March 2016
Enhanced disclosure on costs
At Vanguard we believe in being transparent with investors. That means clearly
describing everything we do, from fund objectives to the charges you pay. And
because costs are one of the few things you can control, we think it’s particularly
important for you to be able to make fair comparisons on cost.
The United Kingdom’s Investment Association (IA) has recommended what managers
of UK-authorised funds should disclose when setting out their charges for investors.
We’ve followed the IA’s recommendations to disclose the costs and charges of our
UK-authorised funds. We’ve also chosen to provide the same information for a group
of our Ireland-domiciled funds that are widely available in the UK. The table overleaf
displays all of this data. Pages three and four describe what each column means, so
you can understand the cost of each element.
Some guidance
Apples and apples
We expect most providers to comply with the IA’s
recommended practice, at least for their UK-authorised
funds. This is good news for investors. However, some of
these figures can be calculated in a variety of ways, and
different firms may legitimately use different methods. We
clearly describe how we’ve calculated the figures in the table.
If you’re going to make comparisons, we’d recommend that
you ask other providers how they’ve calculated their figures
to make sure you’re comparing like with like.
What about other charges?
We’ve included a “pre-set dilution levy / SDRT charge”
column in the table. Ask other providers about any dilution
levy, stamp duty reserve tax (SDRT) charge or other costs
you might pay in addition to what they’ve disclosed in their
version of this table.
It just doesn’t add up
Please don’t try to add the columns to arrive at a “total”
because you may be double-counting some of the charges.
Costs paid by the Fund
Charges paid by investors
Portfolio Transaction Costs
Fund
Entry
charge (% of
investment1)
Pre set
dilution
levy (% of
investment1)
Exit charge
(% of
investment1)
Stamp duty
Ongoing
Broker
and other
Charges
Figure (OCF) commissions transfer taxes
(% of (% of average (% of average
Net Asset
Net Asset
average Net
Value3)
Value3)4
Asset Value3)
Estimated
dealing
spread (% of
average Net
Asset Value3)
Stamp duty
reserve tax
(% of
average Net
Asset Value3)
IA Sector
Domicile
Vanguard FTSE U.K. Equity Income Index
U.K. Equity Income
UK
0.00
0.402
0.00
0.22
0.02
0.43
0.04
0.435
Vanguard FTSE Developed Europe ex-U.K.Equity Index Fund
Europe (Excluding U.K)
UK
0.00
0.00
0.00
0.12
0.02
0.02
0.04
0.00
Vanguard FTSE Developed World ex-U.K.Equity Index Fund
Global Growth
UK
0.00
0.00
0.00
0.15
0.01
0.00
0.11
0.00
Vanguard U.S. Equity Index
North America
UK
0.00
0.00
0.00
0.10
0.00
0.00
0.00
0.00
Vanguard FTSE U.K. All Share Index Unit Trust
U.K.All Companies
UK
0.00
0.202
0.00
0.08
0.00
0.06
0.05
0.06
Vanguard Global Small-Cap Index
Global Growth
Ireland
0.00
0.00
0.00
0.38
0.01
0.01
0.27
0.01
Vanguard Japan Stock Index
Japan
Ireland
0.00
0.00
0.00
0.23
0.01
0.00
0.16
0.00
Vanguard Pacific ex-Japan Stock Index
Asia Pacific ex Japan
Ireland
0.00
0.00
0.00
0.23
0.01
0.02
0.19
0.00
Vanguard Emerging Markets Stock Index
Global Emerging
Markets
Ireland
0.00
0.00
0.00
0.27
0.02
0.04
0.13
0.00
Vanguard SRI European Stock Fund
Europe Inc U.K.
