explorer485b022014.htm - Generated by SEC Publisher for SEC Filing

0000932471-14-004625.txt : 20140224 0000932471-14-004625.hdr.sgml : 20140224 20140221173542 ACCESSION NUMBER: 0000932471-14-004625 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 57 FILED AS OF DATE: 20140224 DATE AS OF CHANGE: 20140221 EFFECTIVENESS DATE: 20140224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD EXPLORER FUND CENTRAL INDEX KEY: 0000034066 IRS NUMBER: 510106626 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-27203 FILM NUMBER: 14634843 BUSINESS ADDRESS: STREET 1: PO BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6106691000 MAIL ADDRESS: STREET 1: P.O. BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD EXPLORER FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EXPLORER FUND INC DATE OF NAME CHANGE: 19900305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VANGUARD EXPLORER FUND CENTRAL INDEX KEY: 0000034066 IRS NUMBER: 510106626 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01530 FILM NUMBER: 14634844 BUSINESS ADDRESS: STREET 1: PO BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6106691000 MAIL ADDRESS: STREET 1: P.O. BOX 2600 STREET 2: V26 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: VANGUARD EXPLORER FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EXPLORER FUND INC DATE OF NAME CHANGE: 19900305

0000034066 S000002578 VANGUARD EXPLORER FUND

C000007081 Investor Shares VEXPX

C000007082 Admiral Shares VEXRX

485BPOS 1 explorer485b022014.htm EXPLORER FUND explorer485b022014.htm - Generated by SEC Publisher for SEC Filing

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form N-1A

REGISTRATION STATEMENT (NO. 2-27203)
UNDER THE SECURITIES ACT OF 1933	[X]
Pre-Effective Amendment No.	[ ]
Post-Effective Amendment No. 101	[X]
and


REGISTRATION STATEMENT (NO. 811-01530) UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 102	[X]

VANGUARD EXPLORER FUND
(Exact Name of Registrant as Specified in Declaration of Trust)

P.O. Box 2600, Valley Forge, PA 19482
(Address of Principal Executive Office)

Registrant’s Telephone Number (610) 669-1000

Heidi Stam, Esquire
P.O. Box 876
Valley Forge, PA 19482

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)

[X] on February 24, 2014, pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a

previously filed post-effective amendment.

Vanguard Explorer™ Fund

Prospectus

February 24, 2014

Investor Shares & Admiral™ Shares

Vanguard Explorer Fund Investor Shares (VEXPX)

Vanguard Explorer Fund Admiral Shares (VEXRX)

This prospectus contains financial data for the Fund through the fiscal year ended October 31, 2013.

The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or

passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.


Contents


Fund Summary	1	Investing With Vanguard	27
More on the Fund	7	Purchasing Shares	27
The Fund and Vanguard	15	Converting Shares	30
Investment Advisors	16	Redeeming Shares	31
Dividends, Capital Gains, and Taxes	20	Exchanging Shares	34
Share Price	22	Frequent-Trading Limitations	35
Financial Highlights	24	Other Rules You Should Know	37
		Fund and Account Updates	41
		Contacting Vanguard	43
		Additional Information	44
		Glossary of Investment Terms	45

Fund Summary

Investment Objective

The Fund seeks to provide long-term capital appreciation.

Fees and Expenses

The following table describes the fees and expenses you may pay if you buy and hold Investor Shares or Admiral Shares of the Fund.


Shareholder Fees
(Fees paid directly from your investment)
	Investor Shares	Admiral Shares
Sales Charge (Load) Imposed on Purchases	None	None
Purchase Fee	None	None
Sales Charge (Load) Imposed on Reinvested Dividends	None	None
Redemption Fee	None	None
Account Service Fee (for certain fund account balances below	$20/year	$20/year
$10,000)

Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
	Investor Shares	Admiral Shares
Management Fees	0.48%	0.32%
12b-1 Distribution Fee	None	None
Other Expenses	0.03%	0.02%
Total Annual Fund Operating Expenses¹	0.51%	0.34%

1 The expense information shown in the table has been restated to reflect estimated amounts for the current fiscal year.

Examples

The following examples are intended to help you compare the cost of investing in the Fund’s Investor Shares or Admiral Shares with the cost of investing in other mutual funds. They illustrate the hypothetical expenses that you would incur over various periods if you invest $10,000 in the Fund’s shares. These examples assume that the Shares provide a return of 5% a year and that total annual fund operating expenses remain as stated in the preceding table. The results apply whether or not you redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:


	1 Year	3 Years	5 Years	10 Years
Investor Shares	$52	$164	$285	$640
Admiral Shares	$35	$109	$191	$431

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense examples, reduce the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 65%.

Primary Investment Strategies

The Fund invests mainly in the stocks of small companies. These companies tend to be unseasoned but are considered by the Fund’s advisors to have superior growth potential. Also, these companies often provide little or no dividend income. The Fund uses multiple investment advisors.

Primary Risks

An investment in the Fund could lose money over short or even long periods. You should expect the Fund’s share price and total return to fluctuate within a wide range, like the fluctuations of the overall stock market. The Fund is subject to the following risks, which could affect the Fund’s performance:

• Stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.

• Investment style risk, which is the chance that returns from small-capitalization growth stocks will trail returns from the overall stock market. Historically, small-cap stocks have been more volatile in price than the large-cap stocks that dominate the overall market, and they often perform quite differently. Small companies tend to have

greater stock volatility because, among other things, these companies are more sensitive to changing economic conditions.

• Manager risk, which is the chance that poor security selection will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective. In addition, significant investment in the information technology sector subjects the Fund to proportionately higher exposure to the risks of this sector.

An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Annual Total Returns

The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund‘s Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the share classes presented compare with those of a relevant market index, which has investment characteristics similar to those of the Fund. Keep in mind that the Fund’s past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447.

Annual Total Returns — Vanguard Explorer Fund Investor Shares

During the periods shown in the bar chart, the highest return for a calendar quarter was 19.79% (quarter ended June 30, 2009), and the lowest return for a quarter was –26.16% (quarter ended December 31, 2008).


Average Annual Total Returns for Periods Ended December 31, 2013
	1 Year	5 Years	10 Years
Vanguard Explorer Fund Investor Shares
Return Before Taxes	44.36%	23.08%	9.20%
Return After Taxes on Distributions	40.58	22.29	8.30
Return After Taxes on Distributions and Sale of Fund Shares	27.32	18.95	7.42
Vanguard Explorer Fund Admiral Shares
Return Before Taxes	44.59%	23.28%	9.39%
Russell 2500 Growth Index
(reflects no deduction for fees, expenses, or taxes)	40.65%	24.03%	10.11%

Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are shown only for the Investor Shares and may differ for each share class. After-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned Return After Taxes on Distributions and Sale of Fund Shares may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.

Investment Advisors

Century Capital Management, LLC (Century Capital) Chartwell Investment Partners, L.P. (Chartwell) Granahan Investment Management, Inc. (Granahan) Kalmar Investment Advisers (Kalmar) Stephens Investment Management Group, LLC (SIMG) Wellington Management Company, LLP (Wellington Management) The Vanguard Group, Inc. (Vanguard)

Portfolio Managers

Alexander L. Thorndike, Managing Partner at Century Capital. He has managed a portion of the Fund since 2008.

Edward N. Antoian, CFA, CPA, Managing Partner at Chartwell. He has co-managed a portion of the Fund since 1997.

John A. Heffern, Managing Partner and Senior Portfolio Manager at Chartwell. He has co-managed a portion of the Fund since 2006.

Gary C. Hatton, CFA, Co-Founder and Chief Investment Officer of Granahan. He has co-managed a portion of the Fund since 1998.

Jane M. White, Co-Founder, President, and Chief Executive Officer of Granahan. She has co-managed a portion of the Fund since 2000.

Jennifer M. Pawloski, Vice President of Granahan. She has co-managed a portion of the Fund since January 2014.

John V. Schneider, CFA, Vice President of Granahan. He has co-managed a portion of the Fund since January 2014.

Ford B. Draper, Jr., President, Chief Investment Officer, and Founder of Kalmar. He has managed a portion of the Fund since 2005 (co-managed since February 2014).

Dana F. Walker, CFA, Portfolio Manager at Kalmar. He has co-managed a portion of the Fund since February 2014.

Ryan E. Crane, CFA, Chief Investment Officer of SIMG. He has managed a portion of the Fund since 2013.

Kenneth L. Abrams, Senior Vice President and Equity Portfolio Manager of Wellington Management. He has managed a portion of the Fund since 1994.

Daniel J. Fitzpatrick, CFA, Vice President and Equity Research Analyst at Wellington Management. He has served as an associate portfolio manager for a portion of the Fund since February 2014.

James D. Troyer, CFA, Principal of Vanguard. He has managed a portion of the Fund since 2006 (co-managed since 2012).

James P. Stetler, Principal of Vanguard. He has co-managed a portion of the Fund since 2012.

Michael R. Roach, CFA, Portfolio Manager at Vanguard. He has co-managed a portion of the Fund since 2012.

Purchase and Sale of Fund Shares

You may purchase or redeem shares online through our website (vanguard.com), by mail (The Vanguard Group, P.O. Box 1110, Valley Forge, PA 19482-1110), or by telephone (800-662-2739). The following table provides the Fund’s minimum initial and subsequent investment requirements.


Account Minimums	Investor Shares	Admiral Shares*
To open and maintain an account	$3,000	$50,000
To add to an existing account	Generally $100 (other than	Generally $100 (other than
	by Automatic Investment	by Automatic Investment
	Plan, which has no	Plan, which has no
	established minimum)	established minimum)

*Institutional and financial intermediary clients should contact Vanguard for information on special eligibility rules that may apply to them.

Tax Information

The Fund’s distributions may be taxable as ordinary income or capital gain. If you are investing through a tax-deferred retirement account, such as an IRA, special tax rules apply.

Payments to Financial Intermediaries

The Fund and its investment advisors do not pay financial intermediaries for sales of Fund shares.

More on the Fund

for fluctuations in the securities markets. Look for this

symbol throughout the

prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk^®explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.

This prospectus offers the Fund‘s Admiral Shares and is intended for participants in employer-sponsored retirement or savings plans. Another version—for investors who would like to open a personal investment account—can be obtained by visiting our website at vanguard.com or by calling Vanguard at 800-662-7447.

Plain Talk About Fund Expenses

All mutual funds have operating expenses. These expenses, which are deducted

from a fund’s gross income, are expressed as a percentage of the net assets of

the fund. Assuming that operating expenses remain as stated in the Fees and

Expenses section, Vanguard Explorer Fund Admiral Shares’ expense ratio would

be 0.34%, or $3.40 per $1,000 of average net assets. The average expense ratio

for small-cap growth funds in 2012 was 1.47%, or $14.70 per $1,000 of average

net assets (derived from data provided by Lipper, a Thomson Reuters Company,

which reports on the mutual fund industry).

Plain Talk About Costs of Investing

Costs are an important consideration in choosing a mutual fund. That is because

you, as a shareholder, pay a proportionate share of the costs of operating a fund,

plus any transaction costs incurred when the fund buys or sells securities. These

costs can erode a substantial portion of the gross income or the capital

appreciation a fund achieves. Even seemingly small differences in expenses can,

over time, have a dramatic effect on a fund’s performance.

shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental.

Market Exposure

The Fund focuses on companies that are considered small-cap by the Fund’s advisors.


U.S. Stock Market Returns
(1926–2013)
	1 Year	5 Years	10 Years	20 Years
Best	54.2%	28.6%	19.9%	17.8%
Worst	–43.1	–12.4	–1.4	3.1
Average	12.0	9.9	10.4	11.1

Plain Talk About Growth Funds and Value Funds

Growth investing and value investing are two styles employed by stock-fund

managers. Growth funds generally focus on stocks of companies believed to

have above-average potential for growth in revenue, earnings, cash flow, or other

similar criteria. These stocks typically have low dividend yields and above-average

prices in relation to measures such as earnings and book value. Value funds

typically emphasize stocks whose prices are below average in relation to those

measures; these stocks often have above-average dividend yields. Growth and

value stocks have historically produced similar long-term returns, though each

style has periods when it outperforms the other.

Security Selection

The Fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks for the Fund.

Chartwell will invest opportunistically when stocks are attractively valued, yet it will concentrate holdings in those companies it considers best positioned for rapid growth, all with an intermediate-term time horizon in mind.

Other Investment Policies and Risks

In addition to investing in common stocks of small companies with growth potential, the Fund may make other kinds of investments to achieve its objective.

Although the Fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 25% of its assets in foreign securities, which may include depositary receipts. Foreign securities may be traded on U.S. or foreign markets. To the extent that it owns foreign securities, the Fund is subject to country risk and currency risk. Country risk is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value of securities issued by companies in foreign countries. In addition, the prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions. Currency risk is the chance that the value of a foreign investment,

measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.

The Fund may invest up to 15% of its net assets in restricted securities with limited marketability or in other illiquid securities.

Plain Talk About Derivatives

Derivatives can take many forms. Some forms of derivatives—such as exchange-

traded futures and options on securities, commodities, or indexes—have been

trading on regulated exchanges for decades. These types of derivatives are

standardized contracts that can easily be bought and sold and whose market

values are determined and published daily. Non-exchange-traded derivatives (such

as certain swap agreements and foreign currency exchange forward contracts),

on the other hand, tend to be more specialized or complex and may be harder

to value.

To facilitate cash flows to and from the Fund’s advisors, Vanguard typically invests a small portion of the Fund’s assets in stock index futures, which are a type of derivative, and/or shares of exchange-traded funds (ETFs), including ETF Shares issued by Vanguard stock funds. These stock index futures and ETFs typically provide returns similar to those of common stocks. Vanguard may also purchase futures or ETFs when doing so will reduce the Fund’s transaction costs or add value because the instruments are favorably priced. Vanguard receives no additional revenue from Fund assets invested in ETF Shares of other Vanguard funds. Fund assets invested in ETF

Shares are excluded when allocating to the Fund its share of the costs of Vanguard operations.

Cash Management

Temporary Investment Measures

Frequent Trading or Market-Timing

board of trustees of each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it. These policies and procedures do not apply to Vanguard ETF^®Shares because frequent trading in ETF Shares does not disrupt portfolio management or otherwise harm fund shareholders. Although there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:

• Each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) generally prohibits, except as otherwise noted in the Investing With Vanguard section, a participant from exchanging into a fund account for 60 calendar days after the participant has exchanged out of that fund account.

• Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.

See the Investing With Vanguard section of this prospectus for further details on Vanguard’s transaction policies.

Do not invest with Vanguard if you are a market-timer.

Turnover Rate

Plain Talk About Turnover Rate

Before investing in a mutual fund, you should review its turnover rate. This gives

an indication of how transaction costs, which are not included in the fund’s

expense ratio, could affect the fund’s future returns. In general, the greater the

volume of buying and selling by the fund, the greater the impact that brokerage

commissions and other transaction costs will have on its return. Also, funds with

high turnover rates may be more likely to generate capital gains that must be

distributed to shareholders.

The Fund and Vanguard

Plain Talk About Vanguard’s Unique Corporate Structure

The Vanguard Group is truly a mutual mutual fund company. It is owned jointly by

the funds it oversees and thus indirectly by the shareholders in those funds.

Most other mutual funds are operated by management companies that may be

owned by one person, by a private group of individuals, or by public investors

who own the management company’s stock. The management fees charged by

these companies include a profit component over and above the companies’ cost

of providing services. By contrast, Vanguard provides services to its member

funds on an at-cost basis, with no profit component, which helps to keep the

funds’ expenses low.

Investment Advisors

• Chartwell Investment Partners, L.P., 1235 Westlakes Drive, Suite 400, Berwyn, PA

19312, is an investment advisory firm founded in 1997. As of October 31, 2013, Chartwell managed approximately $6.8 billion in assets.

• Kalmar Investment Advisers, Barley Mill House, 3701 Kennett Pike, Wilmington, DE

Vanguard’s Equity Investment Group is overseen by:

The managers primarily responsible for the day-to-day management of the Fund are:

John V. Schneider, CFA, Vice President of Granahan. He has worked in investment management since 2000, has been with Granahan since 2006, has managed

investment portfolios since 2007, and has co-managed a portion of the Fund since January 2014. Education: A.B., Dartmouth College.

Ford B. Draper, Jr., President, Chief Investment Officer, and Founder of Kalmar. He has worked in investment management since 1967; founded Kalmar Investments Inc. the sister company of Kalmar, in 1982; and has managed a portion of the Fund since 2005 (co-managed since February 2014). Education: B.A., Yale University; M.B.A., Columbia University.

James P. Stetler, Principal of Vanguard. He has been with Vanguard since 1982, has worked in investment management since 1996, has managed investment portfolios since 2003, and has co-managed a portion of the Fund since 2012. Education: B.S. Susquehanna University; M.B.A., Saint Joseph’s University.

The Statement of Additional Information provides information about each portfolio manager’s compensation, other accounts under management, and ownership of shares of the Fund.

Dividends, Capital Gains, and Taxes

Plain Talk About Distributions

As a shareholder, you are entitled to your portion of a fund’s income from interest

and dividends as well as capital gains from the fund’s sale of investments. Income

consists of both the dividends that the fund earns from any stock holdings and the

interest it receives from any money market and bond investments. Capital gains are

realized whenever the fund sells securities for higher prices than it paid for them.

These capital gains are either short-term or long-term, depending on whether the

fund held the securities for one year or less or for more than one year.

Share Price

obtained from an independent third party. The values of any mutual fund shares held by a fund are based on the NAVs of the shares. The values of any ETF or closed-end fund shares held by a fund are based on the market value of the shares.

Vanguard fund share prices are published daily on our website at vanguard.com/prices.

Financial Highlights

The following financial highlights table is intended to help you understand the Admiral Shares‘ financial performance for the periods shown, and certain information reflects financial results for a single Admiral Share. The total returns in the table represent the rate that an investor would have earned or lost each period on an investment in the Admiral Shares (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report—along with the Fund’s financial statements—is included in the Fund’s most recent annual report to shareholders. You may obtain a free copy of the latest annual or semiannual report by visiting vanguard.com or by contacting Vanguard by telephone or mail.

Plain Talk About How to Read the Financial Highlights Table

The Admiral Shares began fiscal year 2013 with a net asset value (price) of $72.68

per share. During the year, each Admiral Share earned $0.375 from investment

income (interest and dividends) and $30.019 from investments that had

appreciated in value or that were sold for higher prices than the Fund paid for them.

Shareholders received $2.534 per share in the form of dividend and capital gains

distributions. A portion of each year’s distributions may come from the prior year’s

income or capital gains.

The share price at the end of the year was $100.54, reflecting earnings of $30.394

per share and distributions of $2.534 per share. This was an increase of $27.86

per share (from $72.68 at the beginning of the year to $100.54 at the end of the

year). For a shareholder who reinvested the distributions in the purchase of more

shares, the total return was 43.13% for the year.

As of October 31, 2013, the Admiral Shares had approximately $6.5 billion in net

assets. For the year, the expense ratio was 0.34% ($3.40 per $1,000 of net

assets), and the net investment income amounted to 0.43% of average net

assets. The Fund sold and replaced securities valued at 65% of its net assets.


Explorer Fund Admiral Shares
			Year Ended October 31,
For a Share Outstanding Throughout Each Period	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$72.68	$68.04	$61.50	$48.21	$42.45
Investment Operations
Net Investment Income	.375¹	.236	.179	.206	.246
Net Realized and Unrealized Gain (Loss)
on Investments	30.019	4.621	6.550	13.259	5.881
Total from Investment Operations	30.394	4.857	6.729	13.465	6.127
Distributions
Dividends from Net Investment Income	(.392)	(.217)	(.189)	(.175)	(.367)
Distributions from Realized Capital Gains	(2.142)	—	—	—	—
Total Distributions	(2.534)	(.217)	(.189)	(.175)	(.367)
Net Asset Value, End of Period	$100.54	$72.68	$68.04	$61.50	$48.21
Total Return	43.13%	7.16%	10.94%	27.98%	14.66%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$6,497	$3,757	$3,288	$2,864	$2,252
Ratio of Total Expenses to
Average Net Assets²	0.34%	0.32%	0.34%	0.32%	0.34%
Ratio of Net Investment Income to
Average Net Assets	0.43%¹	0.33%	0.28%	0.36%	0.58%
Portfolio Turnover Rate	65%	59%	89%³	82%	95%
1 Net investment income per share and the ratio of net investment income to average net assets include $0.019 and 0.03%,
respectively, resulting from a special dividend from HFF Inc. in December 2012.
2 Includes performance-based investment advisory fee increases (decreases) of 0.00%, (0.03%), 0.00%, (0.01%), and
(0.01%).
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the Fund’s
capital shares.

Investing With Vanguard

• If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.

• Be sure to carefully read each topic that pertains to your transactions with Vanguard.

Vanguard reserves the right to change its policies without notice to shareholders.

Investment Options and Allocations

Transactions

Your transaction will then be based on the next-determined NAV of the Fund‘s Admiral Shares. If your transaction request was received in good order before the close of regular trading on the New York Stock Exchange (NYSE) (generally 4 p.m., Eastern time), you will receive that day’s NAV and trade date. NAVs are calculated only on days the NYSE is open for trading.

Frequent-Trading Limitations

Before making an exchange to or from another fund available in your plan, consider the following:

• Certain investment options, particularly funds made up of company stock or investment contracts, may be subject to unique restrictions.

• Vanguard can accept exchanges only as permitted by your plan. Contact your plan administrator for details on other exchange policies that apply to your plan.

Before making an exchange into another fund, it is important to read that fund’s prospectus. To obtain a copy, please contact Vanguard Participant Services toll-free at 800-523-1188.

Investing With Vanguard Through Other Firms

No Cancellations

Vanguard will not accept your request to cancel any transaction request once processing has begun. Please be careful when placing a transaction request.

Proof of a Caller’s Authority

• Authorization to act on the account (as the account owner or by legal documentation or other means).

Account registration and address.
Fund name and account number, if applicable.
Other information relating to the caller, the account owner, or the account.

Uncashed Checks

Vanguard will not pay interest on uncashed checks. Vanguard may be required to transfer assets related to uncashed checks to a state under the state’s abandoned property law.

Portfolio Holdings


Additional Information


		Newspaper	Vanguard	CUSIP
	Inception Date	Abbreviation	Fund Number	Number
Explorer Fund
Admiral Shares	11/12/2001	ExplrAdml	5024	921926200
	(Investor Shares
12/11/1967)

Accessing Fund Information Online

Vanguard Online at Vanguard.com

CFA^®is a trademark owned by CFA Institute.

Glossary of Investment Terms

Capital Gains Distribution. Payment to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.

Common Stock. A security representing ownership rights in a corporation. A stockholder is entitled to share in the company’s profits, some of which may be paid out as dividends.

Dividend Distribution. Payment to mutual fund shareholders of income from interest or dividends generated by a fund’s investments.

Mutual Fund. An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.

Russell 2500 Growth Index. An index that measures the performance of those Russell 2500 companies with higher price/book ratios and higher predicted growth rates.

Securities. Stocks, bonds, money market instruments, and other investments.

Total Return. A percentage change, over a specified time period, in a mutual fund’s net asset value, assuming the reinvestment of all distributions of dividends and capital gains.

Volatility. The fluctuations in value of a mutual fund or other security. The greater a fund’s volatility, the wider the fluctuations in its returns.

Yield. Income (interest or dividends) earned by an investment, expressed as a percentage of the investment’s price.

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Institutional Division P.O. Box 2900 Valley Forge, PA 19482-2900

Connect with Vanguard^®> vanguard.com


For More Information	To receive a free copy of the latest annual or semiannual
If you would like more information about Vanguard	report or the SAI, or to request additional information
Explorer Fund, the following documents are available	about the Fund or other Vanguard funds, please visit
free upon request:	vanguard.com or contact us as follows:

Annual/Semiannual Reports to Shareholders	The Vanguard Group
Additional information about the Fund’s investments is	Participant Services
available in the Fund’s annual and semiannual reports	P.O. Box 2900
to shareholders. In the annual report, you will find a	Valley Forge, PA 19482-2900
discussion of the market conditions and investment	Telephone: 800-523-1188
strategies that significantly affected the Fund’s	Text telephone for people with hearing impairment:
performance during its last fiscal year.	800-749-7273

Statement of Additional Information (SAI)	Information Provided by the Securities and
The SAI provides more detailed information about the	Exchange Commission (SEC)
Fund and is incorporated by reference into (and thus	You can review and copy information about the Fund
legally a part of) this prospectus.	(including the SAI) at the SEC’s Public Reference Room
	in Washington, DC. To find out more about this public
	service, call the SEC at 202-551-8090. Reports and
	other information about the Fund are also available in
	the EDGAR database on the SEC’s website at
	www.sec.gov, or you can receive copies of this
	information, for a fee, by electronic request at the
	following e-mail address: publicinfo@sec.gov, or by
	writing the Public Reference Section, Securities and
	Exchange Commission, Washington, DC 20549-1520.

	Fund’s Investment Company Act file number: 811-01530

I 5024 022014

PART B

VANGUARD^®EXPLORER™ FUND

STATEMENT OF ADDITIONAL INFORMATION

February 24, 2014

This Statement of Additional Information is not a prospectus but should be read in conjunction with the Fund’s current prospectus (dated February 24, 2014). To obtain, without charge, a prospectus or the most recent Annual Report to Shareholders, which contains the Fund’s financial statements as hereby incorporated by reference, please contact The Vanguard Group, Inc. (Vanguard).

Phone: Investor Information Department at 800-662-7447 Online: vanguard.com


TABLE OF CONTENTS
Description of the Trust	B-1
Fundamental Policies	B-3
Investment Strategies and Nonfundamental Policies	B-4
Share Price	B-20
Purchase and Redemption of Shares	B-20
Management of the Fund	B-21
Investment Advisory Services	B-34
Portfolio Transactions	B-43
Proxy Voting Guidelines	B-44
Financial Statements	B-49

DESCRIPTION OF THE TRUST

Vanguard Explorer Fund (the Trust) currently offers the following fund and share classes (identified by ticker symbol):


	Share Classes¹
Fund	Investor	Admiral
Vanguard Explorer Fund	VEXPX	VEXRX
1 Individually, a class; collectively, the classes.

The Trust has the ability to offer additional funds or classes of shares. There is no limit on the number of full and fractional shares that may be issued for a single fund or class of shares.

Organization

The Trust was organized as a Delaware corporation in 1967 and reorganized as a Maryland corporation in 1973. It was subsequently reorganized as a Delaware statutory trust in 1998. Prior to its reorganization as a Delaware statutory trust, the Trust was known as Vanguard Explorer Fund, Inc. The Trust is registered with the United States Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (the 1940 Act) as an open-end, management investment company. Vanguard Explorer Fund (the Fund) is classified as diversified within the meaning of the 1940 Act.

Service Providers

Custodian. Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109, serves as the Fund‘s custodian. The custodian is responsible for maintaining the Fund‘s assets, keeping all necessary accounts and records of Fund assets, and appointing any foreign subcustodians or foreign securities depositories.

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Independent Registered Public Accounting Firm. PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, PA 19103-7042, serves as the Fund‘s independent registered public accounting firm. The independent registered public accounting firm audits the Fund‘s annual financial statements and provides other related services.

Transfer and Dividend-Paying Agent. The Fund‘s transfer agent and dividend-paying agent is Vanguard, P.O. Box 2600, Valley Forge, PA 19482.

Characteristics of the Fund‘s Shares

Restrictions on Holding or Disposing of Shares. There are no restrictions on the right of shareholders to retain or dispose of the Fund’s shares, other than those described in the Fund’s current prospectus and elsewhere in this Statement of Additional Information. The Fund or class may be terminated by reorganization into another mutual fund or class or by liquidation and distribution of the assets of the Fund or class. Unless terminated by reorganization or liquidation, the Fund and share classes will continue indefinitely.

Shareholder Liability. The Trust is organized under Delaware law, which provides that shareholders of a statutory trust are entitled to the same limitations of personal liability as shareholders of a corporation organized under Delaware law. This means that a shareholder of the Fund generally will not be personally liable for payment of the Fund’s debts. Some state courts, however, may not apply Delaware law on this point. We believe that the possibility of such a situation arising is remote.

Dividend Rights. The shareholders of each class of the Fund are entitled to receive any dividends or other distributions declared by the Fund for each such class. No shares of the Fund have priority or preference over any other shares of the Fund with respect to distributions. Distributions will be made from the assets of the Fund and will be paid ratably to all shareholders of a particular class according to the number of shares of the class held by shareholders on the record date. The amount of dividends per share may vary between separate share classes of the Fund based upon differences in the net asset values of the different classes and differences in the way that expenses are allocated between share classes pursuant to a multiple class plan approved by the Fund’s board of trustees.

Voting Rights. Shareholders are entitled to vote on a matter if (1) the matter concerns an amendment to the Declaration of Trust that would adversely affect to a material degree the rights and preferences of the shares of the Fund or any class; (2) the trustees determine that it is necessary or desirable to obtain a shareholder vote; (3) a merger or consolidation, share conversion, share exchange, or sale of assets is proposed and a shareholder vote is required by the 1940 Act to approve the transaction; or (4) a shareholder vote is required under the 1940 Act. The 1940 Act requires a shareholder vote under various circumstances, including to elect or remove trustees upon the written request of shareholders representing 10% or more of the Fund’s net assets, to change any fundamental policy of the Fund, and to enter into certain merger transactions. Unless otherwise required by applicable law, shareholders of the Fund receive one vote for each dollar of net asset value owned on the record date and a fractional vote for each fractional dollar of net asset value owned on the record date. However, only the shares of the Fund or class affected by a particular matter are entitled to vote on that matter. In addition, each class has exclusive voting rights on any matter submitted to shareholders that relates solely to that class, and each class has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of another. Voting rights are noncumulative and cannot be modified without a majority vote.

Liquidation Rights. In the event that the Fund is liquidated, shareholders will be entitled to receive a pro rata share of the Fund’s net assets. In the event that a class of shares is liquidated, shareholders of that class will be entitled to receive a pro rata share of the Fund’s net assets that are allocated to that class. Shareholders may receive cash, securities, or a combination of the two.

Preemptive Rights. There are no preemptive rights associated with the Fund‘s shares.

Conversion Rights. Fund shareholders may convert their shares to another class of shares of the same Fund upon the satisfaction of any then-applicable eligibility requirements as described in the Fund’s current prospectus.

Redemption Provisions. The Fund’s redemption provisions are described in its current prospectus and elsewhere in this Statement of Additional Information.

Sinking Fund Provisions. The Fund has no sinking fund provisions.

Calls or Assessment. The Fund’s shares, when issued, are fully paid and non-assessable.

B-2

Tax Status of the Fund

The Fund expects to qualify each year for treatment as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the IRC). This special tax status means that the Fund will not be liable for federal tax on income and capital gains distributed to shareholders. In order to preserve its tax status, the Fund must comply with certain requirements. If the Fund fails to meet these requirements in any taxable year, the Fund will, in some cases, be able to cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If the Fund is ineligible to or otherwise does not cure such failure for any year, it will be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, will be taxable to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before regaining its tax status as a regulated investment company.

Dividends received and distributed by the Fund on shares of stock of domestic corporations may be eligible for the dividends-received deduction applicable to corporate shareholders. Corporations must satisfy certain requirements in order to claim the deduction. Capital gains distributed by the Fund are not eligible for the dividends-received deduction.

The Fund may invest in passive foreign investment companies (PFICs). A foreign company is generally a PFIC if 75% or more of its gross income is passive or if 50% or more of its assets produce passive income. Capital gains on the sale of an interest in a PFIC will be deemed ordinary income regardless of how long the Fund held it. Also, the Fund may be subject to corporate income tax and an interest charge on certain dividends and capital gains earned in respect to PFIC interests, whether or not such amounts are distributed to shareholders. To avoid such tax and interest, the Fund may elect to “mark to market” its PFIC interests, that is, to treat such interests as sold on the last day of the Fund’s fiscal year and to recognize any unrealized gains (or losses, to the extent of previously recognized gains) as ordinary income each year. Distributions from the Fund that are attributable to income or gains earned in respect to PFIC interests are characterized as ordinary income.

The Fund may declare a capital gain distribution consisting of the excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carryforwards of the Fund. For Fund fiscal years beginning on or after December 22, 2010, capital losses may be carried forward indefinitely and retain their character as either short-term or long-term. Under prior law, net capital losses could be carried forward for eight tax years and were treated as short-term capital losses. A Fund is required to use capital losses arising in fiscal years beginning on or after December 22, 2010, before using capital losses arising in fiscal years prior to December 22, 2010.

FUNDAMENTAL POLICIES

The Fund is subject to the following fundamental investment policies, which cannot be changed in any material way without the approval of the holders of a majority of the Fund’s shares. For these purposes, a “majority” of shares means shares representing the lesser of (1) 67% or more of the Fund’s net assets voted, so long as shares representing more than 50% of the Fund’s net assets are present or represented by proxy or (2) more than 50% of the Fund’s net assets.

Borrowing. The Fund may borrow money only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.

Commodities. The Fund may invest in commodities only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.

