometimes called tax-efficient funds.
Index funds
The objective of an index fund is to track the performance and risk
characteristics of a market benchmark, such as the Standard &
Poor’s 500 Index. Stock index funds—but not bond index funds—
can reduce an investor’s exposure to taxes.
Index funds buy and hold the securities in a specific index (or a
representative sample of the index). Because of this, the portfolio
turnover of index funds is typically low. The chance that a security
held in an index fund will be sold for a large gain (thus generating
a large tax bill for shareholders) is much lower than a fund that
employs an active management approach (buying and selling
securities at the fund manager’s discretion).
Nonetheless, index funds do sometimes realize gains—for example,
when a stock is removed from a fund’s target index and thus must
be sold by the fund. An index fund could also be forced to sell
securities in its portfolio if many investors decide to sell their
shares—say, during a downturn in the stock market.
Bond index funds do not offer a tax-efficiency edge over actively
managed bond funds because income—not capital gains—
typically accounts for almost all of the long-term total return
from bond funds.
21

Tax-managed funds
Some funds are managed to keep taxable gains and income low.
Among the strategies these funds employ are indexing (to hold down
turnover), carefully selecting which shares to sell (so that capital
losses offset most capital gains), and encouraging long-term
investing (for example, by assessing fees on shareholders who
redeem their shares soon after buying them).
Investing for tax-exempt income
Interest on most municipal bonds is exempt from federal income
tax and, in some cases, from state and local income taxes as well.
However, municipal bond funds (which pay lower yields than
taxable bond funds as the trade-off for their tax advantage) are not
for everyone. Generally, investors in lower tax brackets do not
benefit from owning municipal bond funds. The box below explains
how to compare yields on tax-exempt and taxable bond funds.
22
Choose your bonds—taxable or tax-exempt?
Deciding between taxable and tax-exempt bond funds for your portfolio takes
some analysis. Municipal bonds offer the advantage of producing income
that is exempt from taxes—but they also pay yields lower than those
available on taxable bond funds of comparable quality and maturity. To
decide whether to invest in a tax-exempt bond fund or a taxable one, you
need to know which provides the best overall return.
Here is how to compare the yield of a municipal bond fund with that of a
taxable bond fund that holds bonds of similar credit quality and maturities.
First subtract the percentage of your marginal tax bracket from 1, then
divide the resulting number into the yield of the tax-exempt fund to find the
equivalent taxable yield. For an investor in the 28% tax bracket considering a
tax-exempt fund with a 6% yield, the calculation is as follows:
Example: 1.0 – 0.28 = 0.72 6% ÷ 0.72 = 8.33%
In this example, a taxable fund must provide a yield of more than 8.33% to
top a yield of 6% from a tax-exempt fund.

Keep in mind that only a municipal bond’s income is exempt from
taxes. Taxes are payable on any capital gains that a tax-exempt
fund distributes. And for some investors, a portion of the fund’s
income may be subject to the alternative minimum tax.
State-specific municipal bond funds provide an additional tax
advantage. Municipal bond income is generally exempt from
both state and federal taxes for investors who live in the state
where the bonds are issued. For example, New York State
residents pay no state taxes on income from a municipal bond
fund that holds only securities of New York State issuers.
23

TAX-EFFICIENT VANGUARD F UNDS
Vanguard understands that taxes are an important consideration
for all investors. To address that concern, we offer a wide variety
of funds that may be suitable for tax-conscious investors.
Vanguard ® Municipal Bond Funds
High-Yield Tax-Exempt Fund
Insured Long-Term Tax-Exempt Fund
Intermediate-Term Tax-Exempt Fund
Limited-Term Tax-Exempt Fund
Long-Term Tax-Exempt Fund
Short-Term Tax-Exempt Fund
Tax-Exempt Money Market Fund
Vanguard ® State Tax-Exempt Income Funds
California Insured Intermediate-Term Tax-Exempt Fund
California Insured Long-Term Tax-Exempt Fund
California Tax-Exempt Money Market Fund
Florida Insured Long-Term Tax-Exempt Fund
Massachusetts Tax-Exempt Fund
New Jersey Insured Long-Term Tax-Exempt Fund
New Jersey Tax-Exempt Money Market Fund
New York Insured Long-Term Tax-Exempt Fund
New York Tax-Exempt Money Market Fund
Ohio Long-Term Tax-Exempt Fund
Ohio Tax-Exempt Money Market Fund
Pennsylvania Insured Long-Term Tax-Exempt Fund
Pennsylvania Tax-Exempt Money Market Fund
24

