Vanguard Target Retirement Funds Open to Investors; New Study by Vanguard Explores Different Life-Cycle Fund Approaches.

Business Editors

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Oct. 27, 2003

Vanguard today began accepting investments into its six new Target Retirement Funds, a series of low-cost, funds-of-funds that provide investors a simple solution for investing for retirement. Five of the funds feature a different target retirement date (2005, 2015, 2025, 2035, 2045), and they gradually and automatically shift their underlying fund mix to a more conservative asset allocation as the retirement date draws near. Vanguard Target Retirement Income Fund is designed for those investors currently in retirement.

Unlike most fund-of-funds sponsors, Vanguard will not levy an additional layer of charges for managing the underlying funds. Vanguard(R) Target Retirement Funds will have expenses (based on their underlying funds) ranging from 0.21% to 0.23% ($2.10 - $2.30 for every $1,000 invested), significantly lower than the 1.33% ($13.30 for every $1,000 invested) industry average (source: Lipper). The asset allocation mixes for each of the Target Retirement Funds are:

----------------------------------------------------------------------
          Fund Name                         Initial Allocation
                                          (Will Shift Over Time)
                                         Stocks / Bonds / Reserves
----------------------------------------------------------------------
Target Retirement Income Fund (1)             20% / 75% / 5%
----------------------------------------------------------------------
Target Retirement 2005 Fund                   35% / 65% / 0%
----------------------------------------------------------------------
Target Retirement 2015 Fund                   50% / 50% / 0%
----------------------------------------------------------------------
Target Retirement 2025 Fund                   60% / 40% / 0%
----------------------------------------------------------------------
Target Retirement 2035 Fund                   80% / 20% / 0%
----------------------------------------------------------------------
Target Retirement 2045 Fund                   90% / 10% / 0%
----------------------------------------------------------------------
(1) Allocation is static

The Target Retirement Funds will complement Vanguard's existing series of life-cycle funds--Vanguard LifeStrategy Funds. Broadly, life-cycle funds provide a well-diversified investment solution in a single fund.

However, life-cycle funds follow one of two approaches - targeted maturity funds, which shift their asset allocation from aggressive to conservative over time (i.e., Vanguard(R) Target Retirement Funds), and static-allocation funds, which maintain a defined asset allocation, with investors determining which portfolio mix is appropriate at any given time (i.e., Vanguard(R) LifeStrategy Funds).

"Recent consumer behavior studies have shown that many investors can become overwhelmed by a choice of too many funds, and that can hinder or even deter people from investing for retirement," said Catherine Gordon, Principal - Vanguard Investment Counseling and Research Group. "Life-cycle funds eliminate this choice overload by providing a one-fund solution to retirement savings."

Because of their simplicity, low-costs, and broad diversification, life cycle funds appeal to a broad range of investors seeking a single choice option, including younger individuals just starting their retirement programs, as well as those looking for an ideal vehicle for their IRA or company retirement plan rollover. Life-cycle funds are also popular options within 401(k) and other defined contribution programs. Vanguard's Investment Counseling and Research Group has issued a new study, "Funds for Retirement: The 'Life-Cycle' Approach," to help plan sponsors select between the two types of life-cycle funds.

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 some 17 million shareholder accounts and manages nearly $650 billion in U.S. mutual fund assets, including more than $180 billion in employer-sponsored retirement plans. Vanguard offers 118 funds to U.S. investors and 35 additional funds in foreign markets.

Note to editors: The "Funds for Retirement: The 'Life-Cycle' Approach," study is available upon request.

Vanguard funds are offered by prospectus only. Prospectuses contain more complete information on risks, distribution charges, and other expenses and should be read carefully before you invest. Prospectuses can be obtained directly from The Vanguard Group.

Vanguard Marketing Corporation, Distributor.

Comparison of Vanguard(R) Target Retirement Funds and Vanguard(R)
LifeStrategy Funds
----------------------------------------------------------------------
                Vanguard(R) Target           Vanguard(R)
                Retirement Funds             LifeStrategy(TM) Funds
--------------- ---------------------------- -------------------------
Approach        Targeted maturity funds      Static-allocation funds
--------------- ---------------------------- -------------------------
Number of Funds          Six                          Four
 in Series      Target Retirement Income     LifeStrategy Income Fund
                 Fund                        LifeStrategy Conservative
                Target Retirement 2005 Fund   Growth Fund
                Target Retirement 2015 Fund  LifeStrategy Moderate
                Target Retirement 2025 Fund   Growth Fund
                Target Retirement 2035 Fund  LifeStrategy Growth Fund
                Target Retirement 2045 Fund
--------------- ---------------------------- -------------------------
Types of        Low-cost index funds:        Low-cost index funds:
 Underlying     Vanguard(R) Total Stock      Vanguard(R) Total Stock
 Funds           Market Index Fund,           Market Index Fund,
                 Vanguard(R) European Stock   Vanguard(R) Total
                 Index Fund, Vanguard(R)      International Index
                 Pacific Stock Index Fund,    Fund, Vanguard(R) Total
                 Vanguard Total Bond Market   Bond Market Index Fund
                 Index Fund
                                             Two actively managed
                Two actively managed funds:   funds:
                Vanguard(R) Inflation        Vanguard(R) Asset
                 Protected Securities Fund,   Allocation Fund,
                 Vanguard(R) Prime Money      Vanguard(R) Short Term
                 Market Fund                  Corporate Fund
--------------- ---------------------------- -------------------------
Sales Charge    None                         None
--------------- ---------------------------- -------------------------
Expense Ratio   0.21% -- 0.23% (based on     0.27% -- 0.28% (based on
                 underlying funds)            underlying funds)
--------------- ---------------------------- -------------------------
Risk Profile    This approach assumes that   Investors typically
                 investors who share a        assess their own risk
                 retirement date have         tolerance by responding
                 similar objectives and risk  to a questionnaire.
                 tolerance.
--------------- ---------------------------- -------------------------
Asset           The fund's advisor           The fund is periodically
 Allocation      automatically changes the    rebalanced to maintain
 Shifts          asset allocation over time   its stated allocation.
                 to make the portfolio        The investor decides
                 increasingly conservative    when and how to shift to
                 as the target date           a more conservatively
                 approaches.                  allocated fund as
                                              retirement draws near.
--------------- ---------------------------- -------------------------
Allocation      All asset allocation changes Periodic monitoring by
 Monitoring      occur within the fund,       the investor is
                 eliminating the need for     necessary to ascertain
                 the investors to rebalance.  whether the fund's asset
                As with any other             allocation matches the
                 investment, however, a       investor's risk profile
                 change in personal time      through the stages of
                 horizon or investment        accumulation,
                 objective warrants a review  transition, and
                 of the portfolio.            retirement.
--------------- ---------------------------- -------------------------
Investor Time   The time horizon is          The time horizon is not
 Horizon         predetermined, based on the  predetermined. Investors
                 fund's target date.          have flexibility to
                                              change their asset
                                              allocations based on
                                              their changing time
                                              horizon.
--------------- ---------------------------- -------------------------