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Here's your Vanguard "owner's manual"

February 20, 2014

A message from Bill McNabb,
Vanguard Chairman and Chief Executive Officer

What makes one company different from any other? Some businesses may struggle with that question, but for Vanguard it's easy: We're owned, through our mutual funds, by our clients. There is simply no other company like that.

Because of this structure, our only objective—our only business strategy—is to serve clients. As we sometimes like to say, "strategy follows structure." That may sound like an academic point, but the very practical result is that the profits Vanguard generates are returned to our client-owners in the form of reduced costs or improved services.

Bill McNabbIn the latest edition of our quarterly newsletter, In The Vanguard, we departed from our usual format to provide a glimpse into the inner workings of your investment company. Think of it as an owner's manual of sorts—which is only fitting, because you are the owner.

Below you'll find links to eight articles about everything from talent scouting for fund managers to the ferocious pursuit of efficiency to the way your money travels through our systems. Two of our veteran board members offer their perspectives on what makes your company unique.

In choosing the name "Vanguard" nearly 40 years ago, our founder, Jack Bogle, hoped to inspire a fledgling firm to emulate the excellence demonstrated by British naval hero Horatio Nelson aboard the HMS Vanguard at the Battle of the Nile. At the same time, Jack signaled that we would strive to lead with new ideas and new ways of doing business that could give clients the best chance of investment success. We would be "in the vanguard." The name proved prescient. As you know, we championed low-cost investing and index investing long before their virtues were widely recognized.

I hope these articles illuminate the many ways in which we continue to innovate today and, as always, to put our clients—you—first.

Bill McNabb signature

1. Vanguard's mission: We want you to find value and values
Why have investors entrusted nearly $2.4 trillion to us? The Vanguard value proposition of low costs, competitive investment performance, and responsive service is undoubtedly part of the answer. We believe, however, that another critical element is the Vanguard values proposition—the combination of a unique corporate structure, a sense of mission, and highly dedicated people.
Read the article »

2. Our investment strategy: Enduring, yet adaptable
The world of investing is constantly evolving, and investors, along with the firms that serve them, may feel pressure to keep up. But there's a big difference between thoughtful adaptation and falling for every investment scheme that pops up in your inbox.
Read the article »

3. Our focus on costs: We're monsters of efficiency
The exceptional growth we have seen in assets under management over the years has provided us with many opportunities to lower the cost of investing. Here are some notable examples as to how we harness economies of scale to lower those costs and enhance services.
Read the article »

4. How your money gets put to work
Technology has made mutual fund transactions a simple task for today's investors. But have you ever wondered what happens on our end? In this article, we offer a peek behind the scenes at how we process a client's purchase of shares.
Read the article »

5. Our talent scouts: Recruiting world-class fund managers
For investors who want a chance to beat the market, Vanguard offers access to world-class active managers at costs that are very competitive in the industry. Take a look at how we recruit and monitor that talent.
Read the article »

6. Our investment policies: Long-term clients' interests come first
We follow strict rules for investing for a very good reason—to protect the interests of long-term shareholders. Learn about some of our key policies and how they benefit those long-term clients.
Read the article »

7. Your directors: A boardroom perspective
Alfred M. Rankin, Jr., and Rajiv L. Gupta, two long-serving Vanguard board members, discuss their roles, their views on investing, Vanguard's ownership structure, and how Vanguard can remain the best place to invest in an increasingly competitive world.
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8. The future: Building an engine for a long-term enterprise
Investment success demands a long-term perspective and an ability to manage short-term exigencies while pursuing long-term opportunities. In running the Vanguard business, the same lesson applies. Here we provide two examples to illustrate how Vanguard is constantly managing costs with the long term in mind.
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