Diversification. With respect to 75% of its total assets, the Fund may not (1) purchase more than 10% of the outstanding voting securities of any one issuer or (2) purchase securities of any issuer if, as a result, more than 5% of the Fund’s total assets would be invested in that issuer’s securities. This limitation does not apply to obligations of the U.S. government or its agencies or instrumentalities.

Industry Concentration. The Fund will not concentrate its investments in the securities of issuers whose principal business activities are in the same industry.

Investment Objective. The investment objective of the Fund may not be materially changed without a shareholder vote.

Loans. The Fund may make loans to another person only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.

B-3

Real Estate. The Fund may not invest directly in real estate unless it is acquired as a result of ownership of securities or other instruments. This restriction shall not prevent the Fund from investing in securities or other instruments (1) issued by companies that invest, deal, or otherwise engage in transactions in real estate or (2) backed or secured by real estate or interests in real estate.

Senior Securities. The Fund may not issue senior securities except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.

Underwriting. The Fund may not act as an underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 (the 1933 Act), in connection with the purchase and sale of portfolio securities.

Compliance with the fundamental policies previously described is generally measured at the time the securities are purchased. Unless otherwise required by the 1940 Act (as is the case with borrowing), if a percentage restriction is adhered to at the time the investment is made, a later change in percentage resulting from a change in the market value of assets will not constitute a violation of such restriction. All fundamental policies must comply with applicable regulatory requirements. For more details, see Investment Strategies and Nonfundamental Policies.

None of these policies prevents the Fund from having an ownership interest in Vanguard. As a part owner of Vanguard, the Fund may own securities issued by Vanguard, make loans to Vanguard, and contribute to Vanguard’s costs or other financial requirements. See Management of the Fund for more information.

INVESTMENT STRATEGIES AND NONFUNDAMENTAL POLICIES

Some of the investment strategies and policies described on the following pages and in the Fund’s prospectus set forth percentage limitations on the Fund’s investment in, or holdings of, certain securities or other assets. Unless otherwise required by law, compliance with these strategies and policies will be determined immediately after the acquisition of such securities or assets by the Fund. Subsequent changes in values, net assets, or other circumstances will not be considered when determining whether the investment complies with the Fund’s investment strategies and policies.

The following investment strategies and policies supplement the Fund’s investment strategies and policies set forth in the prospectus. With respect to the different investments discussed as follows, the Fund may acquire such investments to the extent consistent with its investment strategies and policies.

Borrowing. A fund’s ability to borrow money is limited by its investment policies and limitations; by the 1940 Act; and by applicable exemptions, no-action letters, interpretations, and other pronouncements issued from time to time by the SEC and its staff or any other regulatory authority with jurisdiction. Under the 1940 Act, a fund is required to maintain continuous asset coverage (that is, total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowings not in excess of 5% of the fund’s total assets made for temporary or emergency purposes. Any borrowings for temporary purposes in excess of 5% of the fund’s total assets must maintain continuous asset coverage. If the 300% asset coverage should decline as a result of market fluctuations or for other reasons, a fund may be required to sell some of its portfolio holdings within three days (excluding Sundays and holidays) to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time.

Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a fund’s portfolio. Money borrowed will be subject to interest costs that may or may not be recovered by earnings on the securities purchased. A fund also may be required to maintain minimum average balances in connection with a borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.

The SEC takes the position that transactions that have a leveraging effect on the capital structure of a fund or are economically equivalent to borrowing can be viewed as constituting a form of borrowing by the fund for purposes of the 1940 Act. These transactions can include entering into reverse repurchase agreements; engaging in mortgage-dollar-roll transactions; selling securities short (other than short sales “against-the-box”); buying and selling certain derivatives (such as futures contracts); selling (or writing) put and call options; engaging in sale-buybacks; entering into firm-commitment and standby-commitment agreements; engaging in when-issued, delayed-delivery, or forward-commitment transactions; and participating in other similar trading practices. (Additional discussion about a number of these transactions can be found on the following pages.) A borrowing transaction will not be considered to constitute the issuance, by a fund, of a

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“senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund maintains an offsetting financial position; segregates liquid assets (with such liquidity determined by the advisor in accordance with procedures established by the board of trustees) equal (as determined on a daily mark-to-market basis) in value to the fund’s potential economic exposure under the borrowing transaction; or otherwise “covers” the transaction in accordance with applicable SEC guidance (collectively, “covers” the transaction). A fund may have to buy or sell a security at a disadvantageous time or price in order to cover a borrowing transaction. In addition, segregated assets may not be available to satisfy redemptions or to fulfill other obligations.

Common Stock. Common stock represents an equity or ownership interest in an issuer. Common stock typically entitles the owner to vote on the election of directors and other important matters, as well as to receive dividends on such stock. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds, other debt holders, and owners of preferred stock take precedence over the claims of those who own common stock.

Convertible Securities. Convertible securities are hybrid securities that combine the investment characteristics of bonds and common stocks. Convertible securities typically consist of debt securities or preferred stock that may be converted (on a voluntary or mandatory basis) within a specified period of time (normally for the entire life of the security) into a certain amount of common stock or other equity security of the same or a different issuer at a predetermined price. Convertible securities also include debt securities with warrants or common stock attached and derivatives combining the features of debt securities and equity securities. Other convertible securities with features and risks not specifically referred to herein may become available in the future. Convertible securities involve risks similar to those of both fixed income and equity securities. In a corporation’s capital structure, convertible securities are senior to common stock but are usually subordinated to senior debt obligations of the issuer.

The market value of a convertible security is a function of its “investment value” and its “conversion value.” A security’s “investment value” represents the value of the security without its conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer, and the seniority of the security in the issuer’s capital structure. A security’s “conversion value” is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. In that circumstance, the convertible security takes on the characteristics of a bond, and its price moves in the opposite direction from interest rates. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. In that case, the convertible security’s price may be as volatile as that of common stock. Because both interest rates and market movements can influence its value, a convertible security generally is not as sensitive to interest rates as a similar fixed income security, nor is it as sensitive to changes in share price as its underlying equity security. Convertible securities are often rated below investment grade or are not rated, and they are generally subject to a high degree of credit risk.

Although all markets are prone to change over time, the generally high rate at which convertible securities are retired (through mandatory or scheduled conversions by issuers or through voluntary redemptions by holders) and replaced with newly issued convertible securities may cause the convertible securities market to change more rapidly than other markets. For example, a concentration of available convertible securities in a few economic sectors could elevate the sensitivity of the convertible securities market to the volatility of the equity markets and to the specific risks of those sectors. Moreover, convertible securities with innovative structures, such as mandatory-conversion securities and equity-linked securities, have increased the sensitivity of the convertible securities market to the volatility of the equity markets and to the special risks of those innovations, which may include risks different from, and possibly greater than, those associated with traditional convertible securities. A convertible security may be subject to redemption at the option of the issuer at a price set in the governing instrument of the convertible security. If a convertible security held by a fund is subject to such redemption option and is called for redemption, the fund must allow the issuer to redeem the security, convert it into the underlying common stock, or sell the security to a third party.

Debt Securities. A debt security, sometimes called a fixed income security, consists of a certificate or other evidence of a debt (secured or unsecured) on which the issuing company or governmental body promises to pay the holder thereof a

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fixed, variable, or floating rate of interest for a specified length of time and to repay the debt on the specified maturity date. Some debt securities, such as zero-coupon bonds, do not make regular interest payments but are issued at a discount to their principal or maturity value. Debt securities include a variety of fixed income obligations, including, but not limited to, corporate bonds, government securities, municipal securities, convertible securities, mortgage-backed securities, and asset-backed securities. Debt securities include investment-grade securities, non-investment-grade securities, and unrated securities. Debt securities are subject to a variety of risks, such as interest rate risk, income risk, call/prepayment risk, inflation risk, credit risk, and (in the case of foreign securities) country risk and currency risk. The reorganization of an issuer under the federal bankruptcy laws may result in the issuer’s debt securities being cancelled without repayment, repaid only in part, or repaid in part or in whole through an exchange thereof for any combination of cash, debt securities, convertible securities, equity securities, or other instruments or rights in respect to the same issuer or a related entity.

Debt Securities—Non-Investment-Grade Securities. Non-investment-grade securities, also referred to as “high-yield securities” or “junk bonds,” are debt securities that are rated lower than the four highest rating categories by a nationally recognized statistical rating organization (e.g., lower than Baa3/P-2 by Moody’s Investors Service, Inc. (Moody’s), or below BBB–/A-2 by Standard & Poor’s) or, if unrated, are determined to be of comparable quality by the fund’s advisor. These securities are generally considered to be, on balance, predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation, and they will generally involve more credit risk than securities in the investment-grade categories. Non-investment-grade securities generally provide greater income and opportunity for capital appreciation than higher quality securities, but they also typically entail greater price volatility and principal and income risk.

Analysis of the creditworthiness of issuers of high-yield securities may be more complex than for issuers of investment-grade securities. Thus, reliance on credit ratings in making investment decisions entails greater risks for high-yield securities than for investment-grade securities. The success of a fund’s advisor in managing high-yield securities is more dependent upon its own credit analysis than is the case with investment-grade securities.

Some high-yield securities are issued by smaller, less-seasoned companies, while others are issued as part of a corporate restructuring such as an acquisition, a merger, or a leveraged buyout. Companies that issue high-yield securities are often highly leveraged and may not have more traditional methods of financing available to them. Therefore, the risk associated with acquiring the securities of such issuers generally is greater than is the case with investment-grade securities. Some high-yield securities were once rated as investment-grade but have been downgraded to junk-bond status because of financial difficulties experienced by their issuers.

The market values of high-yield securities tend to reflect individual issuer developments to a greater extent than do investment-grade securities, which in general react to fluctuations in the general level of interest rates. High-yield securities also tend to be more sensitive to economic conditions than are investment-grade securities. A projection of an economic downturn or of a sustained period of rising interest rates, for example, could cause a decline in junk-bond prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. If an issuer of high-yield securities defaults, in addition to risking payment of all or a portion of interest and principal, a fund investing in such securities may incur additional expenses to seek recovery.

The secondary market on which high-yield securities are traded may be less liquid than the market for investment-grade securities. Less liquidity in the secondary trading market could adversely affect the ability of a fund’s advisor to sell a high-yield security or the price at which a fund’s advisor could sell a high-yield security, and it could also adversely affect the daily net asset value of fund shares. When secondary markets for high-yield securities are less liquid than the market for investment-grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements of judgment may play a greater role in the valuation because less reliable, objective data is available.

Except as otherwise provided in a fund’s prospectus, if a credit-rating agency changes the rating of a portfolio security held by a fund, the fund may retain the portfolio security if the advisor deems it in the best interests of shareholders.

Depositary Receipts. Depositary receipts are securities that evidence ownership interests in a security or a pool of securities that have been deposited with a “depository.” Depositary receipts may be sponsored or unsponsored and include American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), and Global Depositary Receipts (GDRs). For ADRs, the depository is typically a U.S. financial institution, and the underlying securities are issued by a foreign issuer. For other depositary receipts, the depository may be a foreign or a U.S. entity, and the underlying

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securities may have a foreign or a U.S. issuer. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. Generally, ADRs are issued in registered form, denominated in U.S. dollars, and designed for use in the U.S. securities markets. Other depositary receipts, such as GDRs and EDRs, may be issued in bearer form and denominated in other currencies, and they are generally designed for use in securities markets outside the United States. Although the two types of depositary receipt facilities (sponsored and unsponsored) are similar, there are differences regarding a holder’s rights and obligations and the practices of market participants.

A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of nonobjection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of noncash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.

Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipt holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer’s request.

For purposes of a fund’s investment policies, investments in depositary receipts will be deemed to be investments in the underlying securities. Thus, a depositary receipt representing ownership of common stock will be treated as common stock. Depositary receipts do not eliminate all of the risks associated with directly investing in the securities of foreign issuers.

Derivatives. A derivative is a financial instrument that has a value based on—or “derived from”—the values of other assets, reference rates, or indexes. Derivatives may relate to a wide variety of underlying references, such as commodities, stocks, bonds, interest rates, currency exchange rates, and related indexes. Derivatives include futures contracts and options on futures contracts, forward-commitment transactions, options on securities, caps, floors, collars, swap agreements, and other financial instruments. Some derivatives, such as futures contracts and certain options, are traded on U.S. commodity and securities exchanges, while other derivatives, such as swap agreements, are privately negotiated and entered into in the over-the-counter (OTC) market. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), certain swap agreements may be cleared through a clearinghouse and traded on an exchange or swap execution facility. New regulations could, among other things, increase the costs of such transactions. The risks associated with the use of derivatives are different from, and possibly greater than, the risks associated with investing directly in the securities, assets, or market indexes on which the derivatives are based. Derivatives are used by some investors for speculative purposes. Derivatives also may be used for a variety of purposes that do not constitute speculation, such as hedging, managing risk, seeking to stay fully invested, seeking to reduce transaction costs, seeking to simulate an investment in equity or debt securities or other investments, seeking to add value by using derivatives to more efficiently implement portfolio positions when derivatives are favorably priced relative to equity or debt securities or other investments, and for other purposes. There is no assurance that any derivatives strategy used by a fund’s advisor will succeed. The counterparties to the funds’ derivatives will not be considered the issuers thereof for purposes of certain provisions of the 1940 Act and the IRC, although such derivatives may qualify as securities or investments under such laws. The funds’ advisors, however, will monitor and adjust, as appropriate, the funds’ credit risk exposure to derivative counterparties.

Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks, bonds, and other traditional investments. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions.

The use of derivatives generally involves the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the other party to the contract (usually referred to as a “counterparty”) or the failure of the counterparty to make

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required payments or otherwise comply with the terms of the contract. Additionally, the use of credit derivatives can result in losses if a fund’s advisor does not correctly evaluate the creditworthiness of the issuer on which the credit derivative is based.

Derivatives may be subject to liquidity risk, which exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many OTC derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.

Derivatives may be subject to pricing or “basis” risk, which exists when a particular derivative becomes extraordinarily expensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity.

Because many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. A derivative transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to a fund’s interest. A fund bears the risk that its advisor will incorrectly forecast future market trends or the values of assets, reference rates, indexes, or other financial or economic factors in establishing derivative positions for the fund. If the advisor attempts to use a derivative as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the derivative will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many derivatives (in particular, OTC derivatives) are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.

Exchange-Traded Funds. A fund may purchase shares of exchange-traded funds (ETFs), including ETF Shares issued by other Vanguard funds. Typically, a fund would purchase ETF shares for the same reason it would purchase (and as an alternative to purchasing) futures contracts: to obtain exposure to all or a portion of the stock or bond market. ETF shares enjoy several advantages over futures. Depending on the market, the holding period, and other factors, ETF shares can be less costly and more tax-efficient than futures. In addition, ETF shares can be purchased for smaller sums, offer exposure to market sectors and styles for which there is no suitable or liquid futures contract, and do not involve leverage.

An investment in an ETF generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange-traded) that has the same investment objective, strategies, and policies. The price of an ETF can fluctuate within a wide range, and a fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down. In addition, ETFs are subject to the following risks that do not apply to conventional funds: (1) the market price of an ETF’s shares may trade at a discount or a premium to their net asset value; (2) an active trading market for an ETF’s shares may not develop or be maintained; and (3) trading of an ETF’s shares may be halted by the activation of individual or marketwide “circuit breakers” (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of an ETF’s shares may also be halted if the shares are delisted from the exchange without first being listed on another exchange or if the listing exchange’s officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors.

Most ETFs are investment companies. Therefore, a fund’s purchases of ETF shares generally are subject to the limitations on, and the risks of, a fund’s investments in other investment companies, which are described under the heading “Other Investment Companies.”

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Vanguard ETF^®* Shares are exchange-traded shares that represent an interest in an investment portfolio held by Vanguard funds. A fund’s investments in Vanguard ETF Shares are also generally subject to the descriptions, limitations, and risks described under the heading “Other Investment Companies,” except as provided by an exemption granted by the SEC that permits registered investment companies to invest in a Vanguard fund that issues ETF Shares beyond the limits of Section 12(d)(1) of the 1940 Act, subject to certain terms and conditions.

* U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

Foreign Securities. Typically, foreign securities are considered to be equity or debt securities issued by entities organized, domiciled, or with a principal executive office outside the United States, such as foreign corporations and governments. Securities issued by certain companies organized outside the United States may not be deemed to be foreign securities if the company’s principal operations are conducted from the United States or when the company’s equity securities trade principally on a U.S. stock exchange. Foreign securities may trade in U.S. or foreign securities markets. A fund may make foreign investments either directly by purchasing foreign securities or indirectly by purchasing depositary receipts or depositary shares of similar instruments (depositary receipts) for foreign securities. Direct investments in foreign securities may be made either on foreign securities exchanges or in the OTC markets. Investing in foreign securities involves certain special risk considerations that are not typically associated with investing in securities of U.S. companies or governments.

Because foreign issuers are not generally subject to uniform accounting, auditing, and financial reporting standards and practices comparable to those applicable to U.S. issuers, there may be less publicly available information about certain foreign issuers than about U.S. issuers. Evidence of securities ownership may be uncertain in many foreign countries. As a result, there are multiple risks that could result in a loss to the fund, including, but not limited to, the risk that a fund’s trade details could be incorrectly or fraudulently entered at the time of the transaction. Securities of foreign issuers are generally less liquid than securities of comparable U.S. issuers, and foreign investments may be effected through structures that may be complex or confusing. In certain countries, there is less government supervision and regulation of stock exchanges, brokers, and listed companies than in the United States. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, war, terrorism, nationalization, limitations on the removal of funds or other assets, or diplomatic developments that could affect U.S. investments in those countries. Although an advisor will endeavor to achieve the most favorable execution costs for a fund’s portfolio transactions in foreign securities under the circumstances, commissions and other transaction costs are generally higher than those on U.S. securities. In addition, it is expected that the custodian arrangement expenses for a fund that invests primarily in foreign securities will be somewhat greater than the expenses for a fund that invests primarily in domestic securities. Certain foreign governments levy withholding or other taxes against dividend and interest income from or transactions in foreign securities. Although in some countries a portion of these taxes is recoverable by the fund, the nonrecovered portion of foreign withholding taxes will reduce the income received from such securities.

The value of the foreign securities held by a fund that are not U.S. dollar-denominated may be significantly affected by changes in currency exchange rates. The U.S. dollar value of a foreign security generally decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and it tends to increase when the value of the U.S. dollar falls against such currency (as discussed under the heading “Foreign Securities—Foreign Currency Transactions,” a fund may attempt to hedge its currency risks). In addition, the value of fund assets may be affected by losses and other expenses incurred in converting between various currencies in order to purchase and sell foreign securities, as well as by currency restrictions, exchange control regulation, currency devaluations, and political and economic developments.

Foreign Securities—Emerging Market Risk. Investing in emerging market countries involves certain risks not typically associated with investing in the United States, and it imposes risks greater than, or in addition to, risks of investing in more developed foreign countries. These risks include, but are not limited to, the following: nationalization or expropriation of assets or confiscatory taxation; currency devaluations and other currency exchange rate fluctuations; greater social, economic, and political uncertainty and instability (including amplified risk of war and terrorism); more substantial government involvement in the economy; less government supervision and regulation of the securities markets and participants in those markets and possible arbitrary and unpredictable enforcement of securities regulations; controls on foreign investment and limitations on repatriation of invested capital and on the fund’s ability to exchange local currencies for U.S. dollars; unavailability of currency-hedging techniques in certain emerging market countries; generally smaller, less seasoned, or newly organized companies; difference in, or lack of, auditing and financial

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reporting standards, which may result in unavailability of material information about issuers; difficulty in obtaining and/or enforcing a judgment in a court outside the United States; and greater price volatility, substantially less liquidity, and significantly smaller market capitalization of securities markets. Also, any change in the leadership or politics of emerging market countries, or the countries that exercise a significant influence over those countries, may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities. Furthermore, high rates of inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Custodial services and other investment-related costs are often more expensive in emerging market countries, which can reduce a fund’s income from investments in securities or debt instruments of emerging market country issuers.

Foreign Securities—Foreign Currency Transactions. The value in U.S. dollars of a fund’s non-dollar-denominated foreign securities may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the fund may incur costs in connection with conversions between various currencies. To seek to minimize the impact of such factors on net asset values, a fund may engage in foreign currency transactions in connection with its investments in foreign securities. A fund will not speculate in foreign currency exchange and will enter into foreign currency transactions only to attempt to “hedge” the currency risk associated with investing in foreign securities. Although such transactions tend to minimize the risk of loss that would result from a decline in the value of the hedged currency, they also may limit any potential gain that might result should the value of such currency increase.

Currency exchange transactions may be conducted either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market or through forward contracts to purchase or sell foreign currencies. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into with large commercial banks or other currency traders who are participants in the interbank market. Currency exchange transactions also may be effected through the use of swap agreements or other derivatives.

Currency exchange transactions may be considered borrowings. A currency exchange transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

By entering into a forward contract for the purchase or sale of foreign currency involved in underlying security transactions, a fund may be able to protect itself against part or all of the possible loss between trade and settlement dates for that purchase or sale resulting from an adverse change in the relationship between the U.S. dollar and such foreign currency. This practice is sometimes referred to as “transaction hedging.” In addition, when the advisor reasonably believes that a particular foreign currency may suffer a substantial decline against the U.S. dollar, a fund may enter into a forward contract to sell an amount of foreign currency approximating the value of some or all of its portfolio securities denominated in such foreign currency. This practice is sometimes referred to as “portfolio hedging.” Similarly, when the advisor reasonably believes that the U.S. dollar may suffer a substantial decline against a foreign currency, a fund may enter into a forward contract to buy that foreign currency for a fixed dollar amount.

A fund may also attempt to hedge its foreign currency exchange rate risk by engaging in currency futures, options, and “cross-hedge” transactions. In cross-hedge transactions, a fund holding securities denominated in one foreign currency will enter into a forward currency contract to buy or sell a different foreign currency (one that the advisor reasonably believes generally tracks the currency being hedged with regard to price movements). The advisor may select the tracking (or substitute) currency rather than the currency in which the security is denominated for various reasons, including in order to take advantage of pricing or other opportunities presented by the tracking currency or to take advantage of a more liquid or more efficient market for the tracking currency. Such cross-hedges are expected to help protect a fund against an increase or decrease in the value of the U.S. dollar against certain foreign currencies.

A fund may hold a portion of its assets in bank deposits denominated in foreign currencies, so as to facilitate investment in foreign securities as well as protect against currency fluctuations and the need to convert such assets into U.S. dollars (thereby also reducing transaction costs). To the extent these assets are converted back into U.S. dollars, the value of the assets so maintained will be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations.

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The forecasting of currency market movement is extremely difficult, and whether any hedging strategy will be successful is highly uncertain. Moreover, it is impossible to forecast with precision the market value of portfolio securities at the expiration of a forward currency contract. Accordingly, a fund may be required to buy or sell additional currency on the spot market (and bear the expense of such transaction) if its advisor’s predictions regarding the movement of foreign currency or securities markets prove inaccurate. In addition, the use of cross-hedging transactions may involve special risks and may leave a fund in a less advantageous position than if such a hedge had not been established. Because forward currency contracts are privately negotiated transactions, there can be no assurance that a fund will have flexibility to roll over a forward currency contract upon its expiration if it desires to do so. Additionally, there can be no assurance that the other party to the contract will perform its services thereunder.

Foreign Securities—Foreign Investment Companies. Some of the countries in which a fund may invest may not permit, or may place economic restrictions on, direct investment by outside investors. Fund investments in such countries may be permitted only through foreign government-approved or authorized investment vehicles, which may include other investment companies. Such investments may be made through registered or unregistered closed-end investment companies that invest in foreign securities. Investing through such vehicles may involve layered fees or expenses and may also be subject to the limitations on, and the risks of, a fund’s investments in other investment companies, which are described under the heading “Other Investment Companies.”

Futures Contracts and Options on Futures Contracts. Futures contracts and options on futures contracts are derivatives. A futures contract is a standardized agreement between two parties to buy or sell at a specific time in the future a specific quantity of a commodity at a specific price. The commodity may consist of an asset, a reference rate, or an index. A security futures contract relates to the sale of a specific quantity of shares of a single equity security or a narrow-based securities index. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying commodity. The buyer of a futures contract enters into an agreement to purchase the underlying commodity on the settlement date and is said to be “long” the contract. The seller of a futures contract enters into an agreement to sell the underlying commodity on the settlement date and is said to be “short” the contract. The price at which a futures contract is entered into is established either in the electronic marketplace or by open outcry on the floor of an exchange between exchange members acting as traders or brokers. Open futures contracts can be liquidated or closed out by physical delivery of the underlying commodity or payment of the cash settlement amount on the settlement date, depending on the terms of the particular contract. Some financial futures contracts (such as security futures) provide for physical settlement at maturity. Other financial futures contracts (such as those relating to interest rates, foreign currencies, and broad-based securities indexes) generally provide for cash settlement at maturity. In the case of cash-settled futures contracts, the cash settlement amount is equal to the difference between the final settlement price on the last trading day of the contract and the price at which the contract was entered into. Most futures contracts, however, are not held until maturity but instead are “offset” before the settlement date through the establishment of an opposite and equal futures position.

The purchaser or seller of a futures contract is not required to deliver or pay for the underlying commodity unless the contract is held until the settlement date. However, both the purchaser and seller are required to deposit “initial margin” with a futures commission merchant (FCM) when the futures contract is entered into. Initial margin deposits are typically calculated as a percentage of the contract’s market value. If the value of either party’s position declines, that party will be required to make additional “variation margin” payments to settle the change in value on a daily basis. This process is known as “marking-to-market.” A futures transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

An option on a futures contract (or futures option) conveys the right, but not the obligation, to purchase (in the case of a call option) or sell (in the case of a put option) a specific futures contract at a specific price (called the “exercise” or “strike” price) any time before the option expires. The seller of an option is called an option writer. The purchase price of an option is called the premium. The potential loss to an option buyer is limited to the amount of the premium plus transaction costs. This will be the case, for example, if the option is held and not exercised prior to its expiration date. Generally, an option writer sells options with the goal of obtaining the premium paid by the option buyer. If an option sold by an option writer expires without being exercised, the writer retains the full amount of the premium. The option writer, however, has unlimited economic risk because its potential loss, except to the extent offset by the premium received when the option was written, is equal to the amount the option is “in-the-money” at the expiration date. A call option is

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in-the-money if the value of the underlying futures contract exceeds the exercise price of the option. A put option is in-the-money if the exercise price of the option exceeds the value of the underlying futures contract. Generally, any profit realized by an option buyer represents a loss for the option writer.

A fund that takes the position of a writer of a futures option is required to deposit and maintain initial and variation margin with respect to the option, as previously described in the case of futures contracts. A futures option transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

The Fund intends to comply with Rule 4.5 under the Commodity Exchange Act (CEA), under which a mutual fund is conditionally excluded from the definition of the term Commodity Pool Operator (CPO). Accordingly, Vanguard is not subject to registration or regulation as a CPO with respect to the Fund under the CEA. The Fund will only enter into futures contracts and futures options that are traded on a U.S. or foreign exchange, board of trade, or similar entity or that are quoted on an automated quotation system.

Futures Contracts and Options on Futures Contracts—Risks. The risk of loss in trading futures contracts and in writing futures options can be substantial because of the low margin deposits required, the extremely high degree of leverage involved in futures and options pricing, and the potential high volatility of the futures markets. As a result, a relatively small price movement in a futures position may result in immediate and substantial loss (or gain) for the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract, and the writing of a futures option, may result in losses in excess of the amount invested in the position. In the event of adverse price movements, a fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if the fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements (and segregation requirements, if applicable) at a time when it may be disadvantageous to do so. In addition, on the settlement date, a fund may be required to make delivery of the instruments underlying the futures positions it holds.

A fund could suffer losses if it is unable to close out a futures contract or a futures option because of an illiquid secondary market. Futures contracts and futures options may be closed out only on an exchange that provides a secondary market for such products. However, there can be no assurance that a liquid secondary market will exist for any particular futures product at any specific time. Thus, it may not be possible to close a futures or option position. Moreover, most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. The inability to close futures and options positions also could have an adverse impact on the ability to hedge a portfolio investment or to establish a substitute for a portfolio investment.

U.S.	Treasury futures are generally not subject to such daily limits.
A	fund bears the risk that its advisor will incorrectly predict future market trends. If the advisor attempts to use a futures

contract or a futures option as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the futures position will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving futures products can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments.

A fund could lose margin payments it has deposited with its FCM if, for example, the FCM breaches its agreement with the fund or becomes insolvent or goes into bankruptcy. In that event, the fund may be entitled to return of

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margin owed to it only in proportion to the amount received by the FCM’s other customers, potentially resulting in losses to the fund.

Interfund Borrowing and Lending. The SEC has granted an exemption permitting registered open-end Vanguard funds to participate in Vanguard’s interfund lending program. This program allows the Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes. The program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the program unless it receives a more favorable interest rate than is typically available from a bank for a comparable transaction; (2) no equity, taxable bond, or money market fund may loan money if the loan would cause its aggregate outstanding loans through the program to exceed 5%, 7.5%, or 10%, respectively, of its net assets at the time of the loan; and (3) a fund’s interfund loans to any one fund shall not exceed 5% of the lending fund’s net assets. In addition, a Vanguard fund may participate in the program only if and to the extent that such participation is consistent with the fund’s investment objective and investment policies. The boards of trustees of the Vanguard funds are responsible for overseeing the interfund lending program. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.

Investing for Control. The Vanguard funds invest in securities and other instruments for the sole purpose of achieving a specific investment objective. As such, they do not seek to acquire enough of a company’s outstanding voting stock to have control over management decisions. The Vanguard funds do not invest for the purpose of controlling a company’s management.

Options. An option is a derivative. An option on a security (or index) is a contract that gives the holder of the option, in return for the payment of a “premium,” the right, but not the obligation, to buy from (in the case of a call option) or sell to (in the case of a put option) the writer of the option the security underlying the option (or the cash value of the index) at a specified exercise price prior to the expiration date of the option. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price (in the case of a call option) or to pay the exercise price upon delivery of the underlying security (in the case of a put option). The writer of an option on an index has the obligation upon exercise of the option to pay an amount equal to the cash value of the index minus the exercise price, multiplied by the specified multiplier for the index option. The multiplier for an index option determines the size of the investment position the option represents. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the terms of OTC options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. Although this type of arrangement allows the purchaser or writer greater flexibility to tailor an option to its needs, OTC options generally involve greater credit risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

The buyer (or holder) of an option is said to be “long” the option, while the seller (or writer) of an option is said to be “short” the option. A call option grants to the holder the right to buy (and obligates the writer to sell) the underlying security at the strike price. A put option grants to the holder the right to sell (and obligates the writer to buy) the underlying security at the strike price. The purchase price of an option is called the “premium.” The potential loss to an option buyer is limited to the amount of the premium plus transaction costs. This will be the case if the option is held and not exercised prior to its expiration date. Generally, an option writer sells options with the goal of obtaining the premium paid by the option buyer, but that person could also seek to profit from an anticipated rise or decline in option prices. If an option sold by an option writer expires without being exercised, the writer retains the full amount of the premium. The option writer, however, has unlimited economic risk because its potential loss, except to the extent offset by the premium received when the option was written, is equal to the amount the option is “in-the-money” at the expiration date. A call option is in-the-money if the value of the underlying position exceeds the exercise price of the option. A put option is in-the-money if the exercise price of the option exceeds the value of the underlying position. Generally, any profit realized by an option buyer represents a loss for the option writer. The writing of an option will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

If a trading market in particular options were to become unavailable, investors in those options (such as the funds) would be unable to close out their positions until trading resumes, and they may be faced with substantial losses if the value of

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the underlying instrument moves adversely during that time. Even if the market were to remain available, there may be times when options prices will not maintain their customary or anticipated relationships to the prices of the underlying instruments and related instruments. Lack of investor interest, changes in volatility, or other factors or conditions might adversely affect the liquidity, efficiency, continuity, or even the orderliness of the market for particular options.

A fund bears the risk that its advisor will not accurately predict future market trends. If the advisor attempts to use an option as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the option will have or will develop imperfect or no correlation with the portfolio investment, which could cause substantial losses for the fund. Although hedging strategies involving options can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.

Other Investment Companies. A fund may invest in other investment companies to the extent permitted by applicable law or SEC exemption. Under Section 12(d)(1) of the 1940 Act, a fund generally may invest up to 10% of its assets in shares of investment companies and up to 5% of its assets in any one investment company, as long as no investment represents more than 3% of the voting stock of an acquired investment company. In addition, no funds for which Vanguard acts as an advisor may, in the aggregate, own more than 10% of the voting stock of a closed-end investment company. The 1940 Act and related rules provide certain exemptions from these restrictions. If a fund invests in other investment companies, shareholders will bear not only their proportionate share of the fund’s expenses (including operating expenses and the fees of the advisor), but they also may indirectly bear the similar expenses of the underlying investment companies. Certain investment companies, such as business development companies (BDCs), are more akin to operating companies and, as such, their expenses are not direct expenses paid by fund shareholders and are not used to calculate the fund’s net asset value. SEC rules nevertheless require that any expenses incurred by a BDC be included in a fund’s expense ratio as “Acquired Fund Fees and Expenses.” The expense ratio of a fund that holds a BDC will thus overstate what the fund actually spends on portfolio management, administrative services, and other shareholder services by an amount equal to these Acquired Fund Fees and Expenses. The Acquired Fund Fees and Expenses are not included in a fund’s financial statements, which provide a clearer picture of a fund’s actual operating expenses. Shareholders would also be exposed to the risks associated not only with the investments of the fund but also with the portfolio investments of the underlying investment companies. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that typically trade on a stock exchange or over-the-counter at a premium or discount to their net asset value. Others are continuously offered at net asset value but also may be traded on the secondary market.