Vanguard ® Index Funds
Vanguard ® Domestic Stock Index Funds
500 Index Fund
Balanced Index Fund
Calvert Social Index Fund
Extended Market Index Fund
Growth Index Fund
Mid-Cap Index Fund
Small-Cap Growth Fund
Small-Cap Index Fund
Small-Cap Value Index Fund
Total Stock Market Index Fund
Value Index Fund
Vanguard ® International Stock Index Funds
Developed Markets Index Fund
Emerging Markets Stock Index Fund
European Stock Index Fund
Pacific Stock Index Fund
Total International Stock Index Fund
Vanguard ® Tax-Managed Funds
Tax-Managed Balanced Fund
Tax-Managed Capital Appreciation Fund
Tax-Managed Growth and Income Fund
Tax-Managed International Fund
Tax-Managed Small-Cap Fund
25

VANGUARD’ S TAX I NFORMATION S ERVICES
If figuring your taxes already includes more calculations than
you’d like, several Vanguard services can make tracking and
reporting taxes easier.
Average Cost Service
If you sell or exchange shares of any Vanguard fund that has a
fluctuating share value, you will receive an Average Cost Statement
that lists the average cost basis (using the single category method)
of the shares you sold or exchanged. In addition, the statement lists
the proceeds from each sale and the amount of any gain or loss.
Each sale is classified as either a short-term or a long-term gain or
loss. This service simplifies tax reporting and recordkeeping. Note
that using a different method of calculating your cost basis could
change the amount of taxes that you owe. Consult your tax adviser
for further information.
Information on your Average Cost Statement is not reported
to the IRS, and you are not required to use it to calculate your
capital gains or losses. However, if you use one of the three other
methods (as described on pages 14 and 15), you must keep
careful records for purchases and sales. Remember that while
Form 1099-B provides information about sales, it does not show
the cost basis for the shares.
26
How Vanguard can help
Vanguard can give you daily updates on the cost basis of
your shares.
For example, if you’re considering a sale, you may want to check your
average cost basis as of the previous day’s market closing price. Compare
that figure with the current market value of your shares to estimate the
tax implications of a sale.
For assistance, call Vanguard ® Client Services at 1-800-662-2739.

Information for state tax returns
In January, Vanguard provides a breakdown of the percentage
of income that each Vanguard fund derives from direct U.S.
Treasury obligations (such as U.S. Treasury bills, notes, or
bonds). This information allows you to exclude that percentage
of the income you earned from the income subject to state tax.
Also in January, Vanguard furnishes shareholders of municipal
bond funds a list of the percentage of the fund’s income derived
from each state. Use this information to exclude from your tax
return any income attributable to municipal bonds issued in the
state where you live.
Foreign Tax Credit Service
Vanguard’s Foreign Tax Credit Service provides detailed tax
information in January for all shareholders of Vanguard mutual
funds that hold primarily international investments. A mutual
fund that invests in stocks of overseas companies may have to
pay foreign taxes on the dividends it receives. If this happens,
you may either deduct your share of the foreign tax on your
U.S. income tax return or claim a credit for it. (Claiming a
credit is usually more advantageous, because a deduction only
reduces your taxable income, while a credit reduces the tax you
owe dollar-for-dollar.)
This information specifies the foreign income you earned as well
as the foreign taxes you paid. If you claim a credit, you can use
this information to complete IRS Form 1116, Foreign Tax Credit.
(Some shareholders may be able to claim a credit directly on Form
1040 without completing Form 1116; check with your tax adviser.)
You may receive a credit or deduction for foreign taxes only on
funds you hold in taxable accounts. International investments
held in a tax-deferred account such as an IRA are not eligible
for a tax credit or deduction. If you are eligible to receive a credit
or deduction for any of your fund investments, Vanguard will
send you the appropriate information.
27

A VANGUARD I NVITATION
For more information about Vanguard ® funds and services,
to learn more about investing, or to open an account online,
visit our website at www.vanguard.com. There you’ll find the
complete Plain Talk ® Library, Retirement Center, and our
popular Education Center. Register for immediate secure
access to our online investment-management center, and
you can monitor your accounts, conduct transactions, trade
securities, and invest in both Vanguard and non-Vanguard
funds—24 hours a day.
Or you can speak with a Vanguard associate by calling us at
1-800-662-7447 on business days from 8 a.m. to 10 p.m. and
on Saturdays from 9 a.m. to 4 p.m., Eastern time. Our associates
are always pleased to answer your questions or provide
information about our funds and services.
Vanguard also invites you to take advantage of the broad
selection of programs and services that we offer that can teach
you more about investing and help you stay on track toward
reaching your financial goals.
Vanguard ® Personal Financial Planning Service 1-800-567-5162
At an affordable fee, this service offers customized one-time
analysis and advice on investment, retirement, and estate planning.
Vanguard ® Asset Management and Trust Services 1-800-567-5163
Individuals who have a minimum of $500,000 in investable assets
can receive comprehensive, ongoing wealth management services
at a very reasonable fee.
28

