Fund announcement : January 22, 2021

Shareholders of six Vanguard funds approve changes

At a special meeting of shareholders held virtually on January 22, 2021, shareholders approved a fund merger and a change in diversification status for five other funds. The special meeting concluded a three-month proxy campaign.

Shareholders of Vanguard U.S. Value Fund approved a proposal to merge the fund into Vanguard Value Index Fund.

Shareholders of the following funds approved a proposal to reclassify each fund as "non-diversified," as defined by the Investment Company Act of 1940:

  • Vanguard Health Care Fund
  • Vanguard Energy Fund
  • Vanguard U.S. Growth Fund
  • Vanguard Variable Insurance Funds—Growth Portfolio
  • Vanguard Variable Insurance Funds—Real Estate Index Portfolio

"We're very grateful to all the Vanguard shareholders who voted during our proxy campaign over the past three months," said Tim Buckley, Vanguard chairman and CEO. "The merger will place value-oriented shareholders in a comparable value fund with better historical long-term investment performance and a lower expense ratio, and the diversification status changes will give the funds' investment advisors greater flexibility in managing those funds."

Merger of two value funds

The merger is scheduled to be completed on or about February 5. The combined fund will be called Vanguard Value Index Fund, with Vanguard Equity Index Group continuing as the sole investment advisor. The Value Index Fund's investment objective, benchmark, strategies, policies, and overall portfolio management process will not change.

U.S. Value is an actively managed fund that seeks to provide long-term capital appreciation and income and outperform its benchmark index, the Russell 3000 Value Index. Conversely, Value Index seeks to track the performance of its benchmark index, the CRSP US Large Cap Value Index, which measures the investment return of large-capitalization value stocks. Following the merger, the combined Value Index will continue seeking to track the CRSP US Large Cap Value Index.

Vanguard offers other large-cap value funds for investors who prefer an actively managed approach. There may be tax implications for U.S. Value shareholders considering such an alternative, depending on the account type.

Vanguard fund Share class Ticker Expense ratio
Windsor™ Admiral™ VWNEX 0.20%
  Investor VWNDX 0.30%
Windsor™ II Admiral VWNAX 0.26%
  Investor VWNFX 0.34%

Expense ratio percentages as of February 27, 2020.

Shareholders with existing U.S. Value Fund accounts will be able to make additional purchases until February 3, at which time the fund will be closed to all investment to begin the transition. The fund has been closed to new investors since July 29, 2020.

Diversification status change

The change of diversification status to non-diversified for the other five funds is scheduled to become effective on or about January 26.

A diversified fund must adhere to the 1940 Act diversification requirements: as a diversified fund, at least 75% of the fund's total assets must be represented by:

  • Cash and cash items (including receivables);
  • U.S. government securities;
  • Securities of other investment companies (e.g., mutual funds); and
  • Securities of other issuers, provided that the investment represented by securities of an issuer does not exceed 5% of the total assets of the fund or 10% of the voting stock of the issuer.

A non-diversified fund does not meet the 1940 Act diversification requirements, as described above. Non-diversified status allows a fund to invest a greater percentage of its assets in a small group of issuers or in any one issuer than in a diversified fund. The funds' portfolio managers will now have greater flexibility to invest where they believe the greatest opportunities may lie. Notwithstanding the potential for improved investment performance, a non-diversified fund typically presents a heightened degree of investment risk due to its ability to make more concentrated investments.

"We expect both these changes to lead to better outcomes for investors, which is at the heart of everything we do," Mr. Buckley said.


  • 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.
  • All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.