Preferred Stock. Preferred stock represents an equity or ownership interest in an issuer. Preferred stock normally pays dividends at a specified rate and has precedence over common stock in the event the issuer is liquidated or declares bankruptcy. However, in the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over the claims of those who own preferred and common stock. Preferred stock, unlike common stock, often has a stated dividend rate payable from the corporation’s earnings. Preferred stock dividends may be cumulative or noncumulative, participating, or auction rate. “Cumulative” dividend provisions require all or a portion of prior unpaid dividends to be paid before dividends can be paid to the issuer’s common stock. “Participating” preferred stock may be entitled to a dividend exceeding the stated dividend in certain cases. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of such stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as provisions allowing the stock to be called or redeemed, which can limit the benefit of a decline in interest rates. Preferred stock is subject to many of the risks to which common stock and debt securities are subject. In addition, preferred stock may be subject to more abrupt or erratic price movements than common stock or debt securities because preferred stock may trade with less frequency and in more limited volume.

Repurchase Agreements. A repurchase agreement is an agreement under which a fund acquires a fixed income security (generally a security issued by the U.S. government or an agency thereof, a banker’s acceptance, or a certificate of deposit) from a commercial bank, a broker, or a dealer and simultaneously agrees to resell such security to the seller at an agreed-upon price and date (normally, the next business day). Because the security purchased constitutes collateral for the repurchase obligation, a repurchase agreement may be considered a loan that is collateralized by the security purchased. The resale price reflects an agreed-upon interest rate effective for the period the instrument is held by a fund and is unrelated to the interest rate on the underlying instrument. In these transactions, the securities acquired by a fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement

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and be held by a custodian bank until repurchased. In addition, the investment advisor will monitor a fund’s repurchase agreement transactions generally and will evaluate the creditworthiness of any bank, broker, or dealer party to a repurchase agreement relating to a fund. The aggregate amount of any such agreements is not limited, except to the extent required by law.

The use of repurchase agreements involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under the bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the bankruptcy or other laws, a court may determine that the underlying security is collateral for a loan by the fund not within its control, and therefore the realization by the fund on such collateral may be automatically stayed. Finally, it is possible that the fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement.

Restricted and Illiquid Securities. Illiquid securities are securities that cannot be sold or disposed of in the ordinary course of business within seven business days at approximately the value at which they are being carried on a fund’s books. The SEC generally limits aggregate holdings of illiquid securities by a mutual fund to 15% of its net assets (5% for money market funds). A fund may experience difficulty valuing and selling illiquid securities and, in some cases, may be unable to value or sell certain illiquid securities for an indefinite period of time. Illiquid securities may include a wide variety of investments, such as (1) repurchase agreements maturing in more than seven days (unless the agreements have demand/redemption features), (2) OTC options contracts and certain other derivatives (including certain swap agreements), (3) fixed time deposits that are not subject to prepayment or do not provide for withdrawal penalties upon prepayment (other than overnight deposits), (4) loan interests and other direct debt instruments, (5) certain municipal lease obligations, (6) commercial paper issued pursuant to Section 4(2) of the 1933 Act, and (7) securities whose disposition is restricted under the federal securities laws. Illiquid securities include restricted, privately placed securities that, under the federal securities laws, generally may be resold only to qualified institutional buyers. If a substantial market develops for a restricted security held by a fund, it may be treated as a liquid security, in accordance with procedures and guidelines approved by the board of trustees. This generally includes securities that are unregistered, that can be sold to qualified institutional buyers in accordance with Rule 144A under the 1933 Act, or that are exempt from registration under the 1933 Act, such as commercial paper. Although a fund’s advisor monitors the liquidity of restricted securities, the board of trustees oversees and retains ultimate responsibility for the advisor’s liquidity determinations. Several factors that the trustees consider in monitoring these decisions include the valuation of a security; the availability of qualified institutional buyers, brokers, and dealers that trade in the security; and the availability of information about the security’s issuer.

Reverse Repurchase Agreements. In a reverse repurchase agreement, a fund sells a security to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase that security at an agreed-upon price and time. Under a reverse repurchase agreement, the fund continues to receive any principal and interest payments on the underlying security during the term of the agreement. Reverse repurchase agreements involve the risk that the market value of securities retained by the fund may decline below the repurchase price of the securities sold by the fund that it is obligated to repurchase. A reverse repurchase agreement may be considered a borrowing transaction for purposes of the 1940 Act. A reverse repurchase agreement transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.” A fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been reviewed and found satisfactory by the advisor. If the buyer in a reverse repurchase agreement becomes insolvent or files for bankruptcy, a fund’s use of proceeds from the sale may be restricted while the other party or its trustee or receiver determines if it will honor the fund’s right to repurchase the securities. If the fund is unable to recover the securities it sold in a reverse repurchase agreement, it would realize a loss equal to the difference between the value of the securities and the payment it received for them.

Securities Lending. A fund may lend its investment securities to qualified institutional investors (typically brokers, dealers, banks, or other financial institutions) who may need to borrow securities in order to complete certain transactions, such as covering short sales, avoiding failures to deliver securities, or completing arbitrage operations. By lending its investment securities, a fund attempts to increase its net investment income through the receipt of interest

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on the securities lent. Any gain or loss in the market price of the securities lent that might occur during the term of the loan would be for the account of the fund. If the borrower defaults on its obligation to return the securities lent because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities lent or in gaining access to the collateral. These delays and costs could be greater for foreign securities. If a fund is not able to recover the securities lent, a fund may sell the collateral and purchase a replacement investment in the market. The value of the collateral could decrease below the value of the replacement investment by the time the replacement investment is purchased. Cash received as collateral through loan transactions may be invested in other eligible securities. Investing this cash subjects that investment to market appreciation or depreciation. Currently, Vanguard funds that lend securities invest the cash collateral received in one or more Vanguard CMT Funds, which are very low-cost money market funds.

The terms and the structure of the loan arrangements, as well as the aggregate amount of securities loans, must be consistent with the 1940 Act and the rules or interpretations of the SEC thereunder. These provisions limit the amount of securities a fund may lend to 33 1/3% of the fund’s total assets and require that (1) the borrower pledge and maintain with the fund collateral consisting of cash, an irrevocable letter of credit, or securities issued or guaranteed by the U.S. government having at all times not less than 100% of the value of the securities lent; (2) the borrower add to such collateral whenever the price of the securities lent rises (i.e., the borrower “marks to market” on a daily basis); (3) the loan be made subject to termination by the fund at any time; and (4) the fund receives reasonable interest on the loan (which may include the fund’s investing any cash collateral in interest-bearing short-term investments), any distribution on the lent securities, and any increase in their market value. Loan arrangements made by each fund will comply with all other applicable regulatory requirements, including the rules of the New York Stock Exchange, which presently require the borrower, after notice, to redeliver the securities within the normal settlement time of three business days. The advisor will consider the creditworthiness of the borrower, among other things, in making decisions with respect to the lending of securities, subject to oversight by the board of trustees. At the present time, the SEC does not object if an investment company pays reasonable negotiated fees in connection with lent securities, so long as such fees are set forth in a written contract and approved by the investment company’s trustees. In addition, voting rights pass with the lent securities, but if a fund has knowledge that a material event will occur affecting securities on loan, and in respect to which the holder of the securities will be entitled to vote or consent, the lender must be entitled to call the loaned securities in time to vote or consent. A fund bears the risk that there may be a delay in the return of the securities, which may impair the fund’s ability to vote on such a matter.

Pursuant to Vanguard’s securities lending policy, Vanguard’s fixed income and money market funds are not permitted to, and do not, lend their investment securities.

Swap Agreements. A swap agreement, which is a type of derivative, is an agreement between two parties (counterparties) to exchange payments at specified dates (periodic payment dates) on the basis of a specified amount (notional amount) with the payments calculated with reference to a specified asset, reference rate, or index.

Examples of swap agreements include, but are not limited to, interest rate swaps, credit default swaps, equity swaps, commodity swaps, foreign currency swaps, index swaps, excess return swaps, and total return swaps. Most swap agreements provide that when the periodic payment dates for both parties are the same, payments are netted, and only the net amount is paid to the counterparty entitled to receive the net payment. Consequently, a fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each counterparty. Swap agreements allow for a wide variety of transactions. For example, fixed rate payments may be exchanged for floating rate payments; U.S. dollar-denominated payments may be exchanged for payments denominated in a different currency; and payments tied to the price of one asset, reference rate, or index may be exchanged for payments tied to the price of another asset, reference rate, or index.

An option on a swap agreement, also called a “swaption,” is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium.” A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.

The use of swap agreements by a fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning

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different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions.

Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. If a swap transaction is particularly large or if the relevant market is illiquid (as is the case with many OTC swaps), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. In addition, swap transactions may be subject to a fund’s limitation on investments in illiquid securities.

Swap agreements may be subject to pricing risk, which exists when a particular swap becomes extraordinarily expensive or inexpensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity or to realize the intrinsic value of the swap agreement.

Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment. A leveraged swap transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

Like most other investments, swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a fund’s interest. A fund bears the risk that its advisor will not accurately forecast future market trends or the values of assets, reference rates, indexes, or other economic factors in establishing swap positions for the fund. If the advisor attempts to use a swap as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the swap will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many swaps, OTC swaps in particular, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.

The use of a swap agreement also involves the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the counterparty or the failure of the counterparty to make required payments or otherwise comply with the terms of the agreement. Additionally, the use of credit default swaps can result in losses if a fund’s advisor does not correctly evaluate the creditworthiness of the issuer on which the credit swap is based.

The market for swaps and swaptions is a relatively new market. It is possible that developments in the market could adversely affect a fund, including its ability to terminate existing swap agreements or to realize amounts to be received under such agreements. As previously noted under the heading “Derivatives,” under the Dodd-Frank Act, certain swaps that may be used by a fund may be cleared through a clearinghouse and traded on an exchange or swap execution facility.

Tax Matters—Federal Tax Discussion. Discussion herein of U.S. federal income tax matters summarizes some of the important, generally applicable U.S. federal tax considerations relevant to investment in a fund based on the IRC, U.S. Treasury regulations, and other applicable authority. These authorities are subject to change by legislative, administrative, or judicial action, possibly with retroactive effect. A shareholder should consult his or her tax professional for information regarding the particular situation and the possible application of U.S. federal, state, local, foreign, and other taxes.

Tax Matters—Federal Tax Treatment of Derivatives, Hedging, and Related Transactions. A fund’s transactions in derivative instruments (including, but not limited to, options, futures, forward contracts, and swap agreements), as well as any of the fund’s hedging, short sale, securities loan, or similar transactions, may be subject to one or more special tax rules that affect the treatment of gains or losses recognized by the fund as ordinary or capital. These transactions may also accelerate the recognition of income or gains to the fund, defer losses to the fund, and cause adjustments in the holding period of the fund’s securities.

In order for a fund to continue to qualify for federal income tax treatment as a regulated investment company, at least 90% of its gross income for a taxable year must be derived from qualifying income—i.e., dividends, interest, income derived from securities loans, gains from the sale of securities or foreign currencies, or other income derived with

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respect to the fund’s business of investing in securities or currencies. The funds generally expect that any net gain from options, futures, and forward contracts will be treated as qualifying income.

Tax Matters—Federal Tax Treatment of Futures Contracts. For federal income tax purposes, a fund generally must recognize, as of the end of each taxable year, any net unrealized gains and losses on certain futures contracts, as well as any gains and losses actually realized during the year. In these cases, any gain or loss recognized with respect to a futures contract is considered to be 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to the holding period of the contract. Gains and losses on certain other futures contracts (primarily non-U.S. futures contracts) are not recognized until the contracts are closed and are treated as long-term or short-term, depending on the holding period of the contract. Sales of futures contracts that are intended to hedge against a change in the value of securities held by a fund may affect the holding period of such securities and, consequently, the nature of the gain or loss on such securities upon disposition. A fund may be required to defer the recognition of losses on one position, such as futures contracts, to the extent of any unrecognized gains on a related offsetting position held by the fund.

A fund will distribute to shareholders annually any net capital gains that have been recognized for federal income tax purposes on futures transactions. Such distributions will be combined with distributions of capital gains realized on the fund’s other investments and shareholders will be advised on the nature of the distributions.

Tax Matters—Federal Tax Treatment of Non-U.S. Currency Transactions. Special rules govern the federal income tax treatment of certain transactions denominated in a currency other than the U.S. dollar, determined by reference to the value of one or more currencies other than the U.S. dollar and the disposition of a currency other than the U.S. dollar by a taxpayer whose functional currency is the U.S. dollar. However, foreign-currency-related regulated futures contracts and non-equity options are generally not subject to the special currency rules if they are or would be treated as sold for their fair market value at year-end under the marking-to-market rules applicable to other futures contracts unless an election is made to have such currency rules apply. With respect to transactions covered by the special rules, foreign currency gain or loss is calculated separately from any gain or loss on the underlying transaction and is normally taxable as ordinary income or loss. A taxpayer may elect to treat, as capital gain or loss, foreign currency gain or loss arising from certain identified forward contracts, futures contracts, and options that are capital assets in the hands of the taxpayer and that are not part of a straddle. The U.S. Treasury issued regulations under which certain transactions subject to the special currency rules that are part of a “section 988 hedging transaction” (as defined in the IRC and the U.S. Treasury regulations) will be integrated and treated as a single transaction or otherwise treated consistently for purposes of the IRC. Certain currency transactions may qualify as part of a “section 1221 hedging transaction,” which also has the effect of treating their components consistently. Any gain or loss attributable to the foreign currency component of a transaction engaged in by a fund that is not subject to the special currency rules (such as foreign equity investments other than certain preferred stocks) will be treated as a capital gain or loss and will not be segregated from the gain or loss on the underlying transaction. It is anticipated that some of the non-U.S. dollar-denominated investments and foreign currency contracts a fund may make or enter into will be subject to special currency rules described within this policy.

To the extent a fund engages in non-U.S. currency hedging, the fund may elect or be required to apply other rules that could affect the character and timing of the fund’s gains and losses. For more information, see “Tax Matters—Federal Tax Treatment of Derivatives, Hedging, and Related Transactions.”

Tax Matters—Foreign Tax Credit. Foreign governments may withhold taxes on dividends and interest paid with respect to foreign securities held by a fund. Foreign governments may also impose taxes on other payments or gains with respect to foreign securities. If, at the close of its fiscal year, more than 50% of a fund’s total assets are invested in securities of foreign issuers, the fund may elect to pass through to shareholders the ability to deduct or, if they meet certain holding period requirements, take a credit for foreign taxes paid by the fund. Similarly, if at the close of each quarter of a fund’s taxable year, at least 50% of its total assets consist of interests in other regulated investment companies, the fund is permitted to elect to pass through to its shareholders the foreign income taxes paid by the fund in connection with foreign securities held directly by the fund or held by a regulated investment company in which the fund invests that has elected to pass through such taxes to shareholders.

Tax Matters—Real Estate Mortgage Investment Conduits. If a fund invests directly or indirectly, including through a REIT or other pass-through entity, in residual interests in real estate mortgage investment conduits (REMICs) or equity interests in taxable mortgage pools (TMPs), a portion of the fund’s income that is attributable to a residual interest in a REMIC or an equity interest in a TMP (such portion referred to in the IRC as an “excess inclusion”) will be subject to U.S. federal income tax in all events—including potentially at the fund level—under a notice issued by the IRS in October 2006 and U.S. Treasury regulations that have yet to be issued but may apply retroactively. This notice also provides, and

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the regulations are expected to provide, that excess inclusion income of a registered investment company will be allocated to shareholders of the registered investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related interest directly. As a result, a fund investing in such interests may not be a suitable investment for charitable remainder trusts, as noted below. In general, excess inclusion income allocated to shareholders (1) cannot be offset by net operation losses (subject to a limited exception for certain thrift institutions); (2) will constitute unrelated business taxable income (UBTI) to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan, or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that otherwise might not be required to file a tax return and pay tax on such income; and (3) in the case of a non-U.S. investor, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. As a result, a fund investing in such interests may not be suitable for charitable remainder trusts. See “Tax Matters—Tax-Exempt Investors.”

Tax Matters—Tax Considerations for Non-U.S. Investors. U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments made by non-U.S. investors in Vanguard funds.

Tax Matters—Tax-Exempt Investors. Income of a fund that would be UBTI if earned directly by a tax-exempt entity will not generally be attributed as UBTI to a tax-exempt shareholder of the fund. Notwithstanding this “blocking” effect, a tax-exempt shareholder could realize UBTI by virtue of its investment in a fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of IRC Section 514(b).

A tax-exempt shareholder may also recognize UBTI if a fund recognizes “excess inclusion income” derived from direct or indirect investments in residual interests in REMICs or equity interests in TMPs. See “Tax Matters—Real Estate Mortgage Investment Conduits.”

In addition, special tax consequences apply to charitable remainder trusts that invest in a fund that invests directly or indirectly in residual interests in REMICs or equity interests in TMPs. Charitable remainder trusts and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in a fund.

Warrants. Warrants are instruments that give the holder the right, but not the obligation, to buy an equity security at a specific price for a specific period of time. Changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These factors can make warrants more speculative than other types of investments.

When-Issued, Delayed-Delivery, and Forward-Commitment Transactions. When-issued, delayed-delivery, and forward-commitment transactions involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Typically, no interest accrues to the purchaser until the security is delivered. When purchasing securities pursuant to one of these transactions, payment for the securities is not required until the delivery date. However, the purchaser assumes the rights and risks of ownership, including the risks of price and yield fluctuations and the risk that the security will not be issued as anticipated. When a fund has sold a security pursuant to one of these transactions, the fund does not participate in further gains or losses with respect to the security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, the fund could miss a favorable price or yield opportunity or suffer a loss. A fund may renegotiate a when-issued or forward-commitment transaction and may sell the underlying securities before delivery, which may result in capital gains or losses for the fund. When-issued, delayed-delivery, and forward-commitment transactions will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by the fund, if the fund covers the transaction in accordance with the requirements described under the heading “Borrowing.”

Regulatory restrictions in India. Shares of Vanguard Explorer Fund have not been, and will not be, registered under the laws of India and are not intended to benefit from any laws in India promulgated for the protection of shareholders. Due to regulatory requirements in India, shares of the Fund shall not be knowingly offered to (directly or indirectly) or sold or delivered to (within India); transferred to or purchased by; or held for, on the account of, or for the benefit of (i) a “person resident in India” (as defined in the Foreign Exchange Management Act, 1999), (ii) a “non-resident Indian,” an “overseas

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corporate body,” or a “person of Indian origin,” (as each such term is defined in the Foreign Exchange Management (Deposit) Regulations, 2000), or (iii) any other entity or person disqualified or otherwise prohibited from accessing the Indian securities market under applicable laws, as may be amended from time to time. Each investor, prior to purchasing shares of the Fund, must satisfy itself regarding compliance with these requirements.

SHARE PRICE

Multiple-class funds do not have a single share price. Rather, each class has a share price, called its net asset value, or NAV, that is calculated each business day as of the close of regular trading on the New York Stock Exchange (the Exchange), generally 4 p.m., Eastern time. NAV per share is computed by dividing the total assets, minus liabilities, allocated to each share class by the number of Fund shares outstanding for that class. On U.S. holidays or other days when the Exchange is closed, the NAV is not calculated, and the Fund does not sell or redeem shares. However, on those days the value of the Fund’s assets may be affected to the extent that the Fund holds foreign securities that trade on foreign markets that are open.

The Exchange typically observes the following holidays: New Year’s Day; Martin Luther King, Jr., Day; Presidents’ Day (Washington’s Birthday); Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. Although the Fund expects the same holidays to be observed in the future, the Exchange may modify its holiday schedule or hours of operation at any time.

PURCHASE AND REDEMPTION OF SHARES

Purchase of Shares

The purchase price of shares of the Fund is the NAV per share next determined after the purchase request is received in good order, as defined in the Fund’s prospectus.

Exchange of Securities for Shares of the Fund. Shares of the Fund may be purchased “in kind” (i.e., in exchange for securities, rather than for cash) at the discretion of the Fund’s portfolio manager. Such securities must not be restricted as to transfer and must have a value that is readily ascertainable. Securities accepted by the Fund will be valued, as set forth in the Fund’s prospectus, as of the time of the next determination of NAV after such acceptance. All dividend, subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of the Fund and must be delivered to the Fund by the investor upon receipt from the issuer. A gain or loss for federal income tax purposes, depending upon the cost of the securities tendered, would be realized by the investor upon the exchange. Investors interested in purchasing fund shares in kind should contact Vanguard.

Redemption of Shares

The redemption price of shares of the Fund is the NAV per share next determined after the redemption request is received in good order, as defined in the Fund’s prospectus.

The Fund may suspend redemption privileges or postpone the date of payment for redeemed shares (1) during any period that the Exchange is closed or trading on the Exchange is restricted as determined by the SEC; (2) during any period when an emergency exists, as defined by the SEC, as a result of which it is not reasonably practicable for the Fund to dispose of securities it owns or to fairly determine the value of its assets; or (3) for such other periods as the SEC may permit.

The Trust has filed a notice of election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such period.

If Vanguard determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly or partly in cash, the Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities held by the Fund in lieu of cash in conformity with applicable rules of the SEC. Investors may incur brokerage charges on the sale of such securities received in payment of redemptions.

The Fund does not charge a redemption fee. Shares redeemed may be worth more or less than what was paid for them, depending on the market value of the securities held by the Fund.

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Right to Change Policies

Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time; (2) accept initial purchases by telephone; (3) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners, or if Vanguard reasonably believes a fraudulent transaction may occur or has occurred; (4) temporarily freeze any account and/or suspend account services upon initial notification to Vanguard of the death of the shareholder until Vanguard receives required documentation in good order; (5) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fees charged to a group of shareholders; and (6) redeem an account or suspend account privileges, without the owner’s permission to do so, in cases of threatening conduct or activity Vanguard believes to be suspicious, fraudulent, or illegal. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard reasonably believes they are deemed to be in the best interest of a fund.

Investing With Vanguard Through Other Firms

The Fund has authorized certain agents to accept on its behalf purchase and redemption orders, and those agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund’s behalf (collectively, Authorized Agents). The Fund will be deemed to have received a purchase or redemption order when an Authorized Agent accepts the order in accordance with the Fund’s instructions. In most instances, a customer order that is properly transmitted to an Authorized Agent will be priced at the NAV per share next determined after the order is received by the Authorized Agent.

MANAGEMENT OF THE FUND

Vanguard

The Fund is part of the Vanguard group of investment companies, which consists of more than 170 funds. Through their jointly owned subsidiary, Vanguard, the funds obtain at cost virtually all of their corporate management, administrative, and distribution services. Vanguard also provides investment advisory services on an at-cost basis to several of the Vanguard funds.

Vanguard employs a supporting staff of management and administrative personnel needed to provide the requisite services to the funds and also furnishes the funds with necessary office space, furnishings, and equipment. Each fund pays its share of Vanguard’s total expenses, which are allocated among the funds under methods approved by the board of trustees of each fund. In addition, each fund bears its own direct expenses, such as legal, auditing, and custodial fees.

The funds’ officers are also officers and employees of Vanguard.

Vanguard, Vanguard Marketing Corporation (VMC), the funds, and the funds’ advisors have adopted codes of ethics designed to prevent employees who may have access to nonpublic information about the trading activities of the funds (access persons) from profiting from that information. The codes of ethics permit access persons to invest in securities for their own accounts, including securities that may be held by a fund, but place substantive and procedural restrictions on the trading activities of access persons. For example, the codes of ethics require that access persons receive advance approval for most securities trades to ensure that there is no conflict with the trading activities of the funds.

Vanguard was established and operates under an Amended and Restated Funds’ Service Agreement. The Amended and Restated Funds’ Service Agreement provides that each Vanguard fund may be called upon to invest up to 0.40% of its current net assets in Vanguard. The amounts that each fund has invested are adjusted from time to time in order to maintain the proportionate relationship between each fund’s relative net assets and its contribution to Vanguard’s capital.

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As of October 31, 2013, the Fund had contributed capital to Vanguard as follows:


	Capital	Percentage of	Percent of
	Contribution	Fund’s Average	Vanguard’s
Vanguard Fund	to Vanguard	Net Assets	Capitalization
Explorer Fund	$1,374,000	0.01%	0.55%

Management. Corporate management and administrative services include (1) executive staff, (2) accounting and financial, (3) legal and regulatory, (4) shareholder account maintenance, (5) monitoring and control of custodian relationships, (6) shareholder reporting, and (7) review and evaluation of advisory and other services provided to the funds by third parties.

Distribution. Vanguard Marketing Corporation, 400 Devon Park Drive A39, Wayne, PA 19087, a wholly owned subsidiary of Vanguard, is the principal underwriter for the funds and in that capacity performs and finances marketing, promotional, and distribution activities (collectively, marketing and distribution activities) that are primarily intended to result in the sale of the funds’ shares. VMC offers shares of each fund for sale on a continuous basis and will use all reasonable efforts in connection with the distribution of shares of the funds. VMC performs marketing and distribution activities at cost in accordance with the conditions of a 1981 SEC exemptive order that permits the Vanguard funds to internalize and jointly finance the marketing, promotion, and distribution of their shares. The funds’ trustees review and approve the marketing and distribution expenses incurred by the funds, including the nature and cost of the activities and the desirability of each fund’s continued participation in the joint arrangement.

To ensure that each fund’s participation in the joint arrangement falls within a reasonable range of fairness, each fund contributes to VMC’s marketing and distribution expenses in accordance with an SEC-approved formula. Under that formula, one half of the marketing and distribution expenses are allocated among the funds based upon their relative net assets. The remaining half of those expenses are allocated among the funds based upon each fund’s sales for the preceding 24 months relative to the total sales of the funds as a group, provided, however, that no fund’s aggregate quarterly rate of contribution for marketing and distribution expenses shall exceed 125% of the average marketing and distribution expense rate for Vanguard and that no fund shall incur annual marketing and distribution expenses in excess of 0.20% of its average month-end net assets. Each fund’s contribution to these marketing and distribution expenses helps to maintain and enhance the attractiveness and viability of the Vanguard complex as a whole, which benefits all of the funds and their shareholders.

VMC’s principal marketing and distribution expenses are for advertising, promotional materials, and marketing personnel.

Other marketing and distribution activities that VMC undertakes on behalf of the funds may include, but are not limited to:

Conducting or publishing Vanguard-generated research and analysis concerning the funds, other investments, the financial markets, or the economy.
Providing views, opinions, advice, or commentary concerning the funds, other investments, the financial markets, or the economy.
Providing analytical, statistical, performance, or other information concerning the funds, other investments, the financial markets, or the economy.
Providing administrative services in connection with investments in the funds or other investments, including, but not limited to, shareholder services, recordkeeping services, and educational services.
Providing products or services that assist investors or financial service providers (as defined below) in the investment decision-making process.
Providing promotional discounts, commission-free trading, fee waivers, and other benefits to clients of Vanguard Brokerage Services^®who maintain qualifying investments in the funds.
Sponsoring, jointly sponsoring, financially supporting, or participating in conferences, programs, seminars, presentations, meetings, or other events involving fund shareholders, financial service providers, or others concerning the funds, other investments, the financial markets, or the economy, such as industry conferences, prospecting trips, due diligence visits, training or education meetings, and sales presentations.

VMC performs most marketing and distribution activities itself. Some activities may be conducted by third parties pursuant to shared marketing arrangements under which VMC agrees to share the costs and performance of marketing and distribution activities in concert with a financial service provider. Financial service providers include, but are not

B-22

limited to, investment advisors, broker-dealers, financial planners, financial consultants, banks, and insurance companies. Under these cost- and performance-sharing arrangements, VMC may pay or reimburse a financial service provider (or a third party it retains) for marketing and distribution activities that VMC would otherwise perform. VMC’s cost- and performance-sharing arrangements may be established in connection with Vanguard investment products or services offered or provided to or through the financial service providers. VMC’s arrangements for shared marketing and distribution activities may vary among financial service providers, and its payments or reimbursements to financial service providers in connection with shared marketing and distribution activities may be significant. VMC participates in an offshore arrangement established with a third party to provide marketing, promotional, and other services to qualifying Vanguard funds that are distributed in certain foreign countries on a private-placement basis to government-sponsored and other institutional investors. In exchange for such services, the third party receives an annual base (fixed) fee and may also receive discretionary fees or performance adjustments.

In connection with its marketing and distribution activities, VMC may give financial service providers (or their representatives) (1) promotional items of nominal value that display Vanguard’s logo, such as golf balls, shirts, towels, pens, and mouse pads; (2) gifts that do not exceed $100 per person annually and are not preconditioned on achievement of a sales target; (3) an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment that is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target; and (4) reasonable travel and lodging accommodations to facilitate participation in marketing and distribution activities.

VMC, as a matter of policy, does not pay asset-based fees, sales-based fees, or account-based fees to financial service providers in connection with its marketing and distribution activities for the Vanguard funds. VMC policy also prohibits marketing and distribution activities that are intended, designed, or likely to compromise suitability determinations by, or the fulfillment of any fiduciary duties or other obligations that apply to, financial service providers. Nonetheless, VMC’s marketing and distribution activities are primarily intended to result in the sale of the funds’ shares, and as such, its activities, including shared marketing and distribution activities, may influence participating financial service providers (or their representatives) to recommend, promote, include, or invest in a Vanguard fund or share class. In addition, Vanguard or any of its subsidiaries may retain a financial service provider to provide consulting or other services, and that financial service provider also may provide services to investors. Investors should consider the possibility that any of these activities or relationships may influence a financial service provider’s (or its representatives’) decision to recommend, promote, include, or invest in a Vanguard fund or share class. Each financial service provider should consider its suitability determinations, fiduciary duties, and other legal obligations (or those of its representatives) in connection with any decision to consider, recommend, promote, include, or invest in a Vanguard fund or share class.

The following table describes the expenses of Vanguard and VMC that are incurred by the Fund on an at-cost basis. Amounts captioned “Management and Administrative Expenses” include a fund‘s allocated share of expenses associated with the management, administrative, and transfer agency services Vanguard provides to the funds. Amounts captioned “Marketing and Distribution Expenses” include a fund‘s allocated share of expenses associated with the marketing and distribution activities that VMC conducts on behalf of the Vanguard funds.

As is the case with all mutual funds, transaction costs incurred by the Fund for buying and selling securities are not reflected in the table. Annual Shared Fund Operating Expenses are based on expenses incurred in the fiscal years ended October 31, 2011, 2012, and 2013, and are presented as a percentage of the Fund‘s average month-end net assets.


Annual Shared Fund Operating Expenses
(Shared Expenses Deducted From Fund Assets)
Vanguard Fund	2011	2012	2013
Explorer Fund
Management and Administrative Expenses	0.21%	0.21%	0.20%
Marketing and Distribution Expenses	0.02	0.02	0.02

The Fund’s investment advisors may direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the Fund part of the commissions generated. Such rebates are used solely to reduce the Fund‘s management and administrative expenses and are not reflected in these totals.

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Officers and Trustees

Each Vanguard fund is governed by the board of trustees of its trust and a single set of officers. Consistent with the board’s corporate governance principles, the trustees believe that their primary responsibility is oversight of the management of each fund for the benefit of its shareholders, not day-to-day management. The trustees set broad policies for the funds; select investment advisors; monitor fund operations, regulatory compliance, performance, and costs; nominate and select new trustees; and elect fund officers. Vanguard manages the day-to-day operations of the funds under the direction of the board of trustees.

The trustees play an active role, as a full board and at the committee level, in overseeing risk management for the funds. The trustees delegate the day-to-day risk management of the funds to various groups, including portfolio review, investment management, risk management, compliance, legal, fund accounting, and fund financial services. These groups provide the trustees with regular reports regarding investment, valuation, liquidity, and compliance, as well as the risks associated with each. The trustees also oversee risk management for the funds through regular interactions with the funds’ internal and external auditors.

The full board participates in the funds’ risk oversight, in part, through the Vanguard funds’ compliance program, which covers the following broad areas of compliance: investment and other operations; recordkeeping; valuation and pricing; communications and disclosure; reporting and accounting; oversight of service providers; fund governance; and codes of ethics, insider trading controls, and protection of nonpublic information. The program seeks to identify and assess risk through various methods, including through regular interdisciplinary communications between compliance professionals and business personnel who participate on a daily basis in risk management on behalf of the funds. The funds’ chief compliance officer regularly provides reports to the board in writing and in person.