Ireland
0.00
0.00
0.00
0.30
0.01
0.05
0.04
0.04
Vanguard SRI Global Stock Fund
Fixed Income
Global
Ireland
0.00
0.00
0.00
0.35
0.01
0.02
0.10
0.01
Vanguard U.K. Inflation Linked Gilt Index
U.K. Gilts
UK
0.00
0.00
0.00
0.15
0.00
0.00
0.34
0.00
Vanguard U.K. Long Duration Gilt Index
U.K. Gilts
UK
0.00
0.00
0.00
0.15
0.00
0.00
0.18
0.00
Vanguard U.K. Government Bond Index
U.K. Gilts
Ireland
0.00
0.00
0.00
0.15
0.00
0.00
0.12
0.00
Vanguard U.K. Investment Grade Bond Index
£ Corporate Bond
Ireland
0.00
0.50
0.00
0.15
0.00
0.00
0.84
0.00
Vanguard Global Bond Index
Global Bonds
Ireland
0.00
0.20
0.00
0.15
0.00
0.00
0.24
0.00
Vanguard U.K. Short-Term Investment Grade Bond Index Fund
£ Corporate Bond
Ireland
0.00
0.30
0.00
0.15
0.00
0.00
0.48
0.00
Euro Government Bond Index Fund
Ireland
0.00
0.00
0.00
0.25
0.00
0.00
0.12
0.00
Euro Investment Grade Bond Index Fund
Ireland
0.00
0.30
0.00
0.30
0.00
0.00
0.42
0.00
Japan Government Bond Index Fund
Ireland
0.00
0.00
0.00
0.25
0.00
0.00
0.10
0.00
US Investment Grade Credit Index Fund
Ireland
0.00
0.50
0.00
0.30
0.00
0.00
0.58
0.00
US Government Bond Index Fund
Ireland
0.00
0.00
0.00
0.25
0.00
0.00
0.02
0.00
Equity
Global Short Term Bond Index Fund
Multi Asset
Global Bonds
Ireland
0.00
0.20
0.00
0.15
0.00
0.00
0.12
0.00
Vanguard LifeStrategy® 20% Equity Fund6
Mixed Investment
0-35% Shares
UK
0.00
0.00
0.00
0.24
N/A
N/A
0.00
N/A
Vanguard LifeStrategy® 40% Equity Fund6
Mixed Investment
Shares 40-85% Shares
UK
0.00
0.00
0.00
0.24
N/A
N/A
0.00
N/A
Vanguard LifeStrategy® 60% Equity Fund6
Mixed Investment
Shares 40-85% Shares
UK
0.00
0.00
0.00
0.24
N/A
N/A
0.00
N/A
Vanguard LifeStrategy® 80% Equity Fund6
Mixed Investment
Shares 40-85% Shares
UK
0.00
0.00
0.00
0.24
N/A
N/A
0.00
N/A
Vanguard LifeStrategy® 100% Equity Fund6
Global
UK
0.00
0.00
0.00
0.24
N/A
N/A
0.00
N/A
1 We impose a pre-set dilution levy or SDRT charge on some of our funds to make sure investors bear the cost of their own activity in the funds. See overleaf for a fuller description of these charges.
2 This is an SDRT charge. There is no pre-set dilution levy for this fund.
3 Net Asset Value (NAV) is the total value of the fund’s assets less its accrued liabilities.
4 Unless stated in footnote 5, this column shows the stamp duty and other transfer taxes incurred by each fund as a result of purchases of securities because of: (a) subscriptions into the funds; and (b) day-to-day fund management activity.
5This is the figure for SDRT attributable to day-to-day fund management. It has been calculated from the total SDRT paid by the fund using the ratio of the total positive net cash flow into the relevant fund over the past three years (or period since launch if shorter) as a proportion
of total underlying share purchases in the funds.
6 Vanguard LifeStrategy ® funds charges are 0.00. However, the underlying funds will incur costs / charges, which is disclosed for the respective funds elsewhere in the table.
Charges explained
An entry charge may be imposed by a fund provider when you
enter a fund. Vanguard funds don’t have entry charges as defined
by the IA. However, we do impose what we call a “pre-set
dilution levy” (PDL) for some funds. For other funds we impose
a UK stamp duty reserve tax (SDRT) charge. For very large
investments, we may also charge an “anti-dilution levy”(ADL). This
is because we believe that all investors should bear the cost of their
own activity in the funds.
Our PDLs and ADLs aim to ensure that existing fund holders
don’t pay the costs involved in investing incoming monies. These
charges are paid into the relevant funds; they’re not retained by
Vanguard. PDLs vary from fund to fund and tend to reduce as a
fund grows.
We impose an SDRT charge for all subscriptions into UK-authorised
funds investing in UK shares. The purpose of this charge is to
reimburse the funds for the SDRT they pay in investing new monies
in UK shares.
To ensure transparency, we’ve shown our PDLs/SDRT charges as
a separate column in the table. Please note that many companies
charge levies in addition to their entry charges, but they’re not
always clearly visible.
We keep our PDLs and SDRT charges under review and look to
lower them whenever we can.
A PDL, ADL or SDRT charge is the only Vanguard charge you pay
when you buy Vanguard funds. You might, of course, also separately
pay fees to your adviser for the service he or she provides; and to a
platform for administering your investment.
Exit charges are typically designed to cover the cost of selling your
investments when you leave a fund. We don’t impose exit charges.