Vanguard Brokerage Services ® 1-800-992-8327
Through Vanguard Brokerage, you can invest in individual stocks,
bonds, options, and more than 2,600 non-Vanguard mutual funds.
You can open an account and trade on our website as well.
Retirement Resource Center 1-800-205-6189
Our experienced retirement specialists can provide a wealth
of information to help you plan or manage your retirement
investments.
Individual Retirement Plans 1-800-823-7412
Self-employed individuals and small-business owners can find out
how to establish and administer retirement plans for themselves
and/or their employees.
Voyager and Flagship Services 1-800-337-8476
Vanguard offers special services for clients with substantial assets.
■ Voyager Service ® , for clients investing more than $250,000 in Vanguard
mutual funds, offers the expert assistance of a special service team.
■ Flagship Service, for clients whose Vanguard mutual fund investments
exceed $1 million, offers personal service from a dedicated representative.
Eligible clients are invited to call Vanguard for more information.
29

G LOSSARY
Active management
Portfolio management that seeks to exceed the returns of the
financial markets. Active fund managers rely on research,
market forecasts, and their own judgment and experience in
making investment decisions.
Alternative minimum tax (AMT)
The AMT is a tax intended to ensure that taxpayers who
receive certain tax benefits (such as tax-exempt interest from
private activity bonds, accelerated depreciation deductions, and
incentive stock options) pay their fair share of income taxes
despite tax benefits. Taxpayers must first calculate regular
taxable income, then add back tax adjustments and preferences
to determine the AMT. If the AMT is higher than the regular
tax liability, the taxpayer must pay the AMT.
Capital gains distribution
Payment to mutual fund shareholders of net gains realized
during the year on securities that have been sold at a profit.
Capital gains are distributed on a “net” basis—that is, after
subtracting any capital losses for the year. If losses exceed
gains for the year, the difference may be carried forward and
subtracted from the fund’s future gains.
Cost basis
For tax purposes, the original cost of an investment, including any
reinvested dividend or capital gains distributions. Cost basis may
include adjustments such as increases for transaction fees paid at
purchase or decreases for return-of-capital distributions. It is
subtracted from the sales price to determine any capital gain
or loss from the sale of mutual fund shares or other securities.
30

Declared
When the Board of Directors of a mutual fund announces the
amount and date of a dividend or capital gains distribution, the
distribution is said to have been declared. A declared distribution
is payable to the shareholders of record as of the record date.
Dividend yield
The annualized rate at which an investment pays dividends,
expressed as a percentage of the investment’s current price.
Growth stocks
Stocks of companies with a strong potential for earnings
growth. They are likely to generate much of their total return
in the form of capital gains rather than dividend income.
Income distribution
Interest and dividends earned on securities held by a mutual
fund and paid out to shareholders (after reduction for fund
expenses) in the form of dividends.
Index
Statistical benchmarks designed to reflect changes in segments
of the financial markets or the economy. In investing, indexes
are used to measure changes in segments of the stock and bond
markets and as standards against which fund managers and
investors can measure the performance of their investment
portfolios. You cannot invest in an index.
Indexing
An investment management approach in which a mutual fund
seeks to track the performance of a specific financial market
benchmark, or index, by holding all the securities that compose
the market segment (or a statistically representative sample of the
index).
Marginal tax rate
The income tax rate at which the last dollar of your income is
taxed. Under federal law, you often pay a lower tax rate on your
31

first dollar of taxable income than you do on your last dollar.
The marginal rate—the highest rate at which your income is
taxed—is used to calculate taxes due on investment income.
Net asset value (NAV)
The value of a mutual fund’s assets, after deducting liabilities,
divided by the number of shares currently outstanding. NAV is
expressed as the value of a single share in the fund and is reported
daily in many newspapers.
Ordinary income
Ordinary income includes earned income (such as wages, salaries,
and self-employment income), unearned income (such as taxable
interest and dividends), and other income (such as taxable refunds
of state income taxes). Ordinary income is taxed at higher rates
than long-term capital gains.
Record date
The deadline for owning shares of a fund for the purpose of
receiving the next distribution of dividends or capital gains. All
investors who own shares on the record date receive a distribution
and owe taxes on it, regardless of how long they have owned the
shares. By buying shares after the record date, investors can avoid
the distribution and resulting taxes.
Return of capital
When a mutual fund’s distributions exceed its earnings and
profits, the excess is considered a return of capital (or return of
basis). That part of the distribution is generally not taxable
because it represents a portion of the original investment being
returned. The effect of a return of capital is to reduce basis in
the investment, which may cause future capital gains to be
higher. If a shareholder’s basis is eliminated by return-of-capital
distributions, any excess is treated as a capital gain.
Tax-deferred account
An investment vehicle that shields earnings from taxes. These
types of accounts include 401(k) plans, 403(b) plans, IRAs, and
32