The audit committee of the board, which is composed of all independent trustees, oversees management of financial risks and controls. The audit committee serves as the channel of communication between the independent auditors of the funds and the board with respect to financial statements and financial-reporting processes, systems of internal control, and the audit process. The head of internal audit reports directly to the audit committee and provides reports to the committee in writing and in person on a regular basis. Although the audit committee is responsible for overseeing the management of financial risks, the entire board is regularly informed of these risks through committee reports.

All of the trustees bring to each fund’s board a wealth of executive leadership experience derived from their service as executives (in many cases chief executive officers), board members, and leaders of diverse public operating companies, academic institutions, and other organizations. In determining whether an individual is qualified to serve as a trustee of the funds, the board considers a wide variety of information about the trustee, and multiple factors contribute to the board’s decision. Each trustee is determined to have the experience, skills, and attributes necessary to serve the funds and their shareholders because each trustee demonstrates an exceptional ability to consider complex business and financial matters, evaluate the relative importance and priority of issues, make decisions, and contribute effectively to the deliberations of the board. The board also considers the individual experience of each trustee and determines that the trustee’s professional experience, education, and background contribute to the diversity of perspectives on the board. The business acumen, experience, and objective thinking of the trustees are considered invaluable assets for Vanguard management and, ultimately, the Vanguard funds’ shareholders. The specific roles and experience of each board member that factor into this determination are presented on the following pages. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482.

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			Principal Occupation(s)	Number of
		Vanguard	and Outside Directorships	Vanguard Funds
	Position(s)	Funds’ Trustee/	During the Past Five Years	Overseen by
Name, Year of Birth	Held With Fund	Officer Since	and Other Experience	Trustee/Officer
Interested Trustee¹
F. William McNabb III	Chairman of the	July 2009	Mr. McNabb has served as Chairman of the Board of	179
(1957)	Board, Chief		Vanguard and of each of the investment companies
	Executive Officer,		served by Vanguard, since January 2010; Trustee of
	and President		each of the investment companies served by
			Vanguard, since 2009; Director of Vanguard since
			2008; and Chief Executive Officer and President of
			Vanguard and of each of the investment companies
			served by Vanguard, since 2008. Mr. McNabb also
			serves as a Director of Vanguard Marketing
			Corporation. Mr. McNabb served as a Managing
			Director of Vanguard from 1995 to 2008.

1 Mr. McNabb is considered an “interested person,” as defined in the 1940 Act, because he is an officer of the Trust.


Independent Trustees
Emerson U. Fullwood	Trustee	January 2008	Mr. Fullwood is the former Executive Chief Staff and	179
(1948)			Marketing Officer for North America and Corporate
			Vice President (retired 2008) of Xerox Corporation
			(document management products and services).
			Previous positions held at Xerox by Mr. Fullwood
			include President of the Worldwide Channels Group,
			President of Latin America, Executive Chief Staff Officer
			of Developing Markets, and President of Worldwide
			Customer Services. Mr. Fullwood is the Executive in
			Residence and 2010 Distinguished Minett Professor at
			the Rochester Institute of Technology. Mr. Fullwood
			serves as a director of SPX Corporation (multi-industry
			manufacturing), Amerigroup Corporation (managed
			health care), the University of Rochester Medical
			Center, Monroe Community College Foundation, the
			United Way of Rochester, and North Carolina A&T
			University.

Rajiv L. Gupta	Trustee	December 2001	Mr. Gupta is the former Chairman and Chief Executive	179
(1945)			Officer (retired 2009) and President (2006–2008) of
			Rohm and Haas Co. (chemicals). Mr. Gupta serves as a
			director of Tyco International, Ltd. (diversified
			manufacturing and services), Hewlett-Packard
			Company (electronic computer manufacturing), and
			Delphi Automotive LLP (automotive components) and
			as Senior Advisor at New Mountain Capital.

Amy Gutmann	Trustee	June 2006	Dr. Gutmann has served as the President of the	179
(1949)			University of Pennsylvania since 2004. She is the
			Christopher H. Browne Distinguished Professor of
			Political Science, School of Arts and Sciences, and
			Professor of Communication, Annenberg School for
			Communication, with secondary faculty appointments
			in the Department of Philosophy, School of Arts and
			Sciences, and at the Graduate School of Education,
			University of Pennsylvania. Dr. Gutmann also serves
			as a trustee of the National Constitution Center.
			Dr. Gutmann is Chair of the Presidential Commission
			for the Study of Bioethical Issues.

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			Principal Occupation(s)	Number of
		Vanguard	and Outside Directorships	Vanguard Funds
	Position(s)	Funds’ Trustee/	During the Past Five Years	Overseen by
Name, Year of Birth	Held With Fund	Officer Since	and Other Experience	Trustee/Officer
JoAnn Heffernan Heisen	Trustee	July 1998	Ms. Heisen is the former Corporate Vice President	179
(1950)			and Chief Global Diversity Officer (retired 2008)
			and a former Member of the Executive Committee
			(1997–2008) of Johnson & Johnson (pharmaceuticals/
			medical devices/consumer products). Ms. Heisen
			served as Vice President and Chief Information Officer
			of Johnson & Johnson from 1997 to 2005. Ms. Heisen
			serves as a director of Skytop Lodge Corporation
			(hotels), the University Medical Center at Princeton,
			the Robert Wood Johnson Foundation, and the Center
			for Talent Innovation and as a member of the advisory
			board of the Maxwell School of Citizenship and Public
			Affairs at Syracuse University.

F. Joseph Loughrey	Trustee	October 2009	Mr. Loughrey is the former President and Chief	179
(1949)			Operating Officer (retired 2009) and Vice Chairman of
			the Board (2008–2009) of Cummins Inc. (industrial
			machinery). Mr. Loughrey serves as Chairman of the
			Board of Hillenbrand, Inc. (specialized consumer
			services), and of Oxfam America; as a director of
			SKF AB (industrial machinery), Hyster-Yale Materials
			Handling, Inc. (forklift trucks), the Lumina Foundation
			for Education, and the V Foundation for Cancer
			Research; and as a member of the Advisory Council for
			the College of Arts and Letters and of the Advisory
			Board to the Kellogg Institute for International Studies,
			both at the University of Notre Dame. Mr. Loughrey
			served as a director of Sauer-Danfoss Inc. (machinery)
			from 2000 to 2010 and of Cummins Inc. from 2005
			to 2009.

Mark Loughridge	Trustee	March 2012	Mr. Loughridge is the former Senior Vice President and	179
(1953)			Chief Financial Officer (retired 2013) at IBM
			(information technology services). Mr. Loughridge also
			served as a fiduciary member of IBM’s Retirement Plan
			Committee (2004-2013). Previous positions held by Mr.
			Loughridge at IBM include Senior Vice President and
			General Manager of Global Financing (2002–2004),
			Vice President and Controller (1998–2002), and a
			variety of management roles. Mr. Loughridge serves as
			a member of the Council on Chicago Booth.

Scott C. Malpass	Trustee	March 2012	Mr. Malpass has served as Chief Investment Officer	179
(1962)			since 1989 and Vice President since 1996 at the
			University of Notre Dame. Mr. Malpass serves as an
			Assistant Professor of Finance at the Mendoza College
			of Business at the University of Notre Dame and is a
			member of the Notre Dame 403(b) Investment
			Committee. Mr. Malpass also serves on the board of
			TIFF Advisory Services, Inc. (investment advisor), and
			as a member of the investment advisory committees
			of the Financial Industry Regulatory Authority (FINRA)
			and of Major League Baseball.

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			Principal Occupation(s)	Number of
		Vanguard	and Outside Directorships	Vanguard Funds
	Position(s)	Funds’ Trustee/	During the Past Five Years	Overseen by
Name, Year of Birth	Held With Fund	Officer Since	and Other Experience	Trustee/Officer
André F. Perold	Trustee	December 2004	Dr. Perold is the George Gund Professor of Finance	179
(1952)			and Banking, Emeritus at the Harvard Business School
			(retired 2011). Dr. Perold serves as Chief Investment
			Officer and Managing Partner of HighVista Strategies
			LLC (private investment firm). Dr. Perold also serves as
			a director of Rand Merchant Bank and as an overseer
			of the Museum of Fine Arts Boston. From 2003 to
			2009, Dr. Perold served as chairman of the board of
			UNX, Inc. (equities trading firm).

Alfred M. Rankin, Jr.	Lead	January 1993	Mr. Rankin serves as Chairman, President, and Chief	179
(1941)	Independent		Executive Officer of NACCO Industries, Inc.
	Trustee		(housewares/lignite), and of Hyster-Yale Materials
			Handling, Inc. (forklift trucks). Mr. Rankin also serves as
			Chairman of the Board of University Hospitals of
			Cleveland. Mr. Rankin served as a director of Goodrich
			Corporation (industrial products/aircraft systems and
			services) from 1988 to 2012 and as Chairman of the
			Board of the Fourth District Federal Reserve Bank from
			2010 to 2012.

Peter F. Volanakis	Trustee	July 2009	Mr. Volanakis is the retired President and Chief	179
(1955)			Operating Officer (retired 2010) of Corning
			Incorporated (communications equipment) and a
			former director of Corning Incorporated (2000–2010)
			and of Dow Corning (2001–2010). Mr. Volanakis served
			as a director of SPX Corporation (multi-industry
			manufacturing) in 2012 and as an Overseer of the
			Amos Tuck School of Business Administration at
			Dartmouth College from 2001 to 2013. Mr. Volanakis
			serves as a trustee of Colby-Sawyer College and as a
			member of the Advisory Board of the Norris Cotton
			Cancer Center and of the Advisory Board of the
			Parthenon Group (strategy consulting).

Executive Officers
Glenn Booraem	Controller	July 2010	Mr. Booraem, a Principal of Vanguard, has served as	179
(1967)			Controller of each of the investment companies served
			by Vanguard, since 2010. Mr. Booraem served as
			Assistant Controller of each of the investment
			companies served by Vanguard, from 2001 to 2010.

Thomas J. Higgins	Chief Financial	September 2008	Mr. Higgins, a Principal of Vanguard, has served as Chief	179
(1957)	Officer		Financial Officer of each of the investment companies
			served by Vanguard, since 2008. Mr. Higgins served as
			Treasurer of each of the investment companies served
			by Vanguard, from 1998 to 2008.

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			Principal Occupation(s)	Number of
		Vanguard	and Outside Directorships	Vanguard Funds
	Position(s)	Funds’ Trustee/	During the Past Five Years	Overseen by
Name, Year of Birth	Held With Fund	Officer Since	and Other Experience	Trustee/Officer
Kathryn J. Hyatt	Treasurer	November 2008	Ms. Hyatt, a Principal of Vanguard, has served as	179
(1955)			Treasurer of each of the investment companies served
			by Vanguard, since 2008. Ms. Hyatt served as
			Assistant Treasurer of each of the investment
			companies served by Vanguard, from 1988 to 2008.

Heidi Stam	Secretary	July 2005	Ms. Stam has served as a Managing Director of	179
(1956)			Vanguard since 2006; General Counsel of Vanguard
			since 2005; Secretary of Vanguard and of each of the
			investment companies served by Vanguard, since
			2005; and Director and Senior Vice President of
			Vanguard Marketing Corporation since 2005. Ms. Stam
			served as a Principal of Vanguard from 1997 to 2006.

All but one of the trustees are independent. The independent trustees designate a lead independent trustee. The lead independent trustee is a spokesperson and principal point of contact for the independent trustees and is responsible for coordinating the activities of the independent trustees, including calling regular executive sessions of the independent trustees; developing the agenda of each meeting together with the chairman; and chairing the meetings of the independent trustees, including the meetings of the audit, compensation, and nominating committees. The board also has two investment committees, which consist of independent trustees and the sole interested trustee.

The independent trustees appoint the chairman of the board. The roles of chairman of the board and chief executive officer currently are held by the same person; as a result, the chairman of the board is an “interested” trustee. The independent trustees generally believe that the Vanguard funds’ chief executive officer is best qualified to serve as chairman and that fund shareholders benefit from this leadership structure through accountability and strong day-to-day leadership.

Board Committees: The Trust‘s board has the following committees:

Audit Committee: This committee oversees the accounting and financial reporting policies, the systems of internal controls, and the independent audits of each fund. All independent trustees serve as members of the committee. The committee held four meetings during the Fund‘s fiscal year ended October 31, 2013.
Compensation Committee: This committee oversees the compensation programs established by each fund for the benefit of its trustees. All independent trustees serve as members of the committee. The committee held six meetings during the Fund‘s fiscal year ended October 31, 2013.
Investment Committees: These committees assist the board in its oversight of investment advisors to the funds and in the review and evaluation of materials relating to the board’s consideration of investment advisory agreements with the funds. Each trustee serves on one of two investment committees. Each investment committee held four meetings during the Fund‘s fiscal year ended October 31, 2013.
Nominating Committee: This committee nominates candidates for election to the board of trustees of each fund. The committee also has the authority to recommend the removal of any trustee. All independent trustees serve as members of the committee. The committee held three meetings during the Fund‘s fiscal year ended October 31, 2013.

The Nominating Committee will consider shareholder recommendations for trustee nominees. Shareholders may send recommendations to Mr. Rankin, chairman of the committee.

Trustee Compensation

The same individuals serve as trustees of all Vanguard funds and each fund pays a proportionate share of the trustees’ compensation. The funds also employ their officers on a shared basis; however, officers are compensated by Vanguard, not the funds.

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Independent Trustees. The funds compensate their independent trustees (i.e., the ones who are not also officers of the funds) in three ways:

The independent trustees receive an annual fee for their service to the funds, which is subject to reduction based on absences from scheduled board meetings.
The independent trustees are reimbursed for the travel and other expenses that they incur in attending board meetings.
Upon retirement (after attaining age 65 and completing five years of service), the independent trustees who began their service prior to January 1, 2001, receive a retirement benefit under a separate account arrangement. As of January 1, 2001, the opening balance of each eligible trustee’s separate account was generally equal to the net present value of the benefits he or she had accrued under the trustees’ former retirement plan. Each eligible trustee’s separate account will be credited annually with interest at a rate of 7.5% until the trustee receives his or her final distribution. Those independent trustees who began their service on or after January 1, 2001, are not eligible to participate in the plan.

“Interested” Trustee. Mr. McNabb serves as trustee but is not paid in this capacity. He is, however, paid in his role as an officer of Vanguard.

Compensation Table. The following table provides compensation details for each of the trustees. We list the amounts paid as compensation and accrued as retirement benefits by the Fund for each trustee. In addition, the table shows the total amount of benefits that we expect each trustee to receive from all Vanguard funds upon retirement and the total amount of compensation paid to each trustee by all Vanguard funds.


VANGUARD EXPLORER FUND
TRUSTEES’ COMPENSATION TABLE

		Pension or	Accrued Annual	Total Compensation
	Aggregate	Retirement Benefits	Retirement	From All
	Compensation	Accrued as Part of	Benefit at	Vanguard Funds
Trustee	from the Fund¹	the Fund’s Expenses¹	January 1, 2014²	Paid to Trustees³
F. William McNabb III	—	—	—	—
Emerson U. Fullwood	$2,978	—	—	$220,000
Rajiv L. Gupta	2,978	—	—	213,800
Amy Gutmann	2,978	—	—	220,000
JoAnn Heffernan Heisen	2,978	$41	$ 6,045	207,600
F. Joseph Loughrey	2,978	—	—	220,000
Mark Loughridge	2,978	—	—	207,600
Scott C. Malpass	2,978	—	—	213,800
André F. Perold	2,978	—	—	220,000
Alfred M. Rankin, Jr.	3,381	82	11,846	250,000
Peter F. Volanakis	2,978	—	—	220,000
1 The amounts shown in this column are based on the Trust’s fiscal year ended October 31, 2013.
2 Each trustee is eligible to receive retirement benefits only after completing at least 5 years (60 consecutive months) of service as a trustee for
the Vanguard funds. The annual retirement benefit will be paid in monthly installments, beginning with the month following the trustee’s
retirement from service, and will cease after 10 years of payments (120 monthly installments). Trustees who began their service on or after
January 1, 2001, are not eligible to participate in the retirement benefit plan.
3 The amounts reported in this column reflect the total compensation paid to each trustee for his or her service as trustee of 182 Vanguard
funds for the 2013 calendar year.

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Ownership of Fund Shares

All trustees allocate their investments among the various Vanguard funds based on their own investment needs. The following table shows each trustee’s ownership of shares of the Fund and of all Vanguard funds served by the trustee as of December 31, 2013.


			Aggregate Dollar Range of
		Dollar Range of Fund	Vanguard Fund Shares
Vanguard Fund	Trustee	Shares Owned by Trustee	Owned by Trustee
Explorer Fund	Emerson U. Fullwood	—	Over $100,000
	Rajiv L. Gupta	—	Over $100,000
	Amy Gutmann	—	Over $100,000
	JoAnn Heffernan Heisen	—	Over $100,000
	F. Joseph Loughrey	—	Over $100,000
	Mark Loughridge	—	Over $100,000
	Scott C. Malpass	—	Over $100,000
	F. William McNabb III	—	Over $100,000
	André F. Perold	—	Over $100,000
	Alfred M. Rankin, Jr.	Over $100,000	Over $100,000
	Peter F. Volanakis	Over $100,000	Over $100,000

As of January 31, 2014, the trustees and officers of the funds owned, in the aggregate, less than 1% of each class of each fund’s outstanding shares.

As of January 31, 2014, the following owned of record 5% or more of the outstanding shares of each class:

Vanguard Explorer Fund—Investor Shares: Vanguard STAR Fund, Valley Forge, PA (12.16%); Vanguard Explorer Fund—Admiral Shares: Fidelity Investments Institutional Operations Co. Inc., Covington, KY (7.51%).

Portfolio Holdings Disclosure Policies and Procedures

Introduction

Vanguard and the boards of trustees of the Vanguard funds (Boards) have adopted Portfolio Holdings Disclosure Policies and Procedures (Policies and Procedures) to govern the disclosure of the portfolio holdings of each Vanguard fund. Vanguard and the Boards considered each of the circumstances under which Vanguard fund portfolio holdings may be disclosed to different categories of persons under the Policies and Procedures. Vanguard and the Boards also considered actual and potential material conflicts that could arise in such circumstances between the interests of Vanguard fund shareholders, on the one hand, and those of the fund’s investment advisor, distributor, or any affiliated person of the fund, its investment advisor, or its distributor, on the other. After giving due consideration to such matters and after the exercise of their fiduciary duties and reasonable business judgment, Vanguard and the Boards determined that the Vanguard funds have a legitimate business purpose for disclosing portfolio holdings to the persons described in each of the circumstances set forth in the Policies and Procedures and that the Policies and Procedures are reasonably designed to ensure that disclosure of portfolio holdings and information about portfolio holdings is in the best interests of fund shareholders and appropriately addresses the potential for material conflicts of interest.

The Boards exercise continuing oversight of the disclosure of Vanguard fund portfolio holdings by (1) overseeing the implementation and enforcement of the Policies and Procedures, the Code of Ethics, and the Policies and Procedures Designed to Prevent the Misuse of Inside Information (collectively, the portfolio holdings governing policies) by the chief compliance officer of Vanguard and the Vanguard funds; (2) considering reports and recommendations by the chief compliance officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940) that may arise in connection with any portfolio holdings governing policies; and (3) considering whether to approve or ratify any amendment to any portfolio holdings governing policies. Vanguard and the Boards reserve the right to amend the Policies and Procedures at any time and from time to time without prior notice at their sole discretion. For purposes of the Policies and Procedures, the term “portfolio holdings”

B-30

means the equity and debt securities (e.g., stocks and bonds) held by a Vanguard fund and does not mean the cash investments, derivatives, and other investment positions (collectively, other investment positions) held by the fund.

Online Disclosure of Ten Largest Stock Holdings

Each actively managed Vanguard fund generally will seek to disclose the fund’s ten largest stock portfolio holdings and the percentage of the fund’s total assets that each of these holdings represents as of the end of the most recent calendar quarter (quarter-end ten largest stock holdings with weightings) online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the calendar quarter. Each Vanguard index fund generally will seek to disclose the fund’s ten largest stock portfolio holdings and the percentage of the fund’s total assets that each of these holdings represents as of the end of the most recent month (month-end ten largest stock holdings with weightings) online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the month. In addition, Vanguard funds generally will seek to disclose the fund’s ten largest stock portfolio holdings and the aggregate percentage of the fund’s total assets (and, for balanced funds, the aggregate percentage of the fund’s equity securities) that these holdings represent as of the end of the most recent month (month-end ten largest stock holdings) online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 10 business days after the end of the month. Together, the quarter-end and month-end ten largest stock holdings are referred to as the ten largest stock holdings. Online disclosure of the ten largest stock holdings is made to all categories of persons, including individual investors, institutional investors, intermediaries, third-party service providers, rating and ranking organizations, affiliated persons of a Vanguard fund, and all other persons.

Online Disclosure of Complete Portfolio Holdings

Each actively managed Vanguard fund, excluding Vanguard money market funds and Vanguard Market Neutral Fund, generally will seek to disclose the fund’s complete portfolio holdings as of the end of the most recent calendar quarter online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 30 calendar days after the end of the calendar quarter. In accordance with Rule 2a-7 under the 1940 Act, each of the Vanguard money market funds will disclose the fund’s complete portfolio holdings as of the last business day of the prior month online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, no later than the fifth business day of the current month. The complete portfolio holdings information for money market funds will remain available online for at least six months after the initial posting. Vanguard Market Neutral Fund generally will seek to disclose the Fund’s complete portfolio holdings as of the end of the most recent calendar quarter online at vanguard.com, in the “Portfolio” section of the Fund’s Portfolio & Management page, 60 calendar days after the end of the calendar quarter. Each Vanguard index fund generally will seek to disclose the fund’s complete portfolio holdings as of the end of the most recent month online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the month. Online disclosure of complete portfolio holdings is made to all categories of persons, including individual investors, institutional investors, intermediaries, third-party service providers, rating and ranking organizations, affiliated persons of a Vanguard fund, and all other persons. Vanguard’s Portfolio Review Department will review complete portfolio holdings before online disclosure is made and, except with respect to the complete portfolio holdings of the Vanguard money market funds, may withhold any portion of the fund’s complete portfolio holdings from online disclosure when deemed to be in the best interests of the fund after consultation with a Vanguard fund’s investment advisor.

Disclosure of Complete Portfolio Holdings to Service Providers Subject to Confidentiality and Trading Restrictions

Vanguard, for legitimate business purposes, may disclose Vanguard fund complete portfolio holdings at times it deems necessary and appropriate to rating and ranking organizations; financial printers; proxy voting service providers; pricing information vendors; third parties that deliver analytical, statistical, or consulting services; and other third parties that provide services (collectively, Service Providers) to Vanguard, Vanguard subsidiaries, and/or the Vanguard funds. Disclosure of complete portfolio holdings to a Service Provider is conditioned on the Service Provider being subject to a written agreement imposing a duty of confidentiality, including a duty not to trade on the basis of any material nonpublic information.

The frequency with which complete portfolio holdings may be disclosed to a Service Provider, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed to the Service Provider, is determined based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings

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information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure to a Service Provider varies and may be as frequent as daily, with no lag. Disclosure of Vanguard fund complete portfolio holdings by Vanguard to a Service Provider must be authorized by a Vanguard fund officer or a Principal in Vanguard’s Portfolio Review or Legal Department. Any disclosure of Vanguard fund complete portfolio holdings to a Service Provider as previously described may also include a list of the other investment positions that make up the fund, such as cash investments and derivatives.

Currently, Vanguard fund complete portfolio holdings are disclosed to the following Service Providers as part of ongoing arrangements that serve legitimate business purposes: Abel/Noser Corporation; Advisor Software, Inc.; Alcom Printing Group Inc.; Apple Press, L.C.; Bloomberg L.P.; Brilliant Graphics, Inc.; Broadridge Financial Solutions, Inc.; Brown Brothers Harriman & Co.; Canon Business Process Services; FactSet Research Systems Inc.; Innovation Printing & Communications; Institutional Shareholder Services, Inc.; Intelligencer Printing Company; Investment Technology Group, Inc.; Lipper, Inc.; Markit WSO Corporation; McMunn Associates Inc.; Reuters America Inc.; R.R. Donnelley, Inc.; State Street Bank and Trust Company; Triune Color Corporation; and Tursack Printing Inc.

Disclosure of Complete Portfolio Holdings to Vanguard Affiliates and Certain Fiduciaries Subject to Confidentiality and Trading Restrictions

Vanguard fund complete portfolio holdings may be disclosed between and among the following persons (collectively, Affiliates and Fiduciaries) for legitimate business purposes within the scope of their official duties and responsibilities, subject to such persons’ continuing legal duty of confidentiality and legal duty not to trade on the basis of any material nonpublic information, as such duties are imposed under the Code of Ethics, the Policies and Procedures Designed to Prevent the Misuse of Inside Information, by agreement, or under applicable laws, rules, and regulations: (1) persons who are subject to the Code of Ethics or the Policies and Procedures Designed to Prevent the Misuse of Inside Information; (2) an investment advisor, distributor, administrator, transfer agent, or custodian to a Vanguard fund; (3) an accounting firm, an auditing firm, or outside legal counsel retained by Vanguard, a Vanguard subsidiary, or a Vanguard fund; (4) an investment advisor to whom complete portfolio holdings are disclosed for due diligence purposes when the advisor is in merger or acquisition talks with a Vanguard fund’s current advisor; and (5) a newly hired investment advisor or sub-advisor to whom complete portfolio holdings are disclosed prior to the time it commences its duties.

The frequency with which complete portfolio holdings may be disclosed between and among Affiliates and Fiduciaries, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed between and among the Affiliates and Fiduciaries, is determined by such Affiliates and Fiduciaries based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure between and among Affiliates and Fiduciaries varies and may be as frequent as daily, with no lag. Any disclosure of Vanguard fund complete portfolio holdings to any Affiliates and Fiduciaries as previously described may also include a list of the other investment positions that make up the fund, such as cash investments and derivatives. Disclosure of Vanguard fund complete portfolio holdings or other investment positions by Vanguard, Vanguard Marketing Corporation, or a Vanguard fund to Affiliates and Fiduciaries must be authorized by a Vanguard fund officer or a Principal of Vanguard.

Currently, Vanguard fund complete portfolio holdings are disclosed to the following Affiliates and Fiduciaries as part of ongoing arrangements that serve legitimate business purposes: Vanguard and each investment advisor, custodian, and independent registered public accounting firm identified in each fund’s Statement of Additional Information.

Disclosure of Portfolio Holdings to Broker-Dealers in the Normal Course of Managing a Fund’s Assets

An investment advisor, administrator, or custodian for a Vanguard fund may, for legitimate business purposes within the scope of its official duties and responsibilities, disclose portfolio holdings (whether partial portfolio holdings or complete portfolio holdings) and other investment positions that make up the fund to one or more broker-dealers during the course of, or in connection with, normal day-to-day securities and derivatives transactions with or through such broker-dealers subject to the broker-dealer’s legal obligation not to use or disclose material nonpublic information concerning the fund’s portfolio holdings, other investment positions, securities transactions, or derivatives transactions without the consent of the fund or its agents. The Vanguard funds have not given their consent to any such use or disclosure and no person or agent of Vanguard is authorized to give such consent except as approved in writing by the Boards of the Vanguard funds.

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Disclosure of portfolio holdings or other investment positions by Vanguard to broker-dealers must be authorized by a Vanguard fund officer or a Principal of Vanguard.

Disclosure of Nonmaterial Information

The Policies and Procedures permit Vanguard fund officers, Vanguard fund portfolio managers, and other Vanguard representatives (collectively, Approved Vanguard Representatives) to disclose any views, opinions, judgments, advice, or commentary, or any analytical, statistical, performance, or other information, in connection with or relating to a Vanguard fund or its portfolio holdings and/or other investment positions (collectively, commentary and analysis) or any changes in the portfolio holdings of a Vanguard fund that occurred after the end of the most recent calendar quarter (recent portfolio changes) to any person if (1) such disclosure serves a legitimate business purpose, (2) such disclosure does not effectively result in the disclosure of the complete portfolio holdings of any Vanguard fund (which can be disclosed only in accordance with the Policies and Procedures), and (3) such information does not constitute material nonpublic information. Disclosure of commentary and analysis or recent portfolio changes by Vanguard, Vanguard Marketing Corporation, or a Vanguard fund must be authorized by a Vanguard fund officer or a Principal of Vanguard.

An Approved Vanguard Representative must make a good faith determination whether the information constitutes material nonpublic information, which involves an assessment of the particular facts and circumstances. Vanguard believes that in most cases recent portfolio changes that involve a few or even several securities in a diversified portfolio or commentary and analysis would be immaterial and would not convey any advantage to a recipient in making an investment decision concerning a Vanguard fund. Nonexclusive examples of commentary and analysis about a Vanguard fund include (1) the allocation of the fund’s portfolio holdings and other investment positions among various asset classes, sectors, industries, and countries; (2) the characteristics of the stock and bond components of the fund’s portfolio holdings and other investment positions; (3) the attribution of fund returns by asset class, sector, industry, and country; and (4) the volatility characteristics of the fund. Approved Vanguard Representatives may, at their sole discretion, deny any request for information made by any person, and may do so for any reason or for no reason. Approved Vanguard Representatives include, for purposes of the Policies and Procedures, persons employed by or associated with Vanguard or a subsidiary of Vanguard who have been authorized by Vanguard’s Portfolio Review Department to disclose recent portfolio changes and/or commentary and analysis in accordance with the Policies and Procedures.

Disclosure of Portfolio Holdings Related Information to the Issuer of a Security for Legitimate Business Purposes

Vanguard, at its sole discretion, may disclose portfolio holdings information concerning a security held by one or more Vanguard funds to the issuer of such security if the issuer presents, to the satisfaction of Vanguard’s Fund Financial Services unit, convincing evidence that the issuer has a legitimate business purpose for such information. Disclosure of this information to an issuer is conditioned on the issuer being subject to a written agreement imposing a duty of confidentiality, including a duty not to trade on the basis of any material nonpublic information. The frequency with which portfolio holdings information concerning a security may be disclosed to the issuer of such security, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed to the issuer, is determined based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure to an issuer cannot be determined in advance of a specific request and will vary based upon the particular facts and circumstances and the legitimate business purposes, but in unusual situations could be as frequent as daily, with no lag. Disclosure of portfolio holdings information concerning a security held by one or more Vanguard funds to the issuer of such security must be authorized by a Vanguard fund officer or a Principal in Vanguard’s Portfolio Review or Legal Department.

Disclosure of Portfolio Holdings as Required by Applicable Law

Vanguard fund portfolio holdings (whether partial portfolio holdings or complete portfolio holdings) and other investment positions that make up a fund shall be disclosed to any person as required by applicable laws, rules, and regulations. Examples of such required disclosure include, but are not limited to, disclosure of Vanguard fund portfolio holdings (1) in a filing or submission with the SEC or another regulatory body, (2) in connection with seeking recovery on defaulted bonds in a federal bankruptcy case, (3) in connection with a lawsuit, or (4) as required by court order. Disclosure of portfolio holdings

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or other investment positions by Vanguard, Vanguard Marketing Corporation, or a Vanguard fund as required by applicable laws, rules, and regulations must be authorized by a Vanguard fund officer or a Principal of Vanguard.

Prohibitions on Disclosure of Portfolio Holdings

No person is authorized to disclose Vanguard fund portfolio holdings or other investment positions (whether online at vanguard.com, in writing, by fax, by e-mail, orally, or by other means) except in accordance with the Policies and Procedures. In addition, no person is authorized to make disclosure pursuant to the Policies and Procedures if such disclosure is otherwise unlawful under the antifraud provisions of the federal securities laws (as defined in Rule 38a-1 under the 1940 Act). Furthermore, Vanguard’s management, at its sole discretion, may determine not to disclose portfolio holdings or other investment positions that make up a Vanguard fund to any person who would otherwise be eligible to receive such information under the Policies and Procedures, or may determine to make such disclosures publicly as provided by the Policies and Procedures.

Prohibitions on Receipt of Compensation or Other Consideration

The Policies and Procedures prohibit a Vanguard fund, its investment advisor, and any other person or entity from paying or receiving any compensation or other consideration of any type for the purpose of obtaining disclosure of Vanguard fund portfolio holdings or other investment positions. “Consideration” includes any agreement to maintain assets in the fund or in other investment companies or accounts managed by the investment advisor or by any affiliated person of the investment advisor.

INVESTMENT ADVISORY SERVICES

The Trust currently uses seven investment advisors:

Century Capital Management, LLC, provides investment advisory services for a portion of Vanguard Explorer Fund.
Chartwell Investment Partners, L.P., provides investment advisory services for a portion of Vanguard Explorer Fund.
Granahan Investment Management, Inc., provides investment advisory services for a portion of Vanguard Explorer Fund.
Kalmar Investment Advisers provides investment advisory services for a portion of Vanguard Explorer Fund.
Stephens Investment Management Group, LLC, provides investment advisory services for a portion of Vanguard Explorer Fund.
Wellington Management Company, LLP, provides investment advisory services for a portion of Vanguard Explorer Fund.
Vanguard provides investment advisory services for a portion of Vanguard Explorer Fund.

