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VANGUARD PROPOSES TO REORGANIZE SMALLCAP FUND UNDER VANGUARD INDEX TRUST

 VALLEY FORGE, Pa., Dec. 9 /PRNewswire/ -- The Vanguard Group of Investment Companies today announced a proposal to merge Vanguard Small Capitalization Stock Fund into Vanguard Index Trust.
 Under the terms of the proposal, which is described in a proxy statement that is currently being sent to the Fund's 27,000 shareholders, the $465 million index-oriented small company growth fund would remain a separate and distinct portfolio called the Small Capitalization Stock Portfolio. The renamed Portfolio will join the Trust's five existing index (passively managed) portfolios -- the 500 Portfolio, the Value Portfolio, the Growth Portfolio, the Extended Market Portfolio, and the Total Stock Market Portfolio.
 The investment objectives, policies, and management of the Small Capitalization Stock Portfolio will remain unchanged. The Portfolio will seek to provide investment results paralleling those of the unmanaged Russell 2000 Small Stock Index, a broadly diversified index comprising approximately 2,000 small capitalization common stocks.
 "The purpose of the reorganization is to reduce the expenses associated with operating the Fund as a separate investment company," said Vanguard Chairman John C. Bogle, who noted that the need to produce separate prospectuses, shareholder reports, and marketing materials would be eliminated. "Moreover, as a member of Vanguard Index Trust, the Small Capitalization Portfolio will be more readily identified by investors as an indexed portfolio," said Bogle.
 The current expense ratio (operating expenses as an annual percentage of total net assets) of Vanguard Small Capitalization Stock Fund is 0.18 percent. The Fund is managed at-cost by the Vanguard Core Management Group, which oversees some $15.5 billion in indexed assets.
 Vanguard pioneered the concept of indexing for individual investors with the introduction of Vanguard Index Trust in 1976 -- the world's first index mutual fund. The Trust's original portfolio, now known as the 500 Portfolio, has net assets of $8 billion, making it the largest index mutual fund in the United States and the ninth largest stock mutual fund of all types. Vanguard is today recognized as the leader in index mutual funds, offering eleven different equity and bond portfolios.
 A special shareholder meeting is scheduled for Jan. 28, 1994. If the proposal is approved, the reorganization would take effect on Feb. 1, 1994. The reorganization would be a tax-free event for Federal income tax purposes and would entail no change in the holdings of the Fund and no portfolio transactions whatsoever. The value of shareholders' investments in the Fund will also not be affected.
 The Vanguard Group of Investment Companies, headquartered in Valley Forge, has net assets of some $125 billion and manages 77 investment portfolios owned by more than 4.5 million individual and institutional investors.
 -0- 12/9/93
 /CONTACT: Brian Mattes, 215-669-6219, or John Woerth, 215-669-6224, both of The Vanguard Group of Investment Companies/


CO: The Vanguard Group of Investment Companies ST: Pennsylvania IN: FIN SU:

MJ -- PH023 -- 2286 12/09/93 15:04 EST
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Publication:PR Newswire
Date:Dec 9, 1993
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