variable annuities. Although mutual funds held in these accounts
are not taxed currently, they are subject to federal and state taxes
upon withdrawal (except for qualified distributions from Roth
IRAs and Education IRAs and withdrawals of non-deductible
contributions to traditional IRAs).
Tax-efficient fund
A fund that generates low taxable income for its shareholders
is said to be tax-efficient.
Tax-exempt bond
A bond whose interest payments are not subject to income tax.
The interest on bonds issued by municipal, county, and state
governments and agencies is typically exempt from federal
income tax and may also be exempt from state or local income
taxes. Tax-exempt bonds are also called municipal bonds or
tax-free bonds.
Turnover rate
A measure of a mutual fund’s trading activity. Turnover is
calculated by taking the lesser of the fund’s total purchases or sales
of securities (not counting securities with maturities under one
year) and dividing by the average monthly assets. A turnover rate
of 50% means that, during the year, a fund has sold and replaced
securities with a value equal to 50% of the fund’s average net assets.
Value stocks
Stocks of companies with good long-term prospects but whose
current prices are considered low given the companies’ assets or
profit potential. These stocks tend to pay above-average dividends,
so much of the total return from value funds comes in the form of
ordinary income rather than capital gains.
Wash sale rule
IRS regulation that prohibits a taxpayer from claiming a loss
on the sale of a security (such as stock, bond, or mutual fund
shares) if that same security is purchased within 30 days before
or after—or on the same day of—the sale.
33

Invest with a leader
The Vanguard Group traces its roots to the opening of its first mutual
fund, Wellington Fund, in 1929. The nation’s oldest balanced fund,
Wellington Fund emphasized conservatism and diversification in an
era of rampant market speculation. Despite its creation just before the
worst years in U.S. financial history, Wellington Fund prospered and
within a generation was one of the largest mutual funds in the nation.
The Vanguard Group was launched in 1975 solely to serve the
Vanguard mutual funds and their shareholders. From its start as a
single fund in an infant industry, Vanguard has become one of the
largest investment management firms in the world. Today, some
$550 billion is invested with us in more than 100 investment portfolios.
And some 11,000 crew members now serve millions of shareholders
who have entrusted their investment assets—indeed, their financial
future—to a company that they believe offers the best combination of
investment performance, service, and value in the industry.
35

Calvert Group ® and Calvert
Social Index are trademarks of
Calvert Group, Ltd., and have
been licensed for use by The
Vanguard Group, Inc. Vanguard ®
Calvert Social Index Fund is not
sponsored, endorsed, sold, or
promoted by Calvert Group, Ltd.,
and Calvert Group, Ltd., makes no
representation regarding the
advisability
of investing in the fund.
Standard & Poor’s ® , S&P ® ,
S&P 500 ® , Standard & Poor’s
500, and 500 are trademarks
of The McGraw-Hill Companies,
Inc., and have been licensed for
use by The Vanguard Group, Inc.
Vanguard mutual funds are not
sponsored, endorsed, sold, or
promoted by Standard & Poor’s,
and Standard & Poor’s makes
no representation regarding
the advisability of investing
in the funds.
Vanguard funds and non-
Vanguard funds offered through
our FundAccess ® program
are offered by prospectus only.
Prospectuses contain more
complete information on risks,
advisory fees, distribution
charges, and other expenses
and should be read carefully
before you invest or send money.
Prospectuses for Vanguard funds
can be obtained directly from The
Vanguard Group; prospectuses
for non-Vanguard funds offered
through FundAccess can be
obtained from Vanguard
Brokerage Services, 1-800-992-
8327.
Vanguard Brokerage Services
is a division of Vanguard
Marketing Corporation.
Post Office Box 2600
Valley Forge, PA 19482-2600
World Wide Web
www.vanguard.com
Toll-Free
Investor Information
1-800-662-7447
Printed on recycled paper.
© 2001 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing
Corporation, Distributor.
BTAX 032001