For funds that are advised by independent third-party advisory firms unaffiliated with Vanguard, the board of trustees of each fund hires investment advisory firms, not individual portfolio managers, to provide investment advisory services to such funds. Vanguard negotiates each advisory agreement, which contains advisory fee arrangements, on an arm’s length basis with the advisory firm. Each advisory agreement is reviewed annually by each fund’s board of trustees, taking into account numerous factors, which include, without limitation, the nature, extent, and quality of the services provided; investment performance; and the fair market value of the services provided. Each advisory agreement is between the Trust and the advisory firm, not between the Trust and the portfolio manager. The structure of the advisory fee paid to each unaffiliated investment advisory firm is described in the following sections. In addition, each firm has established policies and procedures designed to address the potential for conflicts of interest. Each firm’s compensation structure and management of potential conflicts of interest is summarized by the advisory firm in the following sections for the fiscal year ended October 31, 2013.

A fund is a party to an investment advisory agreement with each of its independent third-party advisors whereby the advisor manages the investment and reinvestment of the portion of the fund’s assets that the fund’s board of trustees determines to assign to the advisor. In this capacity, each advisor continuously reviews, supervises, and administers the investment program for its portion of the fund’s assets. Hereafter, each portion will be referred to as the advisor’s Portfolio. Each advisor discharges its responsibilities subject to the supervision and oversight of Vanguard’s Portfolio Review Group and the officers and trustees of the fund. Vanguard’s Portfolio Review Group is responsible for recommending changes in a fund’s advisory arrangements to the fund’s board of trustees, including changes in the amount of assets allocated to each advisor and whether to hire, terminate, or replace an advisor.

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The Fund pays each of its independent third-party investment advisors a base fee plus or minus a performance adjustment. Each base fee, which is paid quarterly, is a percentage of average daily net assets managed by the advisor during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of each advisor’s portion of the Fund relative to that of the Russell 2500 Growth Index (for Kalmar, SIMG, and Wellington Management), the Russell 2000 Growth Index (for Chartwell), a 50/50 blend of the Russell 2000 Growth Index and the Russell 2500 Growth Index (for Granahan), or a 50/50 blend of the Russell 2500 Index and the Russell 2500 Growth Index (for Century Capital) over the preceding 36-month period (60-month period for SIMG). Vanguard provides advisory services to the Fund on an at-cost basis.

During the fiscal years ended October 31, 2011, 2012, and 2013, Vanguard Explorer Fund incurred aggregate investment advisory fees and expenses of approximately $20,200,000 (before a performance-based decrease of $56,000), $19,599,000 (before a performance-based decrease of $2,338,000), and $21,212,000 (before a performance-based decrease of $20,000), respectively.

Of the aggregate fees and expenses previously described, the investment advisory expenses paid to Vanguard for the fiscal year ended October 31, 2013, were approximately $323,000 (representing an effective annual rate of less than 0.01%). The investment advisory fees paid to the remaining advisors for the fiscal year ended October 31, 2013, were $20,869,000 (representing an effective annual rate of approximately 0.21%).

A. Century Capital Management, LLC (Century Capital)

Century Capital is a Delaware limited liability company. The firm is an independent, employee-owned investment adviser that traces its origins to 1928 and the establishment of Century Shares Trust.

1. Other Accounts Managed

Alexander L. Thorndike manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Thorndike also managed two other registered investment companies with total assets of $630 million and three other accounts with total assets of $89 million (none of which had advisory fees based on account performance).

2. Material Conflicts of Interest

At Century Capital, a portfolio manager may manage multiple accounts for multiple clients. Managing multiple accounts may give rise to potential conflicts of interest including, for example, conflicts related to the allocation of investment opportunities. A portfolio manager may have an incentive to allocate favorable or limited investment opportunities or structure the timing of investments to favor accounts that have a higher advisory fee or a performance fee. Century Capital has adopted and implemented policies and procedures regarding the allocation of trades and brokerage which it believes address the conflicts associated with managing multiple accounts for multiple clients. These policies and procedures generally require that securities be allocated among clients in a manner that is fair and equitable and consistent with the firm’s fiduciary duty to each client. In addition, Century Capital conducts periodic testing and internal reviews designed to detect favorable treatment of one account over another.

3. Description of Compensation

The portfolio manager’s compensation includes a base salary and discretionary bonus, and also may include a performance bonus that is linked to the pre-tax performance of the two Century Funds for which he serves as portfolio manager. The amount of the performance bonus depends on the performance of each fund over a 1-year period relative to the fund’s benchmark (the Russell 1000 Growth Index for Century Shares Trust and the Russell 2000 Growth Index for Century Small Cap Select Fund). The performance bonus typically does not represent a substantial portion of the portfolio manager’s total compensation.

The portfolio manager’s compensation also includes ownership distributions. In general, distributions are based on the class of equity held and the level of ownership interest.

All employees, including the portfolio manager, are eligible to participate in the firm’s 401(k) plan. The firm’s annual contribution to the plan is discretionary and based primarily on the firm’s profitability.

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4. Ownership of Securities

As of October 31, 2013, Mr. Thorndike owned shares of the Fund within the $100,001–$500,000 range.

B. Chartwell Investment Partners, L.P. (Chartwell)

Chartwell is a Pennsylvania limited partnership.

1. Other Accounts Managed

The management of and investment decisions for the Chartwell Portfolio are made by the Chartwell Growth Group, of which Edward N. Antoian and John A. Heffern are senior members. The Chartwell Growth Group manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion.

Mr. Antoian co-manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Antoian also co-managed one other registered investment company with total assets of $21.3 million (advisory fee not based on account performance), two other pooled investment vehicles with total assets of $187.7 million (advisory fees not based on account performance), and 14 other accounts with total assets of $579.5 million (advisory fee based on account performance for one of these accounts with total assets of $39.8 million).

Mr. Heffern co-manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Heffern also co-managed two other registered investment companies with total assets of $43.6 million (advisory fee not based on account performance), one other pooled investment vehicle with total assets of $700,000 (advisory fees not based on account performance), and 14 other accounts with total assets of $579.5 million (advisory fee based on account performance for one of these accounts with total assets of $39.8 million).

2. Material Conflicts of Interest

With the exception of the two hedge funds managed by Mr. Antoian (discussed in this section), all portfolios are managed in like-style; except for possible client-imposed portfolio restrictions, there are no material conflicts of interest that may arise in connection with simultaneous management of the Chartwell Portfolio and such other accounts. In the allocation of investment opportunities, unless prohibited by client guidelines, trade orders for multiple portfolios in a given investment product are generally “batched” or placed as an aggregated order for execution. Placing an aggregate order may enable Chartwell to obtain more favorable execution and net price for the combined order. All portfolios included in an aggregated trade are allocated the same average price per share. If in fact there are multiple orders on the trade blotter for the same security that cannot be aggregated because of client restrictions, a simple rotational system is implemented.

Proprietary Accounts: Certain new investment products developed begin as incubator funds and, in some cases, are funded by internal officers, directors, partners, and portfolio managers’ personal assets. These new products are traded exactly the same as regular client accounts, except that they do not participate in IPOs. Such accounts are not favored over any other account. The Compliance Group monitors all activity in these accounts regularly. No investment or performance fees are received by the investors nor the firm. Once sufficient client assets are raised in the product, the incubator is closed. Chartwell’s Code of Ethics requires disclosure of any Private Placement investments by all employees including firm incubator funds.

Hedge Funds: Mr. Antoian manages two hedge funds. There is generally a limited amount of overlap of investments between one hedge fund and all other accounts previously listed that are managed by the Chartwell Growth Group (client accounts). Investment opportunities that are appropriate for both the client accounts and the hedge fund are allocated on a pro-rata basis and no one account is favored over another when participating in the same trade. When investment opportunities are of a limited nature (such as IPOs), shares are allocated on a pro-rata basis for all accounts for which the investment is appropriate; if an allocation from the broker is too small to satisfy a 0.05% position in the participating accounts, a rotational system is deployed. The holdings of the hedge fund and all client accounts, as well as all IPO allocations, are reviewed by the Compliance Group to ensure that controls are working properly. The other hedge fund managed by Mr. Antoian is a “fund of funds” that invests in other hedge funds; therefore there is no overlap of investments between this fund and all other accounts.

Other rules to prevent conflicts of interest: No portfolio manager shall initiate a short sale in an investment account when a registered fund or other investment account either holds, or intends to acquire, a long position in the security. If an

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investment account has an existing short position in a security that is subsequently purchased as a long position in any other client account, the portfolio manager is prohibited from initiating further short sales and any purchases of the security shall be allocated in a fair and equitable manner in accordance with the firm’s trade allocation policies.

3. Description of Compensation

The compensation paid to a Chartwell portfolio manager consists of base salary, annual bonus, ownership distribution (if applicable based on ownership status), and an annual profit-sharing contribution to the firm’s retirement plan. A portfolio manager’s base salary is determined by Chartwell’s Compensation Committee and is reviewed at least annually. A portfolio manager’s experience, historical performance, and role in firm or product team management are the primary considerations in determining the base salary. Industry benchmarking is utilized by the Compensation Committee on an annual basis.

Annual bonuses are determined by the Compensation Committee based on a number of factors. The primary factor is a performance-based compensation schedule that is applied to all accounts managed by a portfolio manager within a particular investment product, and is not specific to any one account. The bonus is calibrated based on the gross composite performance of such accounts over one- and three-year periods versus the appropriate benchmark (the Russell 2000 Growth Index) and peer-group rankings. Portfolio construction, sector and security weighting, and performance are reviewed by the Compliance Committee and Compensation Committee to prevent a manager from taking undue risks. Additional factors used to determine the annual bonus include the portfolio manager’s contribution as an analyst, product team management, and contribution to the strategic planning and development of the investment group as well as the firm.

Ownership distributions are paid to an employee based on the employee’s level and type of ownership interest(s). There are currently three types of equity: (1) straight limited partnership interests; (2) Class B share interests; and (3) phantom stock interests. In all cases, the annual ownership distributions are paid to employees based on their respective percentage equity interest(s) multiplied by total net cash distributions paid during the year.

Chartwell also provides a profit-sharing and a 401(k) plan for all employees. The annual profit-sharing contribution and/or matching contribution from Chartwell is discretionary and based solely on the profitability of the firm.

Chartwell’s compensation structure is very competitive with respect to their peers in the industry. Chartwell strives to provide a working environment that fosters creativity as well as ownership enthusiasm.

4. Ownership of Securities

As of October 31, 2013, Mr. Antoian and Mr. Heffern did not own any shares of the Fund.

C. Granahan Investment Management, Inc. (Granahan)

Granahan is a Massachusetts corporation.

1. Other Accounts Managed

Gary C. Hatton, Jane M. White, Jennifer M. Pawloski, and John V. Schneider co-manage a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Hatton, Ms. White, Ms. Pawloski, and Mr. Schneider also co-managed two other registered investment companies with total assets of $1.2 billion (advisory fee based on account performance for one of these accounts with total assets of $869.6 million), and Mr. Hatton also managed two other pooled investment vehicles with total assets of $107.9 million (advisory fees not based on account performance).

2. Material Conflicts of Interest

The portfolio management team responsible for managing the Granahan Portfolio has similar responsibilities to other clients of Granahan. The firm has established policies and procedures to address the potential conflicts of interest inherent in managing portfolios for multiple clients. These policies and procedures are designed to prevent and detect favorable treatment of one account over another, and include policies for allocating trades equitably across multiple accounts, monitoring the composition of client portfolios to ensure that each reflects the investment profile of that client, and reviewing the performance of accounts of similar styles. Additionally, each employee of Granahan is bound by

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its Code of Ethics, which establishes policies and procedures designed to ensure that clients’ interests are placed before those of an individual or the firm.

3. Description of Compensation

The Granahan Portfolio is managed by the portfolio management team of Gary C. Hatton, Jane M. White, Jennifer M. Pawloski, and John V. Schneider. The portfolio managers’ compensation is made up of a base salary plus a performance bonus. Base salary for portfolio managers varies depending on qualitative and quantitative factors such as salary levels in the industry, experience, length of employment, and the nature and number of other duties for which he or she has responsibility. The performance bonus is based on a number of factors including the one- and three-year returns, before management fees and taxes, of each account managed relative to its benchmark (an equal combination of the Russell 2500 Growth Index and the Russell 2000 Growth Index for the Granahan Portfolio); the one- and three-year returns, before management fees and taxes, of each account managed relative to the benchmark sector for which that manager has responsibility; and the value of the assets managed by that manager. Additionally, members of the portfolio management team receive a share of Granahan profits either in the form of dividends for shareholders or via the company’s profit-sharing program for nonshareholders.

4. Ownership of Securities

As of October 31, 2013, Mr. Hatton and Ms. White each owned shares of the Fund within the $10,001–$50,000 range. As of October 31, 2013, Ms. Pawloski and Mr. Schneider did not own shares of the Fund.

D. Kalmar Investment Advisers (Kalmar)

Kalmar, a business trust registered in the state of Delaware, is a research-driven investment firm that is entirely focused on the management of “growth-with-value” smaller-cap equity portfolios, and is owned in its entirety by active Kalmar employees. Kalmar is a sister company of Kalmar Investments Inc., the firm’s separate account management arm, which was founded in 1982.

1. Other Accounts Managed

Ford B. Draper, Jr., and Dana F. Walker, along with Kalmar’s investment team, co-manage a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Draper and Mr. Walker also co-managed two other registered investment companies with total assets of $1.8 billion (advisory fee based on account performance for one of these accounts with total assets of $996 million) and 281 other accounts with total assets of $1.2 billion (advisory fees not based on account performance).

2. Material Conflicts of Interest

Kalmar’s policy from the firm’s inception is to avoid conflicts of interest by neither favoring nor disfavoring any account systematically versus any other. Accordingly, on a best efforts basis, investment opportunities are shared among all accounts of the same market-cap size class as evenhandedly as possible over time. Kalmar has three market-cap size classes of accounts under management: small-cap, smid-cap, and mid-cap. Kalmar’s investment strategy is applied uniformly and individual securities are owned as uniformly as possible by all accounts within a size class, except for those clients with particular investment restrictions or guidelines. In those cases, the same strategy is applied except for elimination of restricted securities.

3. Description of Compensation

Kalmar seeks to maintain a competitive and incentivized compensation program to attract and retain outstanding, high-caliber investment professionals. Therefore, Kalmar closely links the investment professionals’ compensation to their particular contributions to client returns and to the attainment of the performance goals of Kalmar’s “growth-with-value” investment philosophy, in which the Kalmar Portfolio participates. Portfolio managers receive base salaries, incentive bonus opportunities, benefits packages, and opportunities (if invited by Kalmar’s board of directors) to purchase equity in Kalmar. Portfolio manager compensation is reviewed and modified each year as appropriate to reflect changes in the marketplace, as well as to adjust the factors used to determine bonuses, in order to promote good sustained client performance, including the Kalmar Portfolio’s performance.

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Fixed Based Salary: In setting portfolio manager base salaries, Kalmar seeks to be competitive in light of each person’s experience, tenure, contribution, and responsibilities.

Annual Bonus: Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and nonquantitative components. The quantitative component, which generally represents 60–70% of the bonus, is based on the specific contribution of the individual’s research ideas to the pre-tax success of managed portfolios in absolute and index-relative terms for short-term (1 year) and long-term (2–5 year) periods.

The nonquantitative component is based on an evaluation of the individual’s contribution to Kalmar’s team-oriented research and portfolio management process and of his or her other contributions to client satisfaction, client communication, and the overall success of the firm over the past year. For purposes of illustration, examples of factors weighed in this evaluation are (1) maintenance of insightful knowledge and opinions on companies owned by the portfolio; (2) generation and development of new investment ideas, including the quality of security analysis and identification of appreciation catalysts; (3) ability and willingness to develop and share ideas and contribute to idea deliberation on a team basis; and (4) contribution to investment strategy, buy and sell discipline, and the overall performance results of the portfolios managed by the investment team, as well as the productive functioning of the team.

Benefits Package: All employees, including portfolio managers, participate in Kalmar’s benefits package, which includes a 401k plan with a contribution by Kalmar and a profit-sharing plan based on the overall success of the firm. The opportunity for equity ownership in Kalmar is open to all key, high-contributing employees of the firm from all professional disciplines, solely at the discretion and invitation of Kalmar’s board of directors. Such ownership is purchased from the firm rather than awarded as a bonus. Mr. Draper is the lead partner in Kalmar. This equity ownership, coupled with the other competitive and incentivizing ingredients in Kalmar’s compensation package, is intended to link the partner’s compensation directly, plus indirectly but effectively, to client success and performance outcomes.

4. Ownership of Securities

As of October 31, 2013, Mr. Draper and Mr. Walker did not own any shares of the Fund.

E. Stephens Investment Management Group, LLC (SIMG)

SIMG, located in Little Rock, Arkansas, is a subsidiary of Stephens Investments Holdings, a privately held and family owned company.

1. Other Accounts Managed

Ryan E. Crane manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Crane also managed two other registered investment companies with total assets of $739 million (advisory fees not based on account performance) and 50 other accounts with total assets of $2 billion (advisory fees based on account performance for two of these accounts with total assets of $506 million).

2. Material Conflicts of Interest

SIMG manages a number of separate accounts and two other registered investment companies that utilize similar investment strategies as the SIMG Portfolio. Most of these separate accounts are charged an asset-based fee by SIMG, but two of the accounts are charged a performance fee. The firm has established policies and procedures to address the potential conflicts of interest inherent in managing portfolios for multiple clients. These policies and procedures are designed to prevent and detect favorable treatment of one account over another, and include policies for allocating trades equitably across multiple accounts, monitoring the composition of client portfolios to ensure that each reflects the investment profile of the client, and reviewing the performance of accounts of similar styles. Additionally, each employee of SIMG is bound by its Code of Ethics, which establishes policies and procedures designed to ensure the clients’ interests are placed before those of an individual or the firm.

3. Description of Compensation

All SIMG Portfolio Managers receive compensation in the form of a fixed salary and performance bonus. The performance bonus can represent a significant portion of the total compensation. The amount of a Portfolio Manager’s bonus is a function of SIMG products’ asset weighted 1-, 3-, and 5-year performance relative to the appropriate benchmark and peer group. Portfolio Managers with sector specific responsibilities receive a portion of their bonus

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based on performance contribution and attribution analysis based on each individual’s performance within their respective sectors. Mr. Crane’s bonus as team leader is more a function of the product’s performance (in the manner described above), and less sensitive to individual stock picks. His bonus also has a subjective portion that is related in part to SIMG’s level of profitability. Each member of the portfolio management team is a shareholder of Class B shares of SIMG and receives a portion of the overall net profits of SIMG. Performance is measured over the most recent calendar year.

4. Ownership of Securities

As of October 31, 2013, Mr. Crane did not own any shares of the Fund.

F. Wellington Management Company, LLP (Wellington Management)

Wellington Management is a Massachusetts limited liability partnership with principal offices at 280 Congress Street, Boston, MA 02210. As of July 1, 2013, the firm is owned by 131 partners, all fully active in the business of the firm. Wellington Management is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 80 years. Kenneth L. Abrams, Senior Vice President and Equity Portfolio Manager of Wellington Management, has served as a portfolio manager of the Wellington Management Portfolio since 1994.

1. Other Accounts Managed

Mr. Abrams manages a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Abrams also managed two other registered investment companies with total assets of $358.1 million (advisory fees not based on account performance), six other pooled investment vehicles with total assets of $1.4 billion (advisory fees not based on account performance), and eight other accounts with total assets of $1.6 billion (advisory fee based on account performance for one of these accounts with total assets of $24.7 million).

Daniel J. Fitzpatrick serves as associate portfolio manager for a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Fitzpatrick also managed two other registered investment companies with total assets of $358.1 million (advisory fees not based on account performance), three other pooled investment vehicles with total assets of $710.7 million (advisory fees not based on account performance), and five other accounts with total assets of $1.2 billion (advisory fee based on account performance for one of these accounts with total assets of $24.7 million).

2. Material Conflicts of Interest

Individual investment professionals at Wellington Management manage multiple accounts for multiple clients. These accounts may include mutual funds, separate accounts (assets managed on behalf of institutions, such as pension funds, insurance companies, foundations, or separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. The Wellington Management Portfolio’s managers listed in the prospectus, who are primarily responsible for the day-to-day management of the Wellington Management Portfolio (the Portfolio Managers), generally manage accounts in several different investment styles. These accounts may have investment objectives, strategies, time horizons, tax considerations and risk profiles that differ from those of the Fund. The Portfolio Managers make investment decisions for each account, including the Wellington Management Portfolio, based on the investment objectives, policies, practices, benchmarks, cash flows, tax, and other relevant investment considerations applicable to that account. Consequently, the Portfolio Managers may purchase or sell securities, including IPOs, for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. Alternatively, these accounts may be managed in a similar fashion to the Wellington Management Portfolio, and thus the accounts may have similar, and in some cases nearly identical, objectives, strategies, and/or holdings to those of the Wellington Management Portfolio.

A Portfolio Manager or other investment professional at Wellington Management may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of the Wellington Management Portfolio or make investment decisions that are similar to those made for the Wellington Management Portfolio, both of which have the potential to adversely impact the Wellington Management Portfolio depending on market conditions. For example, an investment professional may purchase a security in one account while appropriately

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selling that same security in another account. Similarly, a Portfolio Manager may purchase the same security for the Wellington Management Portfolio and one or more other accounts at or about the same time. In those instances the other accounts will have access to their respective holdings prior to the public disclosure of the Wellington Management Portfolio’s holdings. In addition, some of these accounts have fee structures, including performance fees, which are or have the potential to be higher, in some cases significantly higher, than the fees Wellington Management receives for managing the Wellington Management Portfolio. Mr. Abrams and Mr. Firzpatrick also manage accounts that pay performance allocations to Wellington Management or its affiliates. Because incentive payments paid by Wellington Management to the Portfolio Managers are tied to revenues earned by Wellington Management and, where noted, to the performance achieved by the manager in each account, the incentives associated with any given account may be significantly higher or lower than those associated with other accounts managed by a given Portfolio Manager. Finally, the Portfolio Managers may hold shares or investments in the other pooled investment vehicles and/or other accounts previously identified.

Wellington Management’s goal is to meet its fiduciary obligation to treat all clients fairly and provide high quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, that it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firm’s Code of Ethics, and places additional investment restrictions on investment professionals who manage hedge funds and certain other accounts. Furthermore, senior investment and business personnel at Wellington Management periodically review the performance of Wellington Management’s investment professionals. Although Wellington Management does not track the time an investment professional spends on a single account, Wellington Management does periodically assess whether an investment professional has adequate time and resources to effectively manage the investment professional’s various client mandates.

3. Description of Compensation

Wellington Management receives a fee based on the assets under management of the Wellington Management Portfolio as set forth in the Investment Advisory Agreement between Wellington Management and the Trust on behalf of the Fund. Wellington Management pays its investment professionals out of its total revenues, including the advisory fees earned with respect to the Wellington Management Portfolio. The following information relates to fiscal year ended October 31, 2013.

Wellington Management’s compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high quality investment management services to its clients. Wellington Management’s compensation of the named Portfolio Managers includes a base salary and incentive components. The base salary for each Portfolio Manager who is a partner of Wellington Management is generally a fixed amount that is determined by the Managing Partners of the firm.

Each Portfolio Manager is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the Wellington Management Portfolio and generally each other account managed by the Portfolio Manager. Each Portfolio Manager’s incentive payment relating to the Wellington Management Portfolio is linked to the net pre-tax performance of the Wellington Management Portfolio managed by the Portfolio Managers compared to the Russell 2500 Growth Index over one- and three-year periods, with an emphasis on three-year results. In 2012, Wellington Management began placing increased emphasis on long-term performance and is phasing in five-year performance comparison periods. Wellington Management applies similar incentive compensation structures (although the benchmarks or peer groups, time periods, and rates may differ) to other accounts managed by the Portfolio Managers, including accounts with performance fees.

Portfolio-based incentives across all accounts managed by an investment professional can, and typically do, represent a significant portion of an investment professional’s overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The Portfolio Managers may also be eligible for bonus payments based on their overall contribution to Wellington Management’s business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on other factors. Each partner of Wellington Management is eligible to participate in a partner-funded tax-qualified retirement plan, the contributions to which are made pursuant to an actuarial formula. Mr. Abrams is a partner of the firm.

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4. Ownership of Securities

As of October 31, 2013, Mr. Abrams owned shares of the Fund exceeding $1 million. As of October 31, 2013, Mr. Fitzpatrick owned shares of the Fund in the $500,001–$1,000,000 range.

G. Vanguard

Vanguard, through its Equity Investment Group, provides investment advisory services on an at-cost basis for a portion of Vanguard Explorer Fund. The compensation and other expenses of Vanguard’s advisory staff are allocated among the funds utilizing Vanguard’s advisory services.

1. Other Accounts Managed

James D. Troyer, James P. Stetler, and Michael R. Roach co-manage a portion of Vanguard Explorer Fund; as of October 31, 2013, the Fund held assets of $12.1 billion. As of October 31, 2013, Mr. Troyer, Mr. Stetler, and Mr. Roach also co-managed all or a portion of 13 other registered investment companies with total assets of $98 billion and four other pooled investment vehicles with total assets of $85.5 million (none of which had advisory fees based on account performance).

2. Material Conflicts of Interest

At Vanguard, individual portfolio managers may manage multiple accounts for multiple clients. In addition to mutual funds, these accounts may include separate accounts, collective trusts, and offshore funds. Managing multiple funds or accounts may give rise to potential conflicts of interest including, for example, conflicts among investment strategies and conflicts in the allocation of investment opportunities. Vanguard manages potential conflicts between funds or accounts through allocation policies and procedures, internal review processes, and oversight by trustees and independent third parties. Vanguard has developed trade allocation procedures and controls to ensure that no one client, regardless of type, is intentionally favored at the expense of another. Allocation policies are designed to address potential conflicts in situations where two or more funds or accounts participate in investment decisions involving the same securities.

3. Description of Compensation

All Vanguard portfolio managers are Vanguard employees. This section describes the compensation of the Vanguard employees who manage Vanguard mutual funds. As of October 31, 2013, a Vanguard portfolio manager’s compensation generally consists of base salary, bonus, and payments under Vanguard’s long-term incentive compensation program. In addition, portfolio managers are eligible for the standard retirement benefits and health and welfare benefits available to all Vanguard employees. Also, certain portfolio managers may be eligible for additional retirement benefits under several supplemental retirement plans that Vanguard adopted in the 1980s to restore dollar-for-dollar the benefits of management employees that had been cut back solely as a result of tax law changes. These plans are structured to provide the same retirement benefits as the standard retirement plans.

In the case of portfolio managers responsible for managing multiple Vanguard funds or accounts, the method used to determine their compensation is the same for all funds and investment accounts. A portfolio manager’s base salary is determined by the manager’s experience and performance in the role, taking into account the ongoing compensation benchmark analyses performed by Vanguard’s Human Resources Department. A portfolio manager’s base salary is generally a fixed amount that may change as a result of an annual review, upon assumption of new duties, or when a market adjustment of the position occurs.

A portfolio manager’s bonus is determined by a number of factors. One factor is gross, pre-tax performance of the fund relative to expectations for how the fund should have performed, given the fund’s investment objective, policies, strategies, and limitations, and the market environment during the measurement period. This performance factor is not based on the amount of assets held in the fund’s portfolio. For the portion of Vanguard Explorer Fund managed by Vanguard, the performance factor depends on how successfully the portfolio manager outperforms the Russell 2500 Growth Index and maintains the risk parameters of the Fund over a three-year period. Additional factors include the portfolio manager’s contributions to the investment management functions within the sub-asset class, contributions to the development of other investment professionals and supporting staff, and overall contributions to strategic planning and decisions for the investment group. The target bonus is expressed as a percentage of base salary. The actual bonus

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paid may be more or less than the target bonus, based on how well the manager satisfies the objectives previously described. The bonus is paid on an annual basis.

Under the long-term incentive compensation program, all full-time employees receive a payment from Vanguard’s long-term incentive compensation plan based on their years of service, job level, and, if applicable, management responsibilities. Each year, Vanguard’s independent directors determine the amount of the long-term incentive compensation award for that year based on the investment performance of the Vanguard funds relative to competitors and Vanguard’s operating efficiencies in providing services to the Vanguard funds.

4. Ownership of Securities

Vanguard employees, including portfolio managers, allocate their investments among the various Vanguard funds based on their own individual investment needs and goals. Vanguard employees, as a group, invest a sizable portion of their personal assets in Vanguard funds. As of October 31, 2013, Vanguard employees collectively invested more than $4.1 billion in Vanguard funds. F. William McNabb III, Chairman of the Board, Chief Executive Officer, and President of Vanguard and the Vanguard funds, invests substantially all of his personal financial assets in Vanguard funds.

As of October 31, 2013, Mr. Roach owned shares of Vanguard Explorer Fund within the $50,001–$100,000 range. Mr. Troyer and Mr. Stetler did not own any shares of the Fund.

Duration and Termination of Investment Advisory Agreements

The current investment advisory agreements with Century Capital, Chartwell, Granahan, Kalmar, and Wellington Management are renewable for successive one-year periods, only if (1) each renewal is approved by a vote of the Fund’s board of trustees, including the affirmative votes of a majority of the trustees who are not parties to the agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of considering such approval or (2) each renewal is specifically approved by a vote of a majority of the Fund’s outstanding voting securities. An agreement is automatically terminated if assigned and may be terminated without penalty at any time either (1) by vote of the board of trustees of the Fund upon thirty (30) days’ written notice to the advisor (sixty (60) days’ written notice for Chartwell), (2) by a vote of a majority of the Fund’s outstanding voting securities upon 30 days’ written notice to the advisor (60 days’ written notice for Chartwell), or (3) by the advisor upon ninety (90) days’ written notice to the Fund.

The initial investment advisory agreement with SIMG is binding for a two-year period. At the end of that time, the agreement will become renewable for successive one-year periods, subject to the above conditions.

Vanguard provides at-cost investment advisory services to the Fund pursuant to the terms of the Fifth Amended and Restated Funds’ Service Agreement. This agreement will continue in full force and effect until terminated or amended by mutual agreement of the Vanguard funds and Vanguard.

PORTFOLIO TRANSACTIONS

The advisor decides which securities to buy and sell on behalf of the Fund and then selects the brokers or dealers that will execute the trades on an agency basis or the dealers with whom the trades will be effected on a principal basis. For each trade, the advisor must select a broker-dealer that it believes will provide “best execution.” Best execution does not necessarily mean paying the lowest spread or commission rate available. In seeking best execution, the SEC has said that an advisor should consider the full range of a broker-dealer’s services. The factors considered by the advisor in seeking best execution include, but are not limited to, the broker-dealer’s execution capability, clearance and settlement services, commission rate, trading expertise, willingness and ability to commit capital, ability to provide anonymity, financial responsibility, reputation and integrity, responsiveness, access to underwritten offerings and secondary markets, and access to company management, as well as the value of any research provided by the broker-dealer. In assessing which broker-dealer can provide best execution for a particular trade, the advisor also may consider the timing and size of the order and available liquidity and current market conditions. Subject to applicable legal requirements, the advisor may select a broker based partly on brokerage or research services provided to the advisor and its clients, including the Fund. The advisor may cause the Fund to pay a higher commission than other brokers would charge if the advisor determines in good faith that the amount of the commission is reasonable in relation to the value of services provided. The advisor also may receive brokerage or research services from broker-dealers that are provided at no charge

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in recognition of the volume of trades directed to the broker. To the extent research services or products may be a factor in selecting brokers, services and products may include written research reports analyzing performance or securities, discussions with research analysts, meetings with corporate executives to obtain oral reports on company performance, market data, and other products and services that will assist the advisor in its investment decision-making process. The research services provided by brokers through which the Fund effects securities transactions may be used by the advisor in servicing all of its accounts, and some of the services may not be used by the advisor in connection with the Fund.

During the fiscal years ended October 31, 2011, 2012, and 2013, the Fund paid the following approximate amounts in brokerage commissions:


Vanguard Fund	2011	2012	2013
Explorer Fund	$15,573,000	$10,732,000	$11,776,000

Some securities that are considered for investment by the Fund may also be appropriate for other Vanguard funds or for other clients served by the advisors. If such securities are compatible with the investment policies of the Fund and one or more of the advisor’s other clients and are considered for purchase or sale at or about the same time, then transactions in such securities may be aggregated by the advisor, and the purchased securities or sale proceeds may be allocated among the participating Vanguard funds and the other participating clients of the advisor in a manner deemed equitable by the advisor. Although there may be no specified formula for allocating such transactions, the allocation methods used, and the results of such allocations, will be subject to periodic review by the Fund‘s board of trustees.

The ability of Vanguard and external advisors to purchase or dispose of investments in regulated industries, the derivatives markets, and certain international markets, or to exercise rights on behalf of the Fund, may be restricted or impaired because of limitations on the aggregate level of investment unless regulatory or corporate consents are obtained. As a result, Vanguard and external advisors on behalf of the Fund may be required to limit purchases, sell existing investments, or otherwise restrict or limit the exercise of shareholder rights by the Fund, including voting rights.

