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I guess there is an impact on the funds from those that trade them.
Vanguard Might have the solution. Long article. Delete if not
interested.
Vanguard to Introduce Exchange Traded
Index Shares
May 15, 2000
New Share Classes of Five Equity Index Funds to
be Listed
On the American Stock Exchange
VALLEY FORGE, Pa., May 12 /PRNewswire/ --
The Vanguard Group has filed with the U.S.
Securities and Exchange Commission (SEC) an
amendment to the registration statement for its
nine U.S. stock index funds. The amendment
seeks to add a new class of exchange-traded
shares to five of the funds.
The new share class, to be called VIPER shares
(for Vanguard Index Participation Equity
Receipts), will be listed on the American Stock
Exchange and will trade at market-determined
prices throughout each trading day. The
following funds have filed to register a VIPER
class of exchange-traded shares:
Vanguard 500 Index Fund Vanguard Growth
Index Fund
Vanguard Total Stock Market Index Fund
Vanguard Value Index Fund
Vanguard Small-Cap Index Fund
In conjunction with the amendment of the
registration statement, Vanguard has pending
with the SEC an application seeking exemptive
relief under the Investment Company Act of
1940 that would permit the funds to issue an
exchange-traded class of shares. Although the
application seeks relief on behalf of all nine
Vanguard U.S. stock index funds, Vanguard
intends initially to offer VIPER shares only for the
five funds identified above. While Vanguard has
been working with the SEC staff on the VIPER
shares offering since May 1999, the Commission
still must approve Vanguard's application and
declare the amendment to the registration
statement effective before VIPER shares can be
offered.
VIPER shares differ from conventional mutual
fund shares in that they will trade continuously
at market prices as determined by supply and
demand on the American Stock Exchange, rather
than at the calculated net asset value of the
fund determined at the end of the trading day.
Given this trading flexibility, VIPER shares are
expected to appeal primarily to short-term
investors.
The addition of the VIPER shares is expected to
have no immediate impact on existing fund
shareholders. Vanguard believes though that,
over time, existing fund shareholders will benefit
from a reduction of the deleterious effects of
short-term investors who are likely to be
attracted to the VIPER shares and away from
the traditional shares.
In accordance with SEC regulations, further
information about VIPER shares will be made
available only after the shares become effective.
The expense ratios for the VIPER shares have
yet to be determined.
The Vanguard Group, headquartered in Valley
Forge, Pennsylvania, is the nation's second
largest mutual fund firm and a leading provider of
company sponsored retirement plan services.
Vanguard serves 14 million shareholder accounts
and manages more than $540 billion, including
more than $170 billion in participant-directed
defined contribution plans. Vanguard offers 106
funds to U.S. investors and 33 additional funds in
international markets.
A registration statement for VIPER shares 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 an offer, solicitation, or sale
would be unlawful prior to registration or
qualification under the securities laws of any
such state.
CONTACT: Brian S. Mattes, Principal,
610-669-6219, or John S. Woerth, Principal,
610-669-6219, or John E. Demming,
Communications Manager, 610-669-5457, all of
The Vanguard Group.
SOURCE The Vanguard Group
CONTACT: Brian S. Mattes, Principal,
610-669-6219, or John S. Woerth, Principal,
610-669-6219, or John E. Demming,
Communications Manager, 610-669-5457, all of
The Vanguard Group
Web site: http://www.vanguard.com
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