Ongoing charges cover the actual day-to-day costs of running
a fund. In the past, the fund industry used the term “annual
management charge” (AMC). However, the AMC doesn’t always
give you a true picture of what you’re paying – there are sometimes
other charges not included in the AMC that aren’t immediately
obvious: custodian, audit and legal fees, for example. This is one
reason why AMC was gradually superseded by “total expense
ratio” (TER) of a fund, which usually included the AMC and those
additional charges mentioned above.
But even so, the definitions of AMC and TER can be vague. In some
cases, the total expense ratio has turned out not to be as “total”
as it seemed. For this reason, regulators are now suggesting fund
providers publish an “ongoing charges” figure (OCF) to provide the
most complete picture possible of all of the running costs of a fund.
At Vanguard, this change is relatively straightforward because AMC
= TER = ongoing charges figure.
We’ve honed our systems and processes over the years in a bid to
maximise efficiency. This means that our ongoing charges are lower
than the industry norm. Moreover, we’re always looking for ways
to operate more efficiently, and we’ll look to reduce our ongoing
charges further wherever we can.
Some funds charge performance fees based on their achievement
of certain pre-defined performance targets. The calculations behind
these fees can be complex and we believe that they can lead to a
lack of transparency. That’s one reason why Vanguard funds don’t
have performance fees.
Portfolio transaction costs are the costs we incur in buying and
selling securities in a fund. Comparing portfolio transaction costs
between funds can be misleading because they don’t always
reduce returns. For example, if a manager incurred transaction
costs in buying shares that subsequently performed strongly,
the net impact of the dealing could be positive.
Moreover, transaction costs also vary over time, from country
to country and depending on the types of assets in which a
fund invests.
We’ve split portfolio transaction costs into three parts in the
table: (1) broker commission, (2) estimated dealing spread, (3)
stamp duty and other transfer taxes.
How is it calculated?
Ongoing charges figure
We’ve shown the ongoing charges figure
from the latest Key Investor Information
Document of the relevant fund. This is
based on the actual fund expenses for the
latest financial year of the relevant fund,
unless the fund doesn’t have a full financial
year’s trading history. It includes charges
for investment management, custody, fund
accounting, audit, compliance, transfer
agency, trustee and tax reporting.
Broker commissions, stamp duty and
other transfer taxes
These figures show the three-year average
of the commissions and taxes paid as a
proportion of the relevant fund’s average
NAV (unless the fund does not have three
years’ trading history, in which case we’ve
used a since-launch figure). Because the
funds have grown during this period, most
of the current figures are lower than the
three-year averages.
Estimated dealing spread
For all funds other than the Japan
Government Bond Index Fund, the
estimated dealing spread figures in the
table are based on current market data
gathered from independent sources at the
end of April 2014. The figure for the Japan
Government Bond Index Fund is based on
internal estimates by the Vanguard portfolio
management team responsible for the
management of the fund.
Broker commissions are the fees paid to brokers when we buy
or sell shares on behalf of the funds. As such, they’re driven partly
by cash flows into and out of the funds. Commissions tend to be
higher for active equity funds that deal frequently in pursuit of
outperformance. Because our funds are passively managed to track
an index, their broker commissions tend to be very low.
Estimated dealing spread is the difference between the quoted
market prices for buying and selling the securities held in the funds.
For bonds, the spread also incorporates any broker commissions
paid, while for equities these commissions are paid separately.
The scale of the Vanguard Group, Inc., the volume of deals that it
generates globally and the efficiency of our processes mean that
most of our funds’ dealing spreads are insignificant.
The stamp duty and other transfer taxes column shows the
taxes incurred by the funds as we buy and sell securities to keep
them in line with their benchmarks. An example is SDRT which
is paid to the UK government on purchases of UK shares. Similar
taxes are paid in relation to investments in other markets. For
most of the funds, this column shows stamp duty and other
transfer taxes incurred by each fund as a result of the purchase of
underlying securities because of: (a) subscriptions into the funds;
and (b) day-to-day fund management activity. However, for those
funds where we impose an SDRT charge, this column only shows
SDRT incurred as a result of day-to-day fund management activities.
For these funds, the SDRT charge has been designed to cover all
the SDRT incurred as a result of both: (a) the purchase of UK shares
following subscriptions into the fund; and (b) the sale of UK shares
following investor redemptions.
SDRT on the sale of UK shares was removed from 1 April 2014,
however as these figures are historic, SDRT on the sale of shares is
included up until this date.
We will update this document annually, or more frequently in the
case of any significant changes.
You can find out more general information about fund charges and
costs on the IA’s website at:
http://www.theinvestmentassociation.org/investmentindustry-information/fund-charges-and-costs/
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circumstances. This is where the advice of a qualified financial adviser can be crucial. If you have any questions related to your investment
decision or the suitability or appropriateness for you of the products or services described in this document, please contact your financial adviser.
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