As of October 31, 2013, the Fund held securities of its “regular brokers or dealers,” as that term is defined in Rule 10b-1 of the 1940 Act, as follows:


Regular Broker or Dealer (or Parent)	Aggregate Holdings
Deutsche Bank Securities Inc.	$40,900,000

PROXY VOTING GUIDELINES

The Board of Trustees (the Board) of each Vanguard fund that invests in stocks has adopted proxy voting procedures and guidelines to govern proxy voting by the fund. The Board has delegated oversight of proxy voting to the Proxy Oversight Committee (the Committee), made up of senior officers of Vanguard and subject to the operating procedures and guidelines described below. The Committee reports directly to the Board. Vanguard is subject to these procedures and guidelines to the extent that they call for Vanguard to administer the voting process and implement the resulting voting decisions, and for these purposes the guidelines have been approved by the Board of Directors of Vanguard.

The overarching objective in voting is simple: to support proposals and director nominees that maximize the value of a fund’s investments—and those of fund shareholders—over the long term. Although the goal is simple, the proposals the funds receive are varied and frequently complex. As such, the guidelines adopted by the Board provide a rigorous framework for assessing each proposal. Under the guidelines, each proposal must be evaluated on its merits, based on the particular facts and circumstances as presented.

For ease of reference, the procedures and guidelines often refer to all funds. However, our processes and practices seek to ensure that proxy voting decisions are suitable for individual funds. For most proxy proposals, particularly those involving corporate governance, the evaluation will result in the same position being taken across all of the funds and the funds voting as a block. In some cases, however, a fund may vote differently, depending upon the nature and objective of the fund, the composition of its portfolio, and other factors.

The guidelines do not permit the Board to delegate voting responsibility to a third party that does not serve as a fiduciary for the funds. Because many factors bear on each decision, the guidelines incorporate factors the Committee should

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consider in each voting decision. A fund may refrain from voting some or all of its shares or vote in a particular way if doing so would be in the fund’s and its shareholders’ best interests. These circumstances may arise, for example, if the expected cost of voting exceeds the expected benefits of voting, if exercising the vote would result in the imposition of trading or other restrictions, or if a fund (or all Vanguard funds in the aggregate) were to own more than the permissible maximum percentage of a company’s stock (as determined by the company’s governing documents or by applicable law, regulation, or regulatory agreement).

In evaluating proxy proposals, we consider information from many sources, including, but not limited to, the investment advisor for the fund, the management or shareholders of a company presenting a proposal, and independent proxy research services. We will give substantial weight to the recommendations of the company’s board, absent guidelines or other specific facts that would support a vote against management. In all cases, however, the ultimate decision rests with the members of the Committee, who are accountable to the fund’s Board.

While serving as a framework, the following guidelines cannot contemplate all possible proposals with which a fund may be presented. In the absence of a specific guideline for a particular proposal (e.g., in the case of a transactional issue or contested proxy), the Committee will evaluate the issue and cast the fund’s vote in a manner that, in the Committee’s view, will maximize the value of the fund’s investment, subject to the individual circumstances of the fund.

I.	The Board of Directors
A.	Election of directors

Good governance starts with a majority-independent board, whose key committees are made up entirely of independent directors. As such, companies should attest to the independence of directors who serve on the Compensation, Nominating, and Audit committees. In any instance in which a director is not categorically independent, the basis for the independence determination should be clearly explained in the proxy statement.

Although the funds will generally support the board’s nominees, the following factors will be taken into account in determining each fund’s vote:


Factors For Approval	Factors Against Approval
Nominated slate results in board made up of a majority of	Nominated slate results in board made up of a majority of
independent directors.	non-independent directors.
All members of Audit, Nominating, and Compensation	Audit, Nominating, and/or Compensation committees include
committees are independent of management.	non-independent members.
	Incumbent board member failed to attend at least 75% of meetings
	in the previous year.
	Actions of committee(s) on which nominee serves are inconsistent with
	other guidelines (e.g., excessive equity grants, substantial non-audit fees,
	lack of board independence).

B. Contested director elections

In the case of contested board elections, we will evaluate the nominees’ qualifications, the performance of the incumbent board, and the rationale behind the dissidents’ campaign, to determine the outcome that we believe will maximize shareholder value.

C. Classified boards

The funds will generally support proposals to declassify existing boards (whether proposed by management or shareholders), and will block efforts by companies to adopt classified board structures in which only part of the board is elected each year.

II. Approval of Independent Auditors

The relationship between the company and its auditors should be limited primarily to the audit, although it may include certain closely related activities that do not, in the aggregate, raise any appearance of impaired independence. The funds will generally support management’s recommendation for the ratification of the auditor, except in instances in which audit and audit-related fees make up less than 50% of the total fees paid by the company to the audit firm. We will

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evaluate on a case-by-case basis instances in which the audit firm has a substantial non-audit relationship with the company (regardless of its size relative to the audit fee) to determine whether independence has been compromised.

III.	Compensation Issues
A.	Stock-based compensation plans

Appropriately designed stock-based compensation plans, administered by an independent committee of the board and approved by shareholders, can be an effective way to align the interests of long-term shareholders with the interests of management, employees, and directors. The funds oppose plans that substantially dilute their ownership interest in the company, provide participants with excessive awards, or have inherently objectionable structural features.

An independent compensation committee should have significant latitude to deliver varied compensation to motivate the company’s employees. However, we will evaluate compensation proposals in the context of several factors (a company’s industry, market capitalization, competitors for talent, etc.) to determine whether a particular plan or proposal balances the perspectives of employees and the company’s other shareholders. We will evaluate each proposal on a case-by-case basis, taking all material facts and circumstances into account.

The following factors will be among those considered in evaluating these proposals:


Factors For Approval	Factors Against Approval
Company requires senior executives to hold a minimum amount	Total potential dilution (including all stock-based plans) exceeds 15% of
of company stock (frequently expressed as a multiple of salary).	shares outstanding.
Company requires stock acquired through equity awards to be	Annual equity grants have exceeded 2% of shares outstanding.
held for a certain period of time.
Compensation program includes performance-vesting awards,	Plan permits repricing or replacement of options without
indexed options, or other performance-linked grants.	shareholder approval.
Concentration of equity grants to senior executives is limited	Plan provides for the issuance of reload options.
(indicating that the plan is very broad-based).
Stock-based compensation is clearly used as a substitute for	Plan contains automatic share replenishment (evergreen) feature.
cash in delivering market-competitive total pay.

B. Bonus plans

Bonus plans, which must be periodically submitted for shareholder approval to qualify for deductibility under Section 162(m) of the IRC, should have clearly defined performance criteria and maximum awards expressed in dollars. Bonus plans with awards that are excessive, in both absolute terms and relative to a comparative group, generally will not be supported.

C. Employee stock purchase plans

The funds will generally support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value and that shares reserved under the plan amount to less than 5% of the outstanding shares.

D. Advisory votes on executive compensation (Say on Pay)

In addition to proposals on specific equity or bonus plans, the funds are required to cast advisory votes approving many companies’ overall executive compensation plans (so-called Say on Pay votes). In evaluating these proposals, we consider a number of factors, including the amount of compensation that is at risk, the amount of equity-based compensation that is linked to the company’s performance, and the level of compensation as compared to industry peers. The funds will generally support pay programs that demonstrate effective linkage between pay and performance over time and that provide compensation opportunities that are competitive relative to industry peers. On the other hand, pay programs in which significant compensation is guaranteed or insufficiently linked to performance will be less likely to earn our support.

E. Executive severance agreements (golden parachutes)

Although executives’ incentives for continued employment should be more significant than severance benefits, there are instances—particularly in the event of a change in control—in which severance arrangements may be appropriate.

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Severance benefits payable upon a change of control AND an executive’s termination (so-called “double trigger” plans) are generally acceptable to the extent that benefits paid do not exceed three times salary and bonus. Arrangements in which the benefits exceed three times salary and bonus should be justified and submitted for shareholder approval. We do not generally support guaranteed severance absent a change in control or arrangements that do not require the termination of the executive (so-called “single trigger” plans).

IV. Corporate Structure and Shareholder Rights

The exercise of shareholder rights, in proportion to economic ownership, is a fundamental privilege of stock ownership that should not be unnecessarily limited. Such limits may be placed on shareholders’ ability to act by corporate charter or by-law provisions, or by the adoption of certain takeover provisions. In general, the market for corporate control should be allowed to function without undue interference from these artificial barriers.

The funds’ positions on a number of the most commonly presented issues in this area are as follows:

A.	Shareholder rights plans (poison pills)
A	company’s adoption of a so-called poison pill effectively limits a potential acquirer’s ability to buy a controlling interest

without the approval of the target’s board of directors. Such a plan, in conjunction with other takeover defenses, may serve to entrench incumbent management and directors. However, in other cases, a poison pill may force a suitor to negotiate with the board and result in the payment of a higher acquisition premium.

In general, shareholders should be afforded the opportunity to approve shareholder rights plans within a year of their adoption. This provides the board with the ability to put a poison pill in place for legitimate defensive purposes, subject to subsequent approval by shareholders. In evaluating the approval of proposed shareholder rights plans, we will consider the following factors:


Factors For Approval	Factors Against Approval
Plan is relatively short-term (3-5 years).	Plan is long term (>5 years).
Plan requires shareholder approval for renewal.	Renewal of plan is automatic or does not require shareholder approval.
Plan incorporates review by a committee of independent	Board with limited independence.
directors at least every three years (so-called TIDE provisions).
Ownership trigger is reasonable (15-20%).	Ownership trigger is less than 15%.
Highly independent, non-classified board.	Classified board.
Plan includes permitted-bid/qualified-offer feature (chewable
pill) that mandates a shareholder vote in certain situations.

B. Cumulative voting

The funds are generally opposed to cumulative voting under the premise that it allows shareholders a voice in director elections that is disproportionate to their economic investment in the corporation.

C. Supermajority vote requirements

The funds support shareholders’ ability to approve or reject matters presented for a vote based on a simple majority. Accordingly, the funds will support proposals to remove supermajority requirements and oppose proposals to impose them.

D. Right to call meetings and act by written consent

The funds support shareholders’ right to call special meetings of the board (for good cause and with ample representation) and to act by written consent. The funds will generally vote for proposals to grant these rights to shareholders and against proposals to abridge them.

E. Confidential voting

The integrity of the voting process is enhanced substantially when shareholders (both institutions and individuals) can vote without fear of coercion or retribution based on their votes. As such, the funds support proposals to provide confidential voting.

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F. Dual classes of stock

We are opposed to dual class capitalization structures that provide disparate voting rights to different groups of shareholders with similar economic investments. We will oppose the creation of separate classes with different voting rights and will support the dissolution of such classes.

V. Corporate and Social Policy Issues

Proposals in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices. The Board generally believes that these are “ordinary business matters” that are primarily the responsibility of management and should be evaluated and approved solely by the corporation’s board of directors. Often, proposals may address concerns with which the Board philosophically agrees, but absent a compelling economic impact on shareholder value (e.g., proposals to require expensing of stock options), the funds will typically abstain from voting on these proposals. This reflects the belief that regardless of our philosophical perspective on the issue, these decisions should be the province of company management unless they have a significant, tangible impact on the value of a fund’s investment and management is not responsive to the matter.

VI. Voting in Foreign Markets

Corporate governance standards, disclosure requirements, and voting mechanics vary greatly among the markets outside the United States in which the funds may invest. Each fund’s votes will be used, where applicable, to advocate for improvements in governance and disclosure by each fund’s portfolio companies. We will evaluate issues presented to shareholders for each fund’s foreign holdings in the context with the guidelines described above, as well as local market standards and best practices. The funds will cast their votes in a manner believed to be philosophically consistent with these guidelines, while taking into account differing practices by market. In addition, there may be instances in which the funds elect not to vote, as described below.

Many foreign markets require that securities be “blocked” or reregistered to vote at a company’s meeting. Absent an issue of compelling economic importance, we will generally not subject the fund to the loss of liquidity imposed by these requirements.

The costs of voting (e.g., custodian fees, vote agency fees) in foreign markets may be substantially higher than for U.S. holdings. As such, the fund may limit its voting on foreign holdings in instances in which the issues presented are unlikely to have a material impact on shareholder value.

VII. Voting Shares of a Company that has an Ownership Limitation

Certain companies have provisions in their governing documents that restrict stock ownership in excess of a specified limit. Typically, these ownership restrictions are included in the governing documents of real estate investment trusts, but may be included in other companies’ governing documents.

A company’s governing documents normally allow the company to grant a waiver of these ownership limits, which would allow a fund (or all Vanguard-advised funds) to exceed the stated ownership limit. Sometimes a company will grant a waiver without restriction. From time to time, a company may grant a waiver only if a fund (or funds) agrees to not vote the company’s shares in excess of the normal specified limit. In such a circumstance, a fund may refrain from voting shares if owning the shares beyond the company’s specified limit is in the best interests of the fund and its shareholders.

In addition, applicable law may require prior regulatory approval to permit ownership of certain regulated issuer’s voting securities above certain limits or may impose other restrictions on owners of more than a certain percentage of a regulated issuer’s voting shares. The Board has authorized the funds to vote shares above these limits in the same proportion as votes cast by the issuer’s entire shareholder base (i.e., mirror vote) or to refrain from voting excess shares if mirror voting is not practicable. For example, rules administered by the Board of Governors of the Federal Reserve System (the “FRB”) generally require that a person seeking to own more than 10% of a bank regulated by the FRB seek prior approval. Vanguard has obtained regulatory approval that allows Vanguard funds to own up to 15% of a class of a bank’s outstanding voting shares without seeking prior regulatory approval, provided the funds’ shares in excess of 10% are mirror voted or not voted at all.

B-48

These ownership limits may be applied at the individual fund level, across all Vanguard-advised funds, or across all Vanguard funds, regardless of whether they are advised by Vanguard.

VIII. Voting on a Fund’s Holdings of Other Vanguard Funds

Certain Vanguard funds (owner funds) may, from time to time, own shares of other Vanguard funds (underlying funds). If an underlying fund submits a matter to a vote of its shareholders, votes for and against such matters on behalf of the owner funds will be cast in the same proportion as the votes of the other shareholders in the underlying fund.

IX. The Proxy Voting Group

The Board has delegated the day-to-day operations of the funds’ proxy voting process to the Proxy Voting Group, which the Committee oversees. Although most votes will be determined, subject to the individual circumstances of each fund, by reference to the guidelines as separately adopted by each of the funds, there may be circumstances when the Proxy Voting Group will refer proxy issues to the Committee for consideration. In addition, at any time, the Board has the authority to vote proxies, when, at the Board’s or the Committee’s discretion, such action is warranted.

The Proxy Voting Group performs the following functions: (1) managing proxy voting vendors; (2) reconciling share positions; (3) analyzing proxy proposals using factors described in the guidelines; (4) determining and addressing potential or actual conflicts of interest that may be presented by a particular proxy; and (5) voting proxies. The Proxy Voting Group also prepares periodic and special reports to the Board, and any proposed amendments to the procedures and guidelines.

X. The Proxy Oversight Committee

The Board, including a majority of the independent trustees, appoints the members of the Committee who are senior officers of Vanguard.

The Committee does not include anyone whose primary duties include external client relationship management or sales. This clear separation between the proxy voting and client relationship functions is intended to eliminate any potential conflict of interest in the proxy voting process. In the unlikely event that a member of the Committee believes he or she might have a conflict of interest regarding a proxy vote, that member must recuse himself or herself from the committee meeting at which the matter is addressed, and not participate in the voting decision.

The Committee works with the Proxy Voting Group to provide reports and other guidance to the Board regarding proxy voting by the funds. The Committee has an obligation to conduct its meetings and exercise its decision-making authority subject to the fiduciary standards of good faith, fairness, and Vanguard’s Code of Ethics. The Committee shall authorize proxy votes that the Committee determines, at its sole discretion, to be in the best interests of each fund’s shareholders. In determining how to apply the guidelines to a particular factual situation, the Committee may not take into account any interest that would conflict with the interest of fund shareholders in maximizing the value of their investments.

The Board may review these procedures and guidelines and modify them from time to time. The procedures and guidelines are available on Vanguard’s website at vanguard.com.

You may obtain a free copy of a report that details how the funds voted the proxies relating to the portfolio securities held by the funds for the prior 12-month period ended June 30 by logging on to Vanguard’s website at vanguard.com or the SEC’s website at www.sec.gov.

FINANCIAL STATEMENTS

The Fund’s Financial Statements for the fiscal year ended October 31, 2013, appearing in the Fund‘s 2013 Annual Report to Shareholders, and the report thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, also appearing therein, are incorporated by reference into this Statement of Additional Information. For a more complete discussion of the Fund’s performance, please see the Fund‘s Annual and Semiannual Reports to Shareholders, which may be obtained without charge.

B-49

SAI024 022014

PART C

VANGUARD EXPLORER FUND

OTHER INFORMATION

Item 28. Exhibits

(a)	Articles of Incorporation, Amended and Restated Agreement, and Declaration of Trust, filed on February 19, 2009, Post-Effective Amendment No. 85, is hereby incorporated by reference.
(b)	By-Laws filed on October 14, 2010 Post-Effective Amendment No. 89, is hereby incorporated by reference.
(c)	Instruments Defining Rights of Security Holders, reference is made to Articles III and V of the Registrant’s Amended and Restated Agreement and Declaration of Trust, refer to Exhibit (a) above.
(d)	Investment Advisory Contracts, for Century Capital Management LLC, filed on August 12, 2010, Post-Effective Amendment No. 88, is hereby incorporated by reference. For Kalmar Investment Advisers, filed on February 22, 2010 Post-Effective Amendment No. 87, is hereby incorporated by reference. For Wellington Management Company LLP, filed on March 23, 2011 Post-Effective Amendment No. 92, is hereby incorporated by reference. For Chartwell Investment Partners, L.P., filed on February 17, 2012, Post-Effective Amendment No. 94, is hereby incorporated by reference. For Stephens Investment Management Group, and for Granahan Investment Management, Inc., are filed herewith. The Vanguard Group, Inc. provides investment advisory services to the Fund at cost pursuant to the Fifth Amended and Restated Funds’ Service Agreement, refer to Exhibit (h) below.
(e)	Underwriting Contracts, not applicable.
(f)	Bonus or Profit Sharing Contracts, reference is made to the section entitled “Management of the Fund” in Part B of this Registration Statement.
(g)	Custodian Agreement, for Brown Brothers Harriman & Company, filed on August 12, 2013, Post-Effective Amendment No. 98, is hereby incorporated by reference.
(h)	Other Material Contracts, Fifth Amended and Restated Funds’ Service Agreement, filed on December 16, 2011, Post-Effective Amendment No. 93, is hereby incorporated by reference.
(i)	Legal Opinion, not applicable.
(j)	Other Opinions, Consent of Independent Registered Public Accounting Firm, is filed herewith.
(k)	Omitted Financial Statements, not applicable.
(l)	Initial Capital Agreements, not applicable.
(m)	Rule 12b-1 Plan, not applicable.
(n)	Rule 18f-3 Plan, filed herewith.
(o)	Reserved.
(p)	Codes of Ethics, for Chartwell Investment Partners, The Vanguard Group, Inc., and Century Capital Management LLC, filed on February 22, 2010, Post-Effective Amendment No. 87, are hereby incorporated by reference. For Wellington Management Company LLP, Stephens Investment Management Group, Granahan Investment Management, Inc., and for Kalmar Investment Advisers, are filed herewith.

Item 29. Persons Controlled by or under Common Control with Registrant

Registrant is not controlled by or under common control with any person.

C-1

Item 30. Indemnification

The Registrant’s organizational documents contain provisions indemnifying Trustees and officers against liability incurred in their official capacities. Article VII, Section 2 of the Amended and Restated Agreement and Declaration of Trust provides that the Registrant may indemnify and hold harmless each and every Trustee and officer from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to the performance of his or her duties as a Trustee or officer. Article VI of the By-Laws generally provides that the Registrant shall indemnify its Trustees and officers from any liability arising out of their past or present service in that capacity. Among other things, this provision excludes any liability arising by reason of willful misfeasance, bad faith, gross negligence, or the reckless disregard of the duties involved in the conduct of the Trustee’s or officer’s office with the Registrant.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted for directors, officers, or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Item 31. Business and Other Connections of Investment Adviser

Wellington Management Company, LLP (Wellington Management) is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the Advisers Act). The list required by this Item 31 of officers and partners of Wellington Management, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and partners during the past two years, is incorporated herein by reference from Form ADV filed by Wellington Management pursuant to the Advisers Act (SEC File No. 801-15908).

Granahan Investment Management, Inc. (Granahan) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and directors of Granahan, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated herein by reference from Form ADV filed by Granahan pursuant to the Advisers Act (SEC File No. 801-23705).

Chartwell Investment Partners (Chartwell) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and partners of Chartwell, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and partners during the past two years, is incorporated herein by reference from Form ADV filed by Chartwell pursuant to the Advisers Act (SEC File No. 801-54124).

The Vanguard Group, Inc. (Vanguard) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and directors of Vanguard, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated herein by reference from Form ADV filed by Vanguard pursuant to the Advisers Act (SEC File No. 801-11953).

Kalmar Investment Advisers (Kalmar) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and directors of Kalmar, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated herein by reference from Form ADV filed by Kalmar pursuant to the Advisers Act (SEC File No. 801-53608).

Century Capital Management, LLC (Century Capital) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and directors of Century Capital, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated herein by reference from Form ADV filed by Century Capital pursuant to the Advisers Act (SEC File No. 801-62860).

Stephens Investment Management Group, LLC (SIMG) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and directors of SIMG, together with any information as to any business profession, vocation, or employment of a substantial nature engaged in by such officers and directors during the past two years, is incorporated herein by reference from Form ADV filed by SIMG pursuant to the Advisers Act (SEC File No. 801-64675).

C-2

Item 32. Principal Underwriters

a)	Vanguard Marketing Corporation, a wholly owned subsidiary of The Vanguard Group, Inc., is the principal underwriter of each fund within the Vanguard group of investment companies, a family of more than 170 mutual funds.
(b)	The principal business address of each named director and officer of Vanguard Marketing Corporation is 100 Vanguard Boulevard, Malvern, PA 19355.


Name	Positions and Office with Underwriter	Positions and Office with Funds
F. William McNabb III	Director	Chairman and Chief Executive Officer
Michael S. Miller	Director and Managing Director	None
Glenn W. Reed	Director	None
Mortimer J. Buckley	Director and Senior Vice President	None
Martha G. King	Director and Senior Vice President	None
Chris D. McIsaac	Director and Senior Vice President	None
Heidi Stam	Director and Senior Vice President	Secretary
Paul A. Heller	Director and Senior Vice President	None
Pauline C. Scalvino	Chief Compliance Officer	Chief Compliance Officer
Jack Brod	Principal	None
Kathryn Himsworth	Principal	None
Brian Gallary	Principal	None
John C. Heywood	Principal	None
Timothy P. Holmes	Principal	None
Sarah Houston	Principal	None
Colin M. Kelton	Principal	None
Mike Lucci	Principal	None
Brian McCarthy	Principal	None
Jane K. Myer	Principal	None
Tammy Virnig	Principal	None
Salvatore L. Pantalone	Financial and Operations Principal and Treasurer	None
Joseph Colaizzo	Financial and Operations Principal	None
Richard D. Carpenter	Principal	None
Jack T. Wagner	Principal	None
Michael L. Kimmel	Assistant Secretary	None
Caroline Cosby	Secretary	None

(c)	Not applicable

C-3

Item 33. Location of Accounts and Records

The books, accounts, and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder will be maintained at the offices of the Registrant, 100 Vanguard Boulevard, Malvern, Pennsylvania 19355; the Registrant’s Transfer Agent, The Vanguard Group, Inc., 100 Vanguard Boulevard, Malvern, Pennsylvania 19355; the Registrant’s Custodian, Brown Brothers Harriman, & Co., 40 Water Street, Boston, MA 02109; and the Registrant’s investment advisors at their respective locations identified in the Statement of Additional Information.

Item 34. Management Services

Other than as set forth in the section entitled “Management of the Fund” in Part B of this Registration Statement, the Registrant is not a party to any management-related service contract.

Item 35. Undertakings

Not Applicable

C-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant hereby certifies that it meets all requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Valley Forge and the Commonwealth of Pennsylvania, on the 21st day of February, 2014.

VANGUARD EXPLORER FUND
BY:_______/s/ F. William McNabb III*____________
F. William McNabb III
Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated:


Signature	Title	Date

/s/ F. William McNabb III*	Chairman and Chief Executive	February 21, 2014
	Officer
F. William McNabb
/s/ Emerson U. Fullwood*	Trustee	February 21, 2014
Emerson U. Fullwood
/s/ Rajiv L. Gupta*	Trustee	February 21, 2014
Rajiv L. Gupta
/s/ Amy Gutmann*	Trustee	February 21, 2014
Amy Gutmann
/s/ JoAnn Heffernan Heisen*	Trustee	February 21, 2014
JoAnn Heffernan Heisen
/s/ F. Joseph Loughrey*	Trustee	February 21, 2014
F. Joseph Loughrey
/s/ Mark Loughridge*	Trustee	February 21, 2014
Mark Loughridge
/s/ Scott C. Malpass*	Trustee	February 21, 2014
Scott C. Malpass
/s/ André F. Perold*	Trustee	February 21, 2014
André F. Perold
/s/ Alfred M. Rankin, Jr.*	Trustee	February 21, 2014
Alfred M. Rankin, Jr.
/s/ Peter F. Volanakis*	Trustee	February 21, 2014
Peter F. Volanakis
/s/ Thomas J. Higgins*	Chief Financial Officer	February 21, 2014
Thomas J. Higgins

*By: /s/ Heidi Stam

Heidi Stam, pursuant to a Power of Attorney filed on March 27, 2012, see File Number 2-11444, Incorporated by Reference.

C-5


INDEX TO EXHIBITS

Investment Advisory Contracts, Granahan Investment Management, Inc	Ex-99.D
Investment Advisory Contracts, Stephens Investment Management Group	Ex-99.D
Other Opinions, Consent of Independent Registered Public Accounting Firm	Ex-99.J
Rule 18f-3 Plan	Ex-99.N
Code of Ethics, Granahan Investment Management, Inc. ,	Ex-99.P
Code of Ethics, Kalmar Investment Advisers	Ex-99.P
Code of Ethics, Stephens Investment Management Group	Ex-99.P
Code of Ethics, Wellington Management Company, LLP	Ex-99.P

C-6

EX-99.D ADVSR CONTR 2 investmentadvisoryagreegrana.htm INVESTMENT ADVISORY CONTRACT investmentadvisoryagreegrana.htm - Generated by SEC Publisher for SEC Filing

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made as of this 1st day of November, 2013, between Vanguard Explorer Fund, a Delaware statutory trust (the “Trust”), and Granahan Investment Management, Inc., a Massachusetts corporation (the “Advisor”).

W I T N E S S E T H

WHEREAS, the Trust is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”); and

WHEREAS, the Trust offers a series of shares known as Vanguard Explorer Fund (the “Fund”); and

WHEREAS, the Trust retained the Advisor to render investment advisory services to the Fund under an Investment Advisory Agreement dated as of December 1, 2005, which was amended on May 1, 2007 (collectively, the “Prior Agreement”); and

WHEREAS, the Trust desires to amend and restate such Investment Advisory Agreement, in certain respects, and the Advisor is willing to render investment advisory services to the Fund in accordance with such amendments.

NOW THEREFORE, in consideration of the mutual promises and undertakings set forth in this Agreement, the Trust and the Advisor hereby agree as follows:

1. Appointment of Advisor. The Trust hereby employs the Advisor as investment advisor, on the terms and conditions set forth herein, for the portion of the assets of the Fund that the Trust’s Board of Trustees (the “Board of Trustees”) determines in its sole discretion to assign to the Advisor from time to time (referred to in this Agreement as the “Granahan Portfolio”), as communicated to the Advisor on behalf of the Board of Trustees by The Vanguard Group, Inc. (“Vanguard”). The Board of Trustees may, from time to time, make additions to, and withdrawals from, the assets of the Fund assigned to the Advisor. The Advisor accepts such employment and agrees to render the services herein set forth, for the compensation herein provided.

2. Duties of Advisor. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Granahan Portfolio; to continuously review, supervise, and administer an investment program for the Granahan Portfolio; to determine in its discretion the securities to be purchased or sold and the portion of such assets to be held uninvested; to provide the Fund with all records concerning the activities of the Advisor that the Fund is required to maintain; and to render regular reports to the Trust’s officers and the Board of Trustees concerning the discharge of the foregoing responsibilities. The Advisor will discharge the foregoing responsibilities subject to the supervision and oversight of the Trust’s officers and the Board of Trustees, and in compliance with the objective, policies, and limitations set forth in the Fund’s prospectus and Statement of Additional Information, any additional operating policies or procedures that the Fund communicates to the Advisor in writing, and applicable laws and regulations. The Advisor agrees to provide, at its own expense, the office space, furnishings and equipment, and personnel required by it to perform the services on the terms and for the compensation provided herein.

3. Securities Transactions. The Advisor is authorized to select the brokers or dealers that will execute purchases and sales of securities for the Granahan Portfolio, and is directed to use its best efforts to obtain best execution for such transactions. In selecting brokers or dealers to execute trades for the Granahan Portfolio, the Advisor will comply with all applicable statutes, rules, interpretations by the Securities and Exchange Commission or its staff, other applicable law, and the written policies and procedures established by the Board of Trustees and communicated to the Advisor in writing.

4. Compensation of Advisor. For services to be provided by the Advisor pursuant to this Agreement, the Fund will pay to the Advisor, and the Advisor agrees to accept as full compensation therefor, an investment advisory fee consisting of a base fee plus a performance adjustment at the rates specified in Schedule A to this Agreement, payable quarterly in arrears.

5. Reports. The Fund and the Advisor agree to furnish to each other current prospectuses, proxy statements, reports to shareholders, certified copies of their financial statements, and such other information with regard to their affairs as each may reasonably request including, but not limited to, information about changes in the investment officers of the Advisor who are responsible for managing the Granahan Portfolio.

6. Compliance. The Advisor agrees to comply with all Applicable Law and all policies, procedures, or reporting requirements that the Board of Trustees reasonably adopts and communicates to the Advisor in writing, including, without limitation, any such policies, procedures, or reporting requirements relating to soft dollar or other brokerage arrangements. “Applicable Law” means (i) the “federal securities laws” as defined in Rule 38a-1(e)(1) under the 1940 Act, as amended from time to time, and (ii) any and all other laws, rules, and regulations, whether foreign or domestic, in each case applicable at any time and from time to time to the investment management operations of the Advisor in relation to the Granahan Portfolio.

7. Status of Advisor. The services of the Advisor to the Fund are not to be deemed exclusive, and the Advisor will be free to render similar services to others so long as its services to the Fund are not impaired thereby. The Advisor will be deemed to be an independent contractor and will, unless otherwise expressly provided or authorized, have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund or the Trust.

8. Liability of Advisor. No provision of this Agreement will be deemed to protect the Advisor against any liability to the Fund or its shareholders to which it might otherwise be subject by reason of any willful misfeasance, bad faith, or gross negligence in the performance of its duties or the reckless disregard of its obligations under this Agreement.

9. Limitations on Consultations. The Advisor is prohibited from consulting with other advisors of the Fund, except Vanguard, concerning transactions for the Fund in securities or other assets.

10. Duration; Termination; Notices; Amendment. This Agreement will become effective on the date hereof and shall continue in effect for successive twelve-month periods, only so long as such continuance specifically is approved at least annually by the Board of Trustees, including a majority of those Trustees who are not parties to such Agreement or

interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. In addition, the question of continuance of the Agreement may be presented to the shareholders of the Fund; in such event, such continuance will be effected only if approved by the affirmative vote of a majority of the outstanding voting securities of the Fund.

Notwithstanding the foregoing, however, (i) this Agreement may at any time be terminated without payment of any penalty either by vote of the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund, on thirty days’ written notice to the Advisor, (ii) this Agreement will automatically terminate in the event of its assignment, and (iii) this Agreement may be terminated by the Advisor on ninety days’ written notice to the Fund. Any notice under this Agreement will be given in writing, addressed and delivered, or mailed postpaid, to the other party as follows:

If to the Fund, at:
Vanguard Explorer Fund
P.O. Box 2600
Valley Forge, PA 19482
Attention: Sean P. Hagerty
Telephone: 610-669-4617
Facsimile: 610-503-5855

If to the Advisor, at:
Granahan Investment Management, Inc.
275 Wyman Street, Suite 270
Waltham, MA 02451
Attention: Jane M. White
Telephone: 781-890-4412
Facsimile: 781-890-6427

This Agreement may be amended by mutual consent, but the consent of the Trust must be approved (i) by a majority of those members of the Board of Trustees who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such amendment, and (ii) to the extent required by the 1940 Act, by a vote of a majority of the outstanding voting securities of the Fund.

As used in this Section 10, the terms “assignment,” “interested persons,” and “vote of a majority of the outstanding voting securities” will have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act.

11. Severability. If any provision of this Agreement will be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement will not be affected thereby.

governmental body, or official having jurisdiction over the Advisor, or (iii) for information that is publicly available other than due to disclosure by the Advisor or its affiliates or becomes known to the Advisor from a source other than the Trust, the Board of Trustees, or Vanguard.

13. Proxy Policy. The Advisor acknowledges that Vanguard, at the direction of the Fund, will vote the shares of all securities that are held by the Fund.

14. Governing Law. All questions concerning the validity, meaning, and effect of this Agreement shall be determined in accordance with the laws (without giving effect to the conflict-of-law principles thereof) of the State of Delaware applicable to contracts made and to be performed in that state.

IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory Agreement to be executed as of the date first set forth herein.


Granahan Investment Management, Inc.		Vanguard Explorer Fund



/s/ Jane M. White	9/30/2013	/s/ F. William McNabb	10/14/2013
Signature	Date	Signature	Date


Jane M. White		F. William McNabb
Print Name		Print Name

EX-99.D ADVSR CONTR 3 iaagreestephensforexplorer_0.htm INVESTMENT ADVISORY CONTRACT iaagreestephensforexplorer_0.htm - Generated by SEC Publisher for SEC Filing

INVESTMENT ADVISORY AGREEMENT

THIS AGREEMENT is made as of this 12^stday of August, 2013, between Vanguard Explorer Fund, a Delaware statutory trust (the “Trust”), and Stephens Investment Management Group, LLC

(the “Advisor”), an Arkansas limited liability company.

W I T N E S S E T H

WHEREAS, the Trust is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”); and

WHEREAS, the Trust offers a series of shares known as Vanguard Explorer Fund (the “Fund”); and

WHEREAS, the Trust desires to retain the Advisor to render investment advisory services to the Fund, and the Advisor is willing to render such services.

NOW THEREFORE, in consideration of the mutual promises and undertakings set forth in this “Agreement,” the Trust and the Advisor hereby agree as follows:

1. Appointment of Advisor. The Trust hereby employs the Advisor as investment advisor, on the terms and conditions set forth herein, for the portion of the assets of the Fund that the Trust’s Board of Trustees (the “Board of Trustees”) determines in its sole discretion to assign to the Advisor from time to time (referred to in this Agreement as the “SIMG Portfolio”), as communicated to the Advisor on behalf of the Board of Trustees by The Vanguard Group, Inc. (“Vanguard”). The Board of Trustees may, from time to time, make additions to, and withdrawals from, the assets of the Fund assigned to the Advisor. The Advisor accepts such employment and agrees to render the services herein set forth, for the compensation herein provided.

2. Duties of Advisor. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the SIMG Portfolio; to continuously review, supervise, and administer an investment program for the SIMG Portfolio; to determine in its discretion the securities to be purchased or sold and the portion of such assets to be held uninvested; to provide the Fund with all records concerning the activities of the Advisor that the Fund is required to maintain; and to render regular reports to the Trust’s officers and the Board of Trustees concerning the discharge of the foregoing responsibilities. The Advisor will discharge the foregoing responsibilities subject to the supervision and oversight of the Trust’s officers and the Board of Trustees, and in compliance with the objective, policies, and limitations set forth in the Fund’s prospectus and Statement of Additional Information, any additional operating policies or procedures that the Fund communicates to the Advisor in writing, and applicable laws and regulations. The Advisor agrees to provide, at its own expense, the office space, furnishings and equipment, and personnel required by it to perform the services on the terms and for the compensation provided herein.

3. Securities Transactions. The Advisor is authorized to select the brokers or dealers that will execute purchases and sales of securities for the SIMG Portfolio, and is directed to seek to obtain best execution for such transactions, consistent with Section 28(e) of the Securities Exchange Act of 1934. In selecting brokers or dealers to execute trades for the SIMG Portfolio, the Advisor will comply with all applicable statutes, rules, interpretations by the U.S. Securities and Exchange Commission or its staff, other applicable law, and the written policies and procedures established by the Board of Trustees and communicated to the Advisor in writing.

5. Reports. The Fund and the Advisor agree to furnish to each other current prospectuses, proxy statements, reports to shareholders, financial statements, and such other information with regard to their affairs as each may reasonably request, including, but not limited to, information about changes in investment officers of the Advisor who are responsible for managing the SIMG Portfolio.

6. Compliance. The Advisor agrees to comply with all Applicable Law and all policies, procedures or reporting requirements that the Board of Trustees reasonably adopts and communicates to the Advisor in writing, including, without limitation, any such policies, procedures, or reporting requirements relating to soft dollar or other brokerage arrangements. “Applicable Law” means (i) the “federal securities laws” as defined in Rule 38a-1(e)(1) under the 1940 Act, as amended from time to time, and (ii) any and all other laws, rules, and regulations, whether foreign or domestic, in each case applicable at any time and from time to time to the investment management operations of the Advisor in relation to the SIMG Portfolio.

8. Liability of Advisor. No provision of this Agreement will be deemed to protect the Advisor against any liability to the Fund or its shareholders to which it might otherwise be subject by reason of any willful misfeasance, bad faith, or negligence in the performance of its duties or the reckless disregard of its obligations under this Agreement.

9. Limitations on Consultations. The Advisor is prohibited from consulting with other advisors of the Fund, except Vanguard, concerning transactions for the Fund in securities or other assets.

10. Duration; Termination; Notices; Amendment. This Agreement will become effective on the date hereof and will continue in effect for a period of two years thereafter, and shall continue in effect for successive twelve-month periods thereafter, only so long as each such continuance specifically is approved at least annually by the Board of Trustees, including a majority of those Trustees who are not parties to such Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. In addition, the question of continuance of the Agreement may be presented to the shareholders of the Fund; in such event, such continuance will be effected only if approved by the affirmative vote of a majority of the outstanding voting securities of the Fund.

If to the Fund, at:

Vanguard Explorer Fund
P.O. Box 2600
Valley Forge, PA 19482
Attention: Sean P. Hagerty
Telephone: 610-669-4617
Facsimile: 610-503-5855

If to the Advisor, at:

Stephens Investment Management Group, LLC
111 Center Street
8^thFloor
Little Rock, AR 72201
Telephone: 501-377-2151
Facsimile: 501-377-2327

11. Severability. If any provision of this Agreement will be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement will not be affected thereby.

12. Confidentiality. The Advisor shall keep confidential any and all information obtained in connection with the services rendered hereunder and relating directly or indirectly to the Fund, the Trust, or Vanguard and shall not disclose any such information to any person other than the Trust, the Board of Trustees, Vanguard, and any director, officer, or employee of the Trust or Vanguard, except (i) with the prior written consent of the Trust, (ii) as required by law, regulation, court order or the rules or regulations of any self-regulatory organization, governmental body, or official having jurisdiction over the Advisor, or (iii) for information that is publicly available other than due to disclosure by the Advisor or its affiliates or becomes known to the Advisor from a source other than the Trust, the Board of Trustees, or Vanguard.

13. Proxy Policy. The Advisor acknowledges that Vanguard, at the direction of the Fund, will vote the shares of all securities that are held by the Fund.

IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory Agreement to be executed as of the date first set forth herein.


Stephens Investment		Vanguard Explorer Fund
Management Group, LLC
Signature	Date	Signature	Date
Print Name		Print Name

EX-99.J OTHER OPININ 4 consent.htm CONSENT consent.htm - Generated by SEC Publisher for SEC Filing

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Prospectuses and Statement of Additional Information constituting parts of this Post-Effective Amendment No.101 to the registration statement on Form N-1A (the “Registration Statement”) of our report dated December 16, 2013, relating to the financial statements and financial highlights appearing in the October 31, 2013 Annual Report to Shareholders of Vanguard Explorer Fund, which report is also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading “Financial Highlights” in the Prospectuses and under the headings “Financial Statements” and “Service Providers–Independent Registered Public Accounting Firm” in the Statement of Additional Information.

/s/ PricewaterhouseCoopers LLP
Philadelphia, PA
February 21, 2014

EX-99.N 18F-3 PLAN 5 multipleclassplanvanguardfun.htm RULE 18F-3 PLAN multipleclassplanvanguardfun.htm - Generated by SEC Publisher for SEC Filing

VANGUARD FUNDS
MULTIPLE CLASS PLAN

I. INTRODUCTION

This Multiple Class Plan (the “Plan”) describes six separate classes of shares that may be offered by investment company members of The Vanguard Group (collectively the “Funds,” individually a “Fund”). The Plan explains the separate arrangements for each class, how expenses are allocated to each class, and the conversion features of each class. Each Fund may offer any one or more of the specified classes.

The Plan has been approved by the Board of Directors of The Vanguard Group (“Vanguard”). In addition, the Plan has been adopted by a majority of the Board of Trustees of each Fund, including a majority of the Trustees who are not interested persons of each Fund. The classes of shares offered by each Fund are designated in Schedule A hereto, as such Schedule may be amended from time to time.

II. SHARE CLASSES

A Fund may offer any one or more of the following share classes:

Investor Shares
AdmiralShares
SignalShares
Institutional Shares
Institutional Plus Shares
ETF Shares
Transition Shares

III. DISTRIBUTION, AVAILABILITY AND ELIGIBILITY

Distribution arrangements for all classes are described below. Vanguard retains sole discretion in determining share class availability, and whether Fund shares shall be offered either directly or through certain financial intermediaries, or on certain financial intermediary platforms. Eligibility requirements for purchasing shares of each class will differ, as follows:

A. Investor Shares

Investor Shares generally will be available to investors who are not permitted to purchase other classes of shares, subject to the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended

from time to time. It is expected that the minimum investment amount for
Investor Shares will be substantially lower than the amount required for any other
class of shares.

B. Admiral Shares

Admiral Shares generally will be available to individual and other
investors who meet the eligibility requirements specified in Schedule B hereto, as
such Schedule may be amended from time to time. These eligibility requirements
may include, but are not limited to the following factors: (i) the total amount
invested the Fund; or (ii) any other factors deemed appropriate by a Fund’s Board
of Trustees.

C. Signal Shares

Signal Shares generally will be available to institutional and other
investors who meet the eligibility requirements specified in Schedule B hereto, as
such Schedule may be amended from time to time. It is expected that Signal
Shares will be offered to Vanguard’s institutional clients according to eligibility
criteria deemed appropriate by the Fund’s Board of Trustees.

D. Institutional Shares

Institutional Shares generally will be available to institutional and other
investors who meet the eligibility requirements specified in Schedule B hereto, as
such Schedule may be amended from time to time. It is expected that the
minimum investment amount per account for Institutional Shares will be
substantially higher than the amounts required for Investor Shares, Admiral
Shares or Signal Shares.

E. Institutional Plus Shares

Institutional Plus Shares generally will be available to institutional and
other investors who meet the eligibility requirements specified in Schedule B
hereto, as such Schedule may be amended from time to time. It is expected that
the minimum investment amount for Institutional Plus Shares will be substantially
higher than the amount required for any other class of the Fund’s shares.

F. ETF Shares

A Fund will sell ETF Shares to investors that are (or who purchase
through) Authorized Participants, and who pay for their ETF shares by depositing
a prescribed basket of securities rather than paying cash. An Authorized
Participant is an institution, usually a broker-dealer, that is a participant in the
Depository Trust Company (DTC) and that has executed a Participant Agreement
with the Fund’s distributor. Additional eligibility requirements may be specified

in Schedule B hereto, as such Schedule may be amended from time to time. Investors who are not Authorized Participants may buy and sell ETF shares through various exchanges and market centers.

G. Transition Shares

Transition Shares generally will be available solely to Vanguard funds-of-funds that meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time.

IV. SERVICE ARRANGEMENTS

All share classes will receive a range of services provided by Vanguard on a per
account basis. These “account-based” services may include transaction processing and
shareholder recordkeeping, as well as the mailing of updated prospectuses, shareholder
reports, tax statements, confirmation statements, quarterly portfolio summaries, and other
items. It is expected that the aggregate amount of account-based services provided to
Investor Shares will materially exceed the amount of such services provided to any other
class, due to the existence of many more accounts holding Investor Shares. In addition to
this difference in the volume of services provided, arrangements will differ among the
classes as follows:

A. Investor Shares

Investor Shares generally will receive the most basic level of service from
Vanguard. Investor Shares generally will be serviced through a pool of Vanguard
client service representatives.

B. Admiral Shares

Admiral Shares will receive a different level of service from Vanguard as
compared to Investor Shares. Special client service representatives may be
assigned to service Admiral Shares, and holders of such shares may from time to
time receive special mailings and unique additional services.

C. Signal Shares

Signal Shares will receive a level of service from Vanguard that differs
from the service provided to the holders of shares of other classes. Such services
may include informational newsletters and other similar materials devoted to
investment topics of interest. Such newsletters or other materials may be mailed
on a periodic basis. These newsletters or other materials may also be available to
Signal shareholders through separate electronic venues including a dedicated web
site. In addition, special client service representatives may be assigned to service
Signal Shares.

D. Institutional Shares

Institutional Shares will receive from Vanguard a level of service that
differs from the service provided to the holders of shares of other classes. Such
services may include special client service representatives who will be assigned to
service Institutional Shares. Most holders of Institutional Shares periodically will
receive special investment updates from Vanguard’s investment staff. Holders of
Institutional Shares also may receive unique additional services from Vanguard,
and generally will be permitted to transact with Vanguard through the National
Securities Clearing Corporation’s FundSERV system and other special servicing
platforms for institutional investors.

E. Institutional Plus Shares

Institutional Plus Shares generally will receive a very high level of service
from Vanguard as compared to any other share classes. Special client service
representatives will be assigned to service Institutional Plus Shares, and most
holders of such shares periodically, but more than the holders of all other shares,
will receive special updates from Vanguard’s investment staff. Holders of
Institutional Plus Shares may receive unique additional services from Vanguard,
and generally will be permitted to transact with Vanguard through the National
Securities Clearing Corporation’s FundSERV system and other special servicing
platforms for institutional investors.

F. ETF Shares

A Fund is expected to maintain only one shareholder of record for ETF
Shares¾DTC or its nominee. Special client service representatives will be
assigned to the DTC account, and all transactions on this account will be handled
electronically. Due to the nature and purpose of the DTC account, ETF Shares
will not receive any special updates from Vanguard’s investment staff.

G. Transition Shares

The only investors eligible to own Transition Shares are Vanguard funds-
of-funds, and it is expected that such funds, because of the nature of Transition
Shares, will own the shares only for the brief periods necessary to complete the
relevant portfolio transitions. The level of service provided will be commensurate
with the needs of a fund-of-funds transitioning from one underlying fund to
another.

V. CONVERSION FEATURES

A. Self-Directed Conversions

1. Conversion into Investor Shares, Admiral Shares, Signal
Shares, Institutional Shares, and Institutional Plus Shares.
Shareholders may conduct self-directed conversions from one share class
into another share class of the same fund for which they are eligible. Self-
directed conversions may be initiated by the shareholder; however,
depending upon the particular share class and the complexity of the
shareholder’s accounts, such conversions may require the assistance of a
Vanguard representative. Shareholders may convert from one share class
into another share class provided that following the conversion the
shareholder: (i) meets the then applicable eligibility requirements for the
share class into which they are converting; and (ii) receives services
consistent with such new share class. Any such conversion will occur at
the respective net asset values of the share classes next calculated after
Vanguard’s receipt of the shareholder’s request in good order.

2. Conversion into ETF Shares. Except as otherwise provided,
a shareholder may convert Investor Shares, Admiral Shares, Signal Shares
or Institutional Shares into ETF Shares of the same fund (if available),
provided that: (i) the share class out of which the shareholder is converting
and the ETF Shares declare and distribute dividends on the same schedule;
(ii) the shares to be converted are not held through an employee benefit
plan; and (iii) following the conversion, the shareholder will hold ETF
Shares through a brokerage account. Any such conversion will occur at the
respective net asset values of the share classes next calculated after
Vanguard’s receipt of the shareholder’s request in good order. Vanguard
or the Fund may charge an administrative fee to process conversion
transactions.

B. Automatic Conversions

1. Automatic conversion into Admiral Shares. Vanguard may
automatically convert Investor Shares into Admiral Shares of the same
fund (if available), provided that following the conversion the shareholder:
(i) meets the eligibility requirements for Admiral Shares; and (ii) receives
services consistent with Admiral Shares. Any such conversion will occur
at the respective net asset values of the share classes next calculated after
Vanguard’s conversion without the imposition of any charge. Such
automatic conversions may occur on a periodic, or one-time basis.
Automatic conversions may occur at different times due to the differing
mechanisms through which an account is funded or meets the required
investment minimum. Automatic conversions do not apply to certain

types of accounts (e.g., accounts held through certain intermediaries, or other accounts as may be excluded by Vanguard management).

2. Automatic conversion into Signal Shares, Institutional Shares or Institutional Plus Shares. Vanguard may conduct automatic conversions of any share class into either Signal Shares, Institutional Shares, or Institutional Plus Shares in accordance with then-current eligibility requirements. If a Fund offers Signal Shares, the Admiral Shares and Investor Shares of that Fund held by certain institutional clients also may be automatically converted into Signal Shares to align the share class eligibility requirements.

C. Involuntary Conversions and Cash Outs

1. Cash Outs. If a shareholder in any class of shares no longer
meets the eligibility requirements for such shares, the Fund may cash out
the shareholder’s remaining account balance. Any such cash out will be
preceded by written notice to the shareholder and will be subject to the
Fund’s normal redemption fees, if any.

2. Conversion of Admiral Shares, Signal Shares, Institutional
Shares, and Institutional Plus Shares. If a shareholder no longer meets
the eligibility requirements for the share class currently held, the Fund
may convert the shareholder’s holdings into the share class for which such
shareholder is eligible. Any such conversion will be preceded by written
notice to the shareholder, and will occur at the respective net asset values
of the share classes without the imposition of any sales load, fee, or other
charge.

3. Conversions of Transition Shares. When a Fund that issues
Transition Shares has completed the relevant portfolio transition, the Fund
will convert the Transition Shares to another share class of the same Fund as
appropriate, based on the eligibility requirements of such class as specified in
Schedule B hereto, as such Schedule may be amended from time to time.

VI. EXPENSE ALLOCATION AMONG CLASSES

A. Background

Vanguard is a jointly-owned subsidiary of the Funds. Vanguard provides
the Funds, on an at-cost basis, virtually all of their corporate management,
administrative and distribution services. Vanguard also may provide investment
advisory services on an at-cost basis to the Funds. Vanguard was established and
operates pursuant to a Funds’ Service Agreement between itself and the Funds
(the “Agreement”), and pursuant to certain exemptive orders granted by the U.S.
Securities and Exchange Commission (“Exemptive Orders”). Vanguard’s direct

and indirect expenses of providing corporate management, administrative and distribution services to the Funds are allocated among such funds in accordance with methods specified in the Agreement.

B. Class Specific Expenses

1. Expenses for Account-Based Services. Expenses associated
with Vanguard’s provision of account-based services to the Funds will be
allocated among the share classes of each Fund on the basis of the amount
incurred by each such class as follows:

(a) Account maintenance expenses. Expenses associated with the maintenance of investor accounts will be proportionately allocated among each Fund’s share classes based upon a monthly determination of the costs to service each class of shares. Factors considered in this determination are (i) the percentage of total shareholder accounts represented by each class; (ii) the percentage of total account transactions performed by Vanguard for each class; and (iii) the percentage of new accounts opened for each class.

(b) Expenses of special servicing arrangements.

Expenses relating to any special servicing arrangements for a specific class will be proportionally allocated among each eligible Fund’s share classes primarily based on their percentage of total shareholder accounts receiving the special servicing arrangements.

(c) Literature production and mailing expenses.

Expenses associated with shareholder reports, proxy materials and other literature will be allocated among each Fund’s share classes based upon the number of such items produced and mailed for each class.

2. Other Class Specific Expenses. Expenses for the primary benefit of a particular share class will be allocated to that share class. Such expenses would include any legal fees attributable to a particular class.

Fund-Wide Expenses

1. Marketing and Distribution Expenses. Expenses associated with Vanguard’s marketing and distribution activities will be allocated among the Funds and their separate share classes according to the “Vanguard Modified Formula,” with each share class treated as if it were a separate Fund. The Vanguard Modified Formula, which is set forth in the Agreement and in certain of the SEC Exemptive Orders, has been deemed

an appropriate allocation methodology by each Fund’s Board of Trustees under paragraph (c)(1)(v) of Rule 18f-3 under the Investment Company Act of 1940.

2. Asset Management Expenses. Expenses associated with management of a Fund’s assets (including all advisory, tax preparation and custody fees) will be allocated among the Fund’s share classes on the basis of their relative net assets.

3. Other Fund Expenses. Any other Fund expenses not described above will be allocated among the share classes on the basis of their relative net assets.

VII. ALLOCATION OF INCOME, GAINS AND LOSSES

Income, gains and losses will be allocated among each Fund’s share classes on the basis of their relative net assets. As a result of differences in allocated expenses, it is expected that the net income of, and dividends payable to, each class of shares will vary. Dividends and distributions paid to each class of shares will be calculated in the same manner, on the same day and at the same time.

VIII. VOTING AND OTHER RIGHTS

Each share class will have: (i) exclusive voting rights on any matter submitted to shareholders that relates solely to its service or distribution arrangements; and (ii) separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of the other class; and (iii) in all other respects the same rights, obligations and privileges as each other, except as described in the Plan.

IX. AMENDMENTS

All material amendments to the Plan must be approved by a majority of the Board of Trustees of each Fund, including a majority of the Trustees who are not interested persons of the Fund. In addition, any material amendment to the Plan must be approved by the Board of Directors of Vanguard.

Original Board Approval: July 21, 2000
Last Approved by Board: March 22, 2013

SCHEDULE A to

VANGUARD FUNDS MULTIPLE CLASS PLAN

Note: Transition Shares, when offered by a Fund, are available for a limited period of time and are then converted into another share class. For this reason, Transition Shares are not shown on Schedule A.


Vanguard Fund		Share Classes Authorized

Vanguard Admiral Funds
·	Admiral Treasury Money Market Fund	Investor
·	S&P 500 Value Index Fund	Institutional, ETF
·	S&P 500 Growth Index Fund	Institutional, ETF
·	S&P MidCap 400 Index Fund	Institutional, ETF
·	S&P MidCap 400 Value Index Fund	Institutional, ETF
·	S&P MidCap 400 Growth Index Fund	Institutional, ETF
·	S&P SmallCap 600 Index Fund	Institutional, ETF
·	S&P SmallCap 600 Value Index Fund	Institutional, ETF
·	S&P SmallCap 600 Growth Index Fund	Institutional, ETF

Vanguard Bond Index Funds
·	Short-Term Bond Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Intermediate-Term Bond Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Long-Term Bond Index Fund	Investor, Institutional, Institutional Plus,
		ETF
·	Total Bond Market Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Total Bond Market II Index Fund	Investor, Institutional
·	Inflation-Protected Securities Fund	Investor, Admiral, Institutional

Vanguard California Tax-Free Funds
·	Tax-Exempt Money Market Fund	Investor
·	Intermediate-Term Tax-Exempt Fund	Investor, Admiral
·	Long-Term Tax-Exempt Fund	Investor, Admiral

Vanguard Charlotte Funds


·	Total International Bond Index Fund	Investor, Admiral, Institutional, ETF


Vanguard Fund		Share Classes Authorized


Vanguard Chester Funds
·	PRIMECAP Fund	Investor, Admiral
·	Target Retirement Income Fund	Investor
·	Target Retirement 2010 Fund	Investor
·	Target Retirement 2015 Fund	Investor
·	Target Retirement 2020 Fund	Investor
·	Target Retirement 2025 Fund	Investor
·	Target Retirement 2030 Fund	Investor
·	Target Retirement 2035 Fund	Investor
·	Target Retirement 2040 Fund	Investor
·	Target Retirement 2045 Fund	Investor
·	Target Retirement 2050 Fund	Investor
·	Target Retirement 2055 Fund	Investor
·	Target Retirement 2060 Fund	Investor

Vanguard Convertible Securities Fund		Investor

Vanguard Explorer Fund		Investor, Admiral

Vanguard Fenway Funds
·	Equity Income Fund	Investor, Admiral
·	Growth Equity Fund	Investor
·	PRIMECAP Core Fund	Investor

Vanguard Fixed Income Securities Funds
·	Short-Term Treasury Fund	Investor, Admiral
·	Short-Term Federal Fund	Investor, Admiral
·	Short-Term Investment-Grade Fund	Investor, Admiral, Institutional
·	Intermediate-Term Treasury Fund	Investor, Admiral
·	Intermediate-Term Investment-Grade Fund	Investor, Admiral
·	GNMA Fund	Investor, Admiral
·	Long-Term Treasury Fund	Investor, Admiral
·	Long-Term Investment-Grade Fund	Investor, Admiral
·	High-Yield Corporate Fund	Investor, Admiral

Vanguard Horizon Funds
·	Capital Opportunity Fund	Investor, Admiral
·	Global Equity Fund	Investor
·	Strategic Equity Fund	Investor
·	Strategic Small-Cap Equity Fund	Investor


Vanguard Fund		Share Classes Authorized

Vanguard Index Funds
·	500 Index Fund	Investor, Admiral, Signal, ETF
·	Extended Market Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Growth Index Fund	Investor, Admiral, Signal, Institutional, ETF
·	Large-Cap Index Fund	Investor, Admiral, Signal, Institutional, ETF
·	Mid-Cap Growth Index Fund	Investor, Admiral, ETF
·	Mid-Cap Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Mid-Cap Value Index Fund	Investor, Admiral, ETF
·	Small-Cap Growth Index Fund	Investor, Admiral, Institutional, ETF
·	Small-Cap Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
·	Small-Cap Value Index Fund	Investor, Admiral, Institutional, ETF
·	Total Stock Market Index Fund	Investor, Admiral, Signal, Institutional, ETF
·	Value Index Fund	Investor, Admiral, Signal, Institutional, ETF

Vanguard International Equity Index Funds
·	Emerging Markets Stock Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus
	FTSE Emerging Markets ETF	ETF
·	European Stock Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus
	FTSE Europe ETF	ETF
·	FTSE All-World ex US Index Fund	Investor, Admiral, Institutional, Institutional
		Plus, ETF
·	Pacific Stock Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus
	FTSE Pacific ETF	ETF
·	Total World Stock Index Fund	Investor, Institutional, ETF
·	FTSE All World ex-US Small-Cap Index Fund	Investor, Institutional, ETF
·	Global ex-U.S. Real Estate Index Fund	Investor, Admiral, Institutional, ETF

Vanguard Malvern Funds
·	Capital Value Fund	Investor
·	Short-Term Inflation-Protected Securities
	Index Fund	Investor, Admiral, Institutional, ETF
·	U.S. Value Fund	Investor

Vanguard Massachusetts Tax-Exempt Funds
·	Massachusetts Tax-Exempt Fund	Investor

Vanguard Money Market Funds
·	Prime Money Market Fund	Investor, Institutional
·	Federal Money Market Fund	Investor

Vanguard Morgan Growth Fund		Investor, Admiral


Vanguard Fund		Share Classes Authorized

Vanguard Montgomery Funds
·	Vanguard Market Neutral Fund	Investor, Institutional

Vanguard Municipal Bond Funds
·	Tax-Exempt Money Market Fund	Investor
·	Short-Term Tax-Exempt Fund	Investor, Admiral
·	Limited-Term Tax-Exempt Fund	Investor, Admiral
·	Intermediate-Term Tax-Exempt Fund	Investor, Admiral
·	Long-Term Tax-Exempt Fund	Investor, Admiral
·	High-Yield Tax-Exempt Fund	Investor, Admiral

Vanguard New Jersey Tax-Free Funds
·	Tax-Exempt Money Market Fund	Investor
·	Long-Term Tax-Exempt Fund	Investor, Admiral

Vanguard New York Tax-Free Funds
·	Tax-Exempt Money Market Fund	Investor
·	Long-Term Tax-Exempt Fund	Investor, Admiral

Vanguard Ohio Tax-Free Funds
·	Tax-Exempt Money Market Fund	Investor
·	Long-Term Tax-Exempt Fund	Investor

Vanguard Pennsylvania Tax-Free Funds
·	Tax-Exempt Money Market Fund	Investor
·	Long-Term Tax-Exempt Fund	Investor, Admiral

Vanguard Quantitative Funds
·	Growth and Income Fund	Investor, Admiral

Vanguard Scottsdale Funds
·	Short-Term Government Bond Index Fund	Institutional, Admiral, ETF
·	Intermediate-Term Government Bond Index Fund	Institutional, Admiral, ETF
·	Long-Term Government Bond Index Fund	Institutional, Admiral, ETF
·	Short-Term Corporate Bond Index Fund	Institutional, Admiral, ETF
·	Intermediate-Term Corporate Bond Index Fund	Institutional, Admiral, ETF
·	Long-Term Corporate Bond Index Fund	Institutional, Admiral, ETF
·	Mortgage-Backed Securities Index Fund	Institutional, Admiral, ETF
·	Explorer Value Fund	Investor
·	Russell 1000 Index Fund	Institutional, ETF
·	Russell 1000 Value Index Fund	Institutional, ETF
·	Russell 1000 Growth Index Fund	Institutional, ETF
·	Russell 2000 Index Fund	Institutional, ETF
·	Russell 2000 Value Index Fund	Institutional, ETF
·	Russell 2000 Growth Index Fund	Institutional, ETF
·	Russell 3000 Index Fund	Institutional, ETF


Vanguard Fund		Share Classes Authorized

Vanguard Specialized Funds
·	Energy Fund	Investor, Admiral
·	Precious Metals Fund	Investor
·	Health Care Fund	Investor, Admiral
·	Dividend Growth Fund	Investor
·	REIT Index Fund	Investor, Admiral, Signal, Institutional, ETF
·	Dividend Appreciation Index Fund	Investor, Admiral, ETF

Vanguard STAR Funds
·	Developed Markets Index Fund	Investor, Admiral, Institutional,
		Institutional Plus
·	LifeStrategy Conservative Growth Fund	Investor
·	LifeStrategy Growth Fund	Investor
·	LifeStrategy Income Fund	Investor
·	LifeStrategy Moderate Growth Fund	Investor
·	STAR Fund	Investor
·	Total International Stock Index Fund	Investor, Admiral, Signal, Institutional,
		Institutional Plus, ETF
Vanguard Tax-Managed Funds
·	Tax-Managed Balanced Fund	Admiral
·	Tax-Managed Capital Appreciation Fund	Admiral, Institutional
·	Tax-Managed Growth and Income Fund	Admiral, Institutional
·	Tax-Managed International Fund	Investor, Admiral, Institutional,
		Institutional Plus
	Vanguard FTSE Developed Markets ETF	ETF
·	Tax-Managed Small-Cap Fund	Admiral, Institutional

Vanguard Trustees’ Equity Fund
·	International Value Fund	Investor
·	Diversified Equity Fund	Investor
·	Emerging Markets Select Stock Fund	Investor

Vanguard Valley Forge Funds
·	Balanced Index Fund	Investor, Admiral, Signal, Institutional
·	Managed Payout Fund	Investor


Vanguard Fund		Share Classes Authorized


Vanguard Variable Insurance Funds
·	Balanced Portfolio	Investor
·	Conservative Allocation Portfolio	Investor
·	Diversified Value Portfolio	Investor
·	Equity Income Portfolio	Investor
·	Equity Index Portfolio	Investor
·	Growth Portfolio	Investor
·	Total Bond Market Index Portfolio	Investor
·	High Yield Bond Portfolio	Investor
·	International Portfolio	Investor
·	Mid-Cap Index Portfolio	Investor
·	Moderate Allocation Portfolio	Investor
·	Money Market Portfolio	Investor
·	REIT Index Portfolio	Investor
·	Short-Term Investment Grade Portfolio	Investor
·	Small Company Growth Portfolio	Investor
·	Capital Growth Portfolio	Investor
·	Total Stock Market Index Portfolio	Investor

Vanguard Wellesley Income Fund		Investor, Admiral

Vanguard Wellington Fund		Investor, Admiral

Vanguard Whitehall Funds
·	Selected Value Fund	Investor
·	Mid-Cap Growth Fund	Investor
·	International Explorer Fund	Investor
·	High Dividend Yield Index Fund	Investor, ETF
·	Vanguard Emerging Markets Government
	Bond Index Fund	Investor, Admiral, Institutional, ETF
·	Vanguard Global Minimum Volatility Fund	Investor, Admiral

Vanguard Windsor Funds
·	Windsor Fund	Investor, Admiral
·	Windsor II	Investor, Admiral


Vanguard Fund		Share Classes Authorized

Vanguard World Fund
·	Extended Duration Treasury Index Fund	Institutional, Institutional Plus, ETF
·	FTSE Social Index Fund	Investor, Institutional
·	International Growth Fund	Investor, Admiral
·	Mega Cap Index Fund	Institutional, ETF
·	Mega Cap Growth Index Fund	Institutional, ETF
·	Mega Cap Value Index Fund	Institutional, ETF
·	U.S. Growth Fund	Investor, Admiral
·	Consumer Discretionary Index Fund	Admiral, ETF
·	Consumer Staples Index Fund	Admiral, ETF
·	Energy Index Fund	Admiral, ETF
·	Financials Index Fund	Admiral, ETF
·	Health Care Index Fund	Admiral, ETF
·	Industrials Index Fund	Admiral, ETF
·	Information Technology Index Fund	Admiral, ETF
·	Materials Index Fund	Admiral, ETF
·	Telecommunication Services Index Fund	Admiral, ETF
·	Utilities Index Fund	Admiral, ETF

Original Board Approval: July 21, 2000 Last Updated: January 17, 2014

SCHEDULE B to

VANGUARD FUNDS MULTIPLE CLASS PLAN

Vanguard has policies and procedures designed to ensure consistency and compliance with the offering of multiple classes of shares within this Multiple Class Plan’s eligibility requirements. These policies are reviewed and monitored on an ongoing basis in conjunction with Vanguard’s Compliance Department.

Investor Shares - Eligibility Requirements

Investor Shares generally require a minimum initial investment and ongoing account balance of $3,000. Particular Vanguard Funds may, from time to time, establish higher or lower minimum amounts for Investor Shares. Vanguard also reserves the right to establish higher or lower minimum amounts for certain investors or a group of investors.

Admiral Shares – Eligibility Requirements

Admiral Shares generally are intended for clients who meet the required minimum initial investment and ongoing account balance of $10,000 in index funds and $50,000 for retail clients in actively managed funds. Financial intermediary and other institutional clients may hold Admiral Shares of actively managed funds without restriction. Vanguard Funds may, from time to time, establish higher or lower minimum amounts for Admiral Shares and Vanguard reserves the right to establish higher or lower minimum amounts for certain investors or a group of investors. Admiral Share class eligibility also is subject to the following rule:

Certain Retirement Plans – Admiral Shares generally are not available to 403(b)(7) custodial accounts and SIMPLE IRAs held directly with Vanguard.

Signal Shares – Eligibility Requirements

Signal Shares generally are intended for institutional and financial intermediary clients who meet the then-current eligibility requirements. Eligibility criteria are subject to the discretion of Vanguard management, and Vanguard reserves the right to establish higher or lower minimum amounts for certain investors or a group of investors and to change such requirements at any time. Signal Share class eligibility also is subject to the following rules:

Previously held Admiral Shares or Investor Shares. Admiral Shares or Investor Shares held by institutional and financial intermediary clients prior to the effective date of Signal Shares may be converted at the discretion of Vanguard management into Signal Shares.

· Institutional intermediary clients. Institutional clients that are financial
intermediaries generally may hold Signal Shares without restriction.

· Mutual fund supermarkets. Signal Shares generally are not available to
financial intermediaries that serve as mutual fund supermarkets. Generally,
mutual fund supermarkets means a program or platform offered by an
intermediary or an underlying intermediary through which its individual
investors (person), on a self-directed basis, may purchase and sell mutual
funds offered by a variety of independent fund families. This definition may
be changed or amended at any time and without prior notice as may be
determined in the discretion of management.

· Vanguard Brokerage Services. Nothing in the definition of mutual fund
supermarket, or any other eligibility requirements, should be construed to
prohibit Vanguard Brokerage Services (VBS) from offering Signal Shares to
its clients.

· Institutional clients whose accounts are not recordkept by Vanguard.
Institutional clients, including but not limited to financial intermediary and
defined benefit and contribution plan clients, endowments, and foundations
whose accounts are not recordkept by Vanguard may hold Signal Shares
without restriction.

· Institutional clients whose accounts are recordkept by Vanguard.
Institutional clients whose accounts are recordkept by Vanguard may hold
Signal Shares without an investment minimum. Additional recordkeeping
costs may also be charged.

Institutional Shares – Eligibility Requirements

Institutional Shares generally require a minimum initial investment and ongoing account balance of $5,000,000. However, Vanguard also reserves the right to establish higher or lower minimum amounts for certain investors or a group of investors. Institutional Share class eligibility also is subject to the following special rules:

· Individual clients. Individual clients may hold Institutional Shares by
aggregating up to 3 accounts held by the same client (same tax I.D. number)
in a single Fund.

· Financial intermediary clients. Financial intermediaries generally may hold
Institutional Shares for the benefit of their underlying clients provided that:

(1) each underlying investor individually meets the investment minimum
amount described above; and
(2) the financial intermediary agrees to monitor ongoing compliance of the
underlying investor accounts with the investment minimum amount; or

(3) a sub-accounting arrangement between Vanguard and the financial
intermediary allows Vanguard to monitor compliance with the eligibility
requirements established by Vanguard.

· Institutional clients. Institutional clients, including but not limited to defined
benefit and contribution plan clients, endowments, and foundations may hold
Institutional Shares if the total amount aggregated among all accounts held by
such client (including accounts held through financial intermediaries) and
invested in the Fund is at least $5 million (or such higher minimum required
by the individual fund). Such institutional clients must disclose to Vanguard
on behalf of their accounts the following: (1) that each account has a common
decision-maker; and (2) the total balance in each account held by the client in
the Fund.

· Investment by Vanguard Target Retirement Collective Trust. A Vanguard
Target Retirement Trust that is a collective trust exempt from regulation under
the Investment Company Act and that seeks to achieve its investment
objective by investing in underlying Vanguard Funds (a “TRT”) may hold
Institutional Shares of an underlying Fund whether or not its investment meets
the minimum investment threshold specified above.

· Accumulation Period¾ Accounts funded through regular contributions (e.g.
employer sponsored participant contribution plans), whose assets are expected
to quickly achieve eligibility levels, may qualify for Institutional Shares upon
account creation, rather than undergoing the conversion process shortly after
account set-up if Vanguard management determines that the account will
become eligible for Institutional Shares within a limited period of time
(generally 90 days). The accumulation period eligibility is subject to the
discretion of Vanguard management.

Institutional Plus Shares - Eligibility Requirements

Institutional Plus Shares generally require a minimum initial investment and ongoing account balance of $100,000,000. However, Vanguard also reserves the right to establish higher or lower minimum amounts for certain investors or a group of investors. Institutional Plus Share class eligibility also is subject to the following special rules:

· Individual clients. Individual clients may hold Institutional Plus Shares by
aggregating up to 3 accounts held by the same client (same tax I.D. number) in a
single Fund. For purposes of this rule, Vanguard management is authorized to
permit aggregation of a greater number of accounts in the case of clients whose
aggregate assets within the Vanguard Funds are expected to generate substantial
economies in the servicing of their accounts.

· Institutional clients. Institutional clients, including but not limited to defined
benefit and contribution plan clients, endowments, and foundations may hold

Institutional Plus Shares if the total amount aggregated among all accounts
held by such client (including accounts held through financial intermediaries)
and invested in the Fund is at least $100 million (or such higher or lower
minimum required by the individual fund). Such institutional clients must
disclose to Vanguard on behalf of their accounts the following: (1) that each
account has a common decision-maker; and (2) the total balance in each
account held by the client in the Fund.

· Financial intermediary clients. Financial intermediaries generally may hold
Institutional Plus Shares for the benefit of their underlying clients provided
that:

(1) each underlying investor individually meets the investment minimum
amount described above; and
(2) the financial intermediary agrees to monitor ongoing compliance of the
underlying investor accounts with the investment minimum amount; or
(3) a sub-accounting arrangement between Vanguard and the financial
intermediary allows Vanguard to monitor compliance with the eligibility
requirements established by Vanguard.

· Accumulation Period - Accounts funded through regular contributions e.g.
employer sponsored participant contribution plans), whose assets are expected
to quickly achieve eligibility levels, may qualify for Institutional Plus Shares
upon account creation, rather than undergoing the conversion process shortly
after account set-up if Vanguard management determines that the account will
become eligible for Institutional Plus Shares within a limited period of time
(generally 90 days).

· Asset Allocation Models - Vanguard clients with defined asset allocation
models whose assets meet eligibility requirements may qualify for
Institutional Plus Shares if such models comply with policies and procedures
that have been approved by Vanguard management.

ETF Shares – Eligibility Requirements

The eligibility requirements for ETF Shares will be set forth in the Fund’s Registration Statement. To be eligible to purchase ETF Shares directly from a Fund, an investor must be (or must purchase through) an Authorized DTC Participant, as defined in Paragraph III.D of the Multiple Class Plan. Investors purchasing ETF Shares from a Fund must purchase a minimum number of shares, known as a Creation Unit. The number of ETF Shares in a Creation Unit may vary from Fund to Fund, and will be set forth in the relevant prospectus. The value of a Fund's Creation Unit will vary with the net asset value of the Fund’s ETF Shares, but is expected to be several million dollars. An eligible investor generally must purchase a Creation Unit by depositing a prescribed basket of securities with the Fund, rather than paying cash.

Transition Shares – Eligibility Requirements

Transition Shares will be offered only to Vanguard funds-of-funds and only by an underlying fund of a Vanguard fund-of-funds (i) that is receiving assets in kind from one or more funds-of-funds and (ii) that will “transition” those in-kind assets by selling some or all of them and using the proceeds to purchase different assets. There is no minimum investment amount for Transition Shares.

Original Board Approval: July 21, 2000
Last Approved by Board: September 27, 2013

EX-99.P CODE ETH 6 granahancodeofethicsdec2013.htm CODE OF ETHICS granahancodeofethicsdec2013.htm - Generated by SEC Publisher for SEC Filing

Purpose: Granahan Investment Management’s reputation for fair and honest dealing with its clients has taken considerable time to build, and this reputation is a direct reflection of the conduct of each employee.

This Code defines the activities that employees of GIM must undertake, or avoid, to properly perform the Fiduciary Duty the company has to its clients.

The Code includes a discussion of Policies and Procedures for handling activities in these areas, and Sanctions for failing to apply them with care.

Insider Trading
Personal Trading
Gifts and Entertainment Policy
Outside Business Activities
Charitable contributions
Privacy of Client information

This Code is intended to comply with the various provisions of the Advisers Act, and requires that all supervised persons comply with the applicable provisions of the Investment Company Act of 1940, as amended, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and applicable rules and regulations adopted by the Securities and Exchange Commission (“SEC”).

This Code addresses Section 206 of the Advisers Act which requires every adviser to:

Adopt Policies and procedures designed to prevent the misuse of material, non- public information by the adviser and its personnel,
Adopt Policies and procedures which cover transactions in any reportable securities in which an Access person has a beneficial interest by way of any accounts over which the access person has control, as well as accounts of an access person’s family living with him or her.

Additionally, this Code addresses Section 206 of the Advisers Act which prohibits Granahan Investment Management, its agents, or employees to:

Employ any device, scheme or artifice to defraud any client or prospective client, or
To engage in fraudulent, deceptive or manipulative practices.

The Code is designed to ensure that the high ethical standards long maintained by the Firm continue to be applied. The provisions of the Code are not all-inclusive, rather are intended as a guide for employees of Granahan in their conduct. In those situations where an employee may be uncertain as to the intent or purpose of the Code, he/she is advised to consult with the CCO. The CCO may grant exceptions to certain provisions contained in the Code, but will only do so in those situations when it is clear beyond dispute that the interests of our clients will not be adversely affected or compromised. All questions arising in connection with personal securities trading shall be resolved in favor of the client even at the expense of the interests of employees.

Code of Ethics

Employees should also understand that a material breach of the provisions of the Code may constitute grounds for disciplinary action, including termination of employment with Granahan Investment Management.

The CCO will periodically report to senior management of Granahan to document compliance with this Code.

Code of Ethics

Fiduciary Duty

As an investment adviser, Granahan Investment Management is charged with the duty to act in the best interests of its clients in all its affairs.

This Code defines the activities that employees of GIM must undertake, or avoid, to properly perform this Fiduciary Duty the company has to its clients.

A Fiduciary is defined as:

1) A person or an organization…, such as an investment manager , entrusted with

the property of another party and in whose best interests the fiduciary is expected to

act when holding, investing, or otherwise using that party's property. (Wall Street

Words, Houghton Mifflin,2003)

2) A person to whom property or power is entrusted for the benefit of another.

(Dictionary.com Unabridged v 1.1)

As a Fiduciary Granahan Investment Management and its employees, when dealing with clients, are subject to the following specific fiduciary obligations:

The duty to have a reasonable, independent basis for the investment advice provided;
The duty to obtain best execution for a client’s transactions where the Firm is in a position to direct brokerage transactions for the client;
The duty to ensure that investment advice is suitable to meeting the client’s individual objectives, needs and circumstances; and
A duty to be loyal to clients.

And Must AVOID

Serving his/her own personal interests ahead of the clients’;
Taking advantage of his/her position;
Any actual or potential conflicts of interest or any abuse of their position of trust and responsibility.

Code of Ethics


DEFINITIONS

For the purposes of this Code, the following definitions shall apply:

•	‘Access person’ means any supervised		such as public filings with the SEC,
	person who: has access to nonpublic		newspapers, data services, general
	information regarding any clients’		circulation information etc. Material
	purchase or sale of securities, or		public information is not made public by
	nonpublic information regarding the		select dissemination or by partial
	portfolio holdings of any fund RIA or its		disclosures and in such cases will retain
	control affiliates manage; or is involved		its status as non-public information.
	in making securities recommendations to		Information will not be considered public
	clients that are nonpublic. For the		until sufficient time has passed since
	purposes of the Code of Ethics, all		disclosure to the general public that such
	Granahan employees, officers, and		information is widely available.

	directors are considered Access Persons.	•	'Reportable security” means any security
•	‘Account’ means accounts of any		as defined in Section 202(a)(18) of the
	employee and includes accounts of the		Advisers Act, except that it does not
	employee’s immediate family members		include: (i) Transactions and holdings in
	(any relative by blood or marriage living		direct obligations of the Government of
	in the employee’s household), and any		the United States; (ii) Bankers’
	account in which he or she has a direct		acceptances, bank certificates of deposit,
	or indirect beneficial interest, such as		commercial paper and other high quality
	trusts and custodial accounts or other		short-term debt instruments, including
	accounts in which the employee has a		repurchase agreements; (iii) Shares
	beneficial interest or exercises		issued by money market funds; (iv)
	investment discretion.		Transactions and holdings in shares of
			other types of open-end registered
•	'Affiliated Fund' is a fund for which		mutual funds, unless Granahan
	Granahan Investment Management acts		Investment Management or a control
	as the investment adviser, sub-adviser,		affiliate acts as the investment adviser
	or principal underwriter for the fund.		or principal underwriter for the fund; and
•	‘Beneficial ownership’ shall be		(v) Transactions in units of a unit
	interpreted in the same manner as it		investment trust if the unit investment
	would be under Rule 16a-1(a)(2) under		trust is invested exclusively in mutual
	the Securities Exchange Act of 1934 in		funds, unless Granahan Investment
	determining whether a person is the		Management or a control affiliate acts as
	beneficial owner of a security for		the investment adviser or principal
	purposes of Section 16 of such Act and		underwriter for the fund.
	the rules and regulations thereunder.	•	‘Supervised person’ means directors,
•	‘Client Account’ is any account under the		officers and partners of Granahan
	management of Granahan Investment		Investment Management (or other
	Management.		persons occupying a similar status or
			performing similar functions); employees
•	‘Client-Eligible Securities’ are securities		of Granahan Investment Management;
	which are held in any account, are being		and any other person who provides
	considered for purchase in an account,		advice on behalf of Granahan
	or are eligible for purchase given its		Investment Management and is subject
	current market cap.		to its supervision and control.

•	‘Public information’ is information that
	has been disseminated broadly to
	investors in the marketplace. One must
	be able to point to some tangible
	evidence that the information is public

Code of Ethics

Misuse of Material, Non-public Information

Policy Statement

No supervised person may trade, either personally or on behalf of others (such as investment funds and private accounts managed by Granahan Investment Management), while in the possession of material, nonpublic information, nor may any personnel of Granahan Investment Management communicate material, nonpublic information to others in violation of the law.

Trading securities while in possession of material, nonpublic information, or improperly communicating that information to others may expose supervised persons and Granahan Investment Management to stringent penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The SEC can recover the profits gained or losses avoided through the illegal trading, impose a penalty of up to three times the illicit windfall, and/or issue an order permanently barring you from the securities industry. Finally, supervised persons and Granahan Investment Management may be sued by investors seeking to recover damages for insider trading violations.

The rules contained in this Code apply to securities trading and information handling by supervised persons of Granahan Investment Management and their immediate family members.

The law of insider trading is unsettled and continuously developing. An individual legitimately may be uncertain about the application of the rules contained in this Code in a particular circumstance. Often, a single question can avoid disciplinary action or complex legal problems. You must notify the CCO immediately if you have any reason to believe that a violation of this Code has occurred or is about to occur.

1. What is Material Information?

Information is material where there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions. Generally, this includes any information the disclosure of which will have a substantial effect on the price of a company’s securities. No simple test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry. For this reason, you should direct any questions about whether information is material to the CCO.

Material information often relates to a company’s results and operations, including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.

Material information also may relate to the market for a company’s securities. Information about a significant order to purchase or sell securities may, in some contexts, be material. Prepublication information regarding reports in the financial press also may be material. For example, the United States Supreme Court upheld the criminal convictions of insider trading defendants who capitalized on prepublication information about The Wall Street Journal’s “Heard on the Street” column.

Code of Ethics

You should also be aware of the SEC’s position that the term “material nonpublic information” relates not only to issuers but also to the Firm’s securities recommendations and client securities holdings and transactions.

2. What is Nonpublic Information?

Information is “public” when it has been disseminated broadly to investors in the marketplace. For example, information is public after it has become available to the general public through a public filing with the SEC or some other government agency, the Dow Jones “tape” or The Wall Street Journal or some other publication of general circulation and after sufficient time has passed so that the information has been disseminated widely.

3. Identifying Inside Information

Before executing any trade for yourself or others, including investment funds or private accounts managed by Granahan Investment Management (“Client Accounts”), you must determine whether you have access to material, nonpublic information. If you think that you might have access to material, nonpublic information, you should take the following steps:

Report the information and proposed trade immediately to the CCO.
Do not purchase or sell the securities on behalf of yourself or others, including investment funds or private accounts managed by the firm.
Do not communicate the information inside or outside the firm, other than to the CCO.
After the CCO has reviewed the issue, the firm will determine whether the information is material and nonpublic and, if so, what action the firm will take.

You should consult with the CCO before taking any action. This degree of caution will protect you, our clients, and the firm.

4. Contacts with Public Companies

Contacts with public companies may represent an important part of our research efforts. The firm may make investment decisions on the basis of conclusions formed through such contacts and analysis of publicly available information. Difficult legal issues arise, however, when, in the course of these contacts, a supervised person of Granahan Investment Management or other person subject to this Code becomes aware of material, nonpublic information. This could happen, for example, if a company’s Chief Financial Officer prematurely discloses quarterly results to an analyst, or an investor relations representative makes selective disclosure of adverse news to a handful of investors. In such situations, Granahan Investment Management must make a judgment as to its further conduct. To protect yourself, your clients and the firm, you should contact the CCO immediately if you believe that you may have received material, nonpublic information.

5. Tender Offers

Tender offers represent a particular concern in the law of insider trading for two reasons: First, tender offer activity often produces extraordinary gyrations in the price of the target

Code of Ethics

company’s securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and “tipping” while in the possession of material, nonpublic information regarding a tender offer received from the tender offer-or, the target company or anyone acting on behalf of either. Supervised persons of Granahan Investment Management and others subject to this Code should exercise extreme caution any time they become aware of nonpublic information relating to a tender offer.

6. Restricted/Watch Lists

Although Granahan Investment Management does not typically receive confidential information from portfolio companies, it may, if it receives such information take appropriate procedures to establish restricted or watch lists in certain securities.

The CCO may place certain securities on a “restricted list.” Access persons are prohibited from personally, or on behalf of an advisory account, purchasing or selling securities during any period they are listed. Securities issued by companies about which a number of supervised persons are expected to regularly have material, nonpublic information should generally be placed on the restricted list. The CCO shall take steps to immediately inform all supervised persons of the securities listed on the restricted list.

The CCO may place certain securities on a “watch list.” Securities issued by companies about which a limited number of supervised persons possess material, nonpublic information should generally be placed on the watch list. The list will be disclosed only to the CCO and a limited number of other persons who are deemed necessary recipients of the list because of their roles in compliance.

Code of Ethics

Personal Trading

General Policy on Personal Trading

Granahan Investment Management has adopted the following principles regarding personal investments by its employees designed to protect our clients, and the firm’s reputation:

The interests of client accounts will at all times be placed first;
All personal securities transactions will be conducted in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual’s position of trust and responsibility;
Access persons must not take inappropriate advantage of their positions.

These Procedures Apply to…

The following policies and procedures apply to all Access persons at Granahan Investment Management and to all accounts for which he or she is a beneficial owner. That is, all accounts in the name of the Access person, his/her spouse, his/her children under 21, and family members living in the same household regardless of age.

Policy varies according to the Potential for Conflict –

The intent of this Code is to minimize the potential for perceived or actual conflicts of interest between employees, officers, and directors of the firm, and its clients. The rules that govern trading in one's personal investment accounts are therefore most stringent for those transactions which offer the greatest potential for conflict with client accounts.

The Code divides the universe of investments into three (3) categories based on potential for conflict:

Transactions Requiring Preclearance and Reporting- These transactions potentially put the Access person's interest (and the firm’s interests) at odds with GIM clients;

Transactions which must be reported quarterly- These are transactions in securities which offer little potential for conflict with GIM clients, but must be monitored under SEC rules; holdings and transactions in these securities must be reported quarterly to the CCO; and

Non-Reportable Securities- transactions in securities which create virtually no conflict with GIM clients, and therefore are do not require pre-approval or quarterly reporting. Non-affiliated mutual funds, cash and money-market instruments fall in this category.

Access Persons may NOT trade in a security within seven (7) calendar days before and after any client Account trades in that security, without pre-approval from the CCO.

Code of Ethics

I.	Preclearance AND Quarterly Reporting Required
	Pre-Clearance Procedures are outlined in a section following the table below.
	A. Transactions in Client-Eligible Securities

These are transactions in an equity security, or its equivalent, which are

held in a client portfolio,
are being considered for purchase¹in a client portfolio,
or whose market cap (shares outstanding, including all classes, times its price) is LESS THAN $10 billion AND is traded on a major US exchange or market².

These transactions present the most risk to the firm’s clients and therefore, the firm’s reputation, and therefore must pass the most stringent of tests to ensure the firm does not place itself at odds with its clients.

B. Participation in IPOs, Private Placements and Limited Offerings

Access persons must obtain written approval of the CCO prior to acquiring a beneficial ownership in any securities through an Initial Public Offering (IPO), Private Placement, or Limited Offering for his or her account, as defined herein. The CCO must be provided with full details of the proposed transaction (including written certification that the investment opportunity did not arise by virtue of the Access person’s activities on behalf of a client) and, if approved, will be subject to continuous monitoring for possible future conflicts.

C. Transactions in Affiliated Funds

Access persons must obtain approval from the CCO prior to trading in an affiliated fund (a fund for which GIM is a manager or sub-adviser).

As of the current release of this Code, the funds for which pre-clearance is required are: the Vanguard Explorer Fund (VEXPX & VEXRX) and the USAA Small Cap Stock Fund (USCAX, UISCX).

D. Interested Transactions Disclosure

No Access person shall recommend any securities transactions for a client without having disclosed his or her interest, if any, in such securities or the issuer thereof, including without limitation:

any direct or indirect beneficial ownership of any securities of such issuer;
any contemplated transaction by such person in such securities;
any position with such issuer or its affiliates; and

¹That is, there is evidence of the intent to acquire or dispose of such security, such as a current order in the OMS, the recent creation of a purchase recommendation sheet (PR sheet), or reasonably recent verbal communication to that effect by a member of the research team.

²Major exchanges and markets consist of: NYSE, AMEX, NASDAQ (NMS & GS). Stocks that DO NOT trade on these markets do not require pre-clearance.

Code of Ethics

any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest.

II. Transactions Requiring Quarterly Reporting-

Transactions of this type require quarterly holdings reports, under SEC rules, but do not require pre-clearance.

A. Equity securities not classified as “Client-Eligible”

Individual equity securities which fall outside of the definition, “client-eligible”, may be traded without pre-clearance. It is the responsibility of the Access person to determine the eligibility of the proposed transaction prior to trading to ensure he/she obtains pre-approval if necessary.

B. Other Securities

Other security types which are tradable by Access persons without pre-clearance, but which must be reported quarterly are:

Preferred stock
Corporate Bonds
Exchange Traded Funds, and other index/commodity tracking funds
Closed-end mutual funds
Foreign-traded securities (issues which are NOT traded on a US market or exchange)

C. Automatic Investment plans

An automatic investment program, which consists of a specific trade, for a fixed trade amount (dollars or shares), in a pre-determined security, on a specific day of the month, quarter, or year, may be approved once initially, so long as there is no action or discretion by the individual for each transaction.

III. Non-Reportable Securities-

These securities offer little to no risk to the client and therefore do not require any pre-clearance or reporting to the CCO.

These include:

Mutual Funds with which GIM is not affiliated
US Government issued securities (T-bills, notes, bonds, etc.)
CD’s, bank accounts, money-market securities, and other cash equivalents.
Municipal bonds
“529” Investment Plans (education plans)

Code of Ethics

The following table summarizes an Access Person’s Pre-clearance and Reporting Responsibilities for each type of investment.

Access Persons may NOT Trade a Security within seven (7) calendar days before and after a client Account trades in that security, without specific pre-approval from the CCO.

Pre-clear

Report Quarterly

Pre-approval AND Quarterly Holdings Report required


IPO, Private Placement or
Limited Offering	Y	Y
Securities currently held in GIM	Y	Y
client account
Securities eligible for purchase	Y	Y
into any GIM client account
Explorer Fund trades (VEXPX,	Y	Y
VEXRX)
Quarterly Holdings Report required
Equity Securities NOT eligible for
purchase into client accounts	N	Y
ETF (Exchange Traded Funds) or	N	Y
index/commodity basket funds
Closed-end mutual funds	N	Y
Corporate bonds	N	Y
Foreign Traded Securities¹	N	Y
Preferred Stock	N	Y
No reporting required
US Gov’t issued securities (T-bills,
notes, bonds, etc)	N	N
Mutual Funds other than those
affiliated with GIM	N	N
Money market funds, CD’s, and	N	N
other short-term cash equivalents

¹Securities traded primarily on a foreign exchange can be traded without pre-clearance. Foreign “domiciled” securities (headquarters are outside US) traded on US exchanges may be held or under consideration for purchase by client accounts.

Code of Ethics

Personal Trading Pre-Clearance and Other Reporting Duties

Initial Reporting Requirement- Every access person shall, no later than ten (10) days after the person becomes an access person, file an initial holdings report containing the following information:

The title and exchange ticker symbol or CUSIP number, type of security, number of shares and principal amount (if applicable) of each reportable security in which the Access person had any direct or indirect beneficial interest ownership;
The name of any broker, dealer or bank, account name, number and location with whom the Access person maintained an account in which any securities were held for the direct or indirect benefit of the Access person; and
The date that the report is submitted by the Access person.

The information submitted must be current as of a date no more than forty-five (45) days before the person became an Access person.

Before executing a personal transaction, Access Persons must:

1.	Ensure that (s)he is not using “inside” information, or taking inappropriate
		of his/her position at the firm, in executing the contemplated
		Refer to the section on Insider Trading for details.
2.	Determine whether the contemplated transaction requires pre-clearance by the
		¹. If pre-clearance is required, the request must contain:
		The transaction you are requesting (BUY, SELL, SS, CS, etc),
		Number of shares, or dollar value of each trade in each account,
		Name and identifier (symbol or CUSIP) of the security being pre-cleared, and
		Name or number of Account or Accounts for which the Access person is requesting pre-clearance.

Pre-clearance approval for client eligible EQUITY securities is valid for 3 trading days from the approval date, unless revoked prior to that. Pre-clearance of securities for which GIM is an adviser (i.e. a mutual fund) is valid for 5 trading days.

Each Quarter- Access persons must submit Statements and Transactions, and verify Accounts

1.	Access persons must submit a copy of account statements (or equivalent) for each investment account which holds, or can hold, a reportable security. The statement(s) must be current within 30 days of the end of the quarter, AND include:
		Positions in reportable securities held as of the statement date,
		All transactions, if any, in reportable securities made within the quarter.


¹Refer to the definition of Client Eligible Securities to determine if a security is deemed “Client Eligible”.
Code of Ethics	13

A certified list of accounts, holdings, and transactions may be submitted by the access person when statements are not available or timely.

Accounts covered here include: Brokerage Accounts in which the holder can buy individual securities, and any holdings in Affiliated Funds. Non-affiliated mutual fund accounts that are opened directly with the mutual fund company (Vanguard, Fidelity, etc) are generally excluded from reporting.

2.	Access persons must also verify/update the account list to include any accounts which became reportable since the last update.

These requirements will be fulfilled through the proper use of Compliance11, the system used by the Company to track personal transactions and other Code of Ethics disclosures.

Annual Requirement-

Within 30 days of the end of the calendar year, every Access Persons will submit the following items, together with a certification that the submission is accurate as of the period ending December 31:

1)	Listing of all accounts (brokerage, affiliated fund accounts, or other securities accounts) which are open and for which he/she is a beneficial owner. Beneficial ownership includes accounts in one’s name or in the name of any immediate family member (including in-laws) sharing one’s house. It excludes accounts over which the Access Person has no influence or control.
2)	Listing of positions in Reportable Securities held in all beneficial accounts as of the end of the calendar year.

Ongoing Supervisory Review of Personal Securities Transactions

1.	The CCO or a designee will monitor and review all reports required under the Code for compliance with the Firm’s policies regarding personal securities transactions and applicable SEC rules and regulations. The CCO may also initiate inquiries of Access persons regarding personal securities trading. Access persons are required to cooperate with such inquiries and any monitoring or review procedures employed Granahan Investment Management.
2.	Any transactions for any accounts of the CCO will be reviewed and approved by the President or other designated supervisory person.
3.	The CCO shall at least annually identify all Access persons who are required to file reports pursuant to the Code and will inform such Access persons of their reporting obligations.

Code of Ethics

Outside Business Activities

Board Service by Employees of GIM

No Access person shall serve on the board of directors of any publicly traded company without prior authorization by the firm's CCO or a designated supervisory person based upon a determination that such board service would be consistent with the interest of the Firm’s clients. Where board service is approved Granahan Investment Management shall implement a “Chinese Wall” or other appropriate procedure to isolate such person from making decisions relating to the company’s securities.

Other Business Relationships

GIM’s compliance policy requires that all employees report promptly to the Compliance Officer, using the form ”Disclosure of Outside Business Activities”, any employment or business relationship outside the scope of their position with GIM for which compensation is received. This includes part-time jobs and other activities if compensated. Further any activity whereby an employee provides investment advice must be disclosed whether or not compensated. Such outside activities include but are not limited to the following: (a) Teaching; (b) Consulting; (c) Business association with an individual not associated with GIM; (d) Professional practices; and (e) Presentations at seminars and conferences.

The Compliance Officer will review this disclosure for potential conflicts of interest and determine whether to approve, restrict or disapprove this activity. Compensation received by an employee for certain types of outside business activities may be required to be paid to GIM. The Compliance officer will notify the individual in writing of disapproval or restrictions on outside business activities.

Code of Ethics

Gifts and Entertainment Policies and Procedures

When an employee of Granahan Investment Management accepts something of value from a broker¹such as a gift, an invitation to a show or sporting event, or other benefits, the Company risks having the employee give weight to those gestures when making business decisions. These gestures create a conflict of interest, and may create the appearance of impropriety even if that individual is cautious in his or her decision making process.

Granahan Investment Management has adopted the following policies governing employee’s acceptance of gifts and invitations to entertainment. These are designed to protect the Company’s clients and the Company’s reputation by ensuring that any gifts or other benefits provided to Granahan employees do not factor into business decisions. The governing policies are based in the following fiduciary duties owed to the Company’s clients. They are:

The duty to have a reasonable, independent basis for the investment advice provided;
The duty to obtain best execution for a client’s transactions;
The duty to ensure that investment advice is suitable; and
A duty to be loyal to clients.

It is important never to seek special treatment from a broker for one’s personal gain or benefit.

Gifts

¾ Employees shall not accept from brokers gifts which exceed $100 in value.

“Gifts” include any of the following items from any broker with whom GIM does business, with whom GIM is seeking to do business, or from any broker seeking to do business with GIM:

money,
gifts for you,
gifts on your behalf (such as gifts to your spouse or children, or donations to a cause of yours²),
benefits,
unusual hospitality or,
Other items of monetary value.

Should an employee receive a gift which exceeds $100, he or she will notify the CCO who will promptly return the gift to the sender.

Gifts which exceed $20 in estimated value must be reported to the CCO within one week of receipt.

¹“Broker”, for the purposes of the Gifts and Entertainment policy, shall include any vendor which is paid using client funds via commissions. A vendor of a product which is procured using soft dollars or commission sharing funds is considered