Vanguard Florida Focused Long-Term Tax-Exempt Fund merger proposed
March 27, 2013
Because there are no longer state tax benefits for Florida residents to invest in Florida municipal bonds, Vanguard has announced plans to merge Vanguard Florida Focused Long-Term Tax-Exempt Fund into Vanguard Long-Term Tax-Exempt Fund in the third quarter of 2013.
Vanguard Florida Focused Long-Term Tax-Exempt Fund was created in 1992 to allow Florida residents to avoid a state tax on intangible property, such as investments. Florida eliminated this tax in 2007.
The proposed merger offers shareholders of Vanguard Florida Focused Long-Term Tax-Exempt Fund an opportunity to merge into a larger, more diversified fund that also seeks to provide current income exempt from federal income taxes. The merger should also benefit investors in both funds because the combined fund would spread fixed expenses, such as audit and custody fees, over a larger asset base, which could result in lower expense ratios for investors over the long term. Currently, both funds have the same expense ratios of 0.20% for Investor Shares and 0.12% for Admiral™ Shares.
Vanguard Fixed Income Group, one of the world's largest fixed income managers with more than $720 billion in bond and money market fund assets, will manage the merged fund. The group currently manages each individual fund, and has managed Vanguard Long-Term Tax-Exempt Fund since 1977.
The merger proposal requires approval by Vanguard Florida Focused Long-Term Tax-Exempt Fund shareholders and will be submitted for their consideration at a shareholder meeting to be held on or about July 22, 2013. If you hold shares in Vanguard Florida Focused Long-Term Tax-Exempt Fund, you'll soon receive a combined proxy statement/prospectus with details about Vanguard Long-Term Tax-Exempt Fund and the terms of the proposed merger, along with a request to approve the action.
- All investing is subject to risks, including the possible loss of the money you invest.
- Diversification does not ensure a profit or protect against a loss in a declining market.
- Investments in bond funds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal alternative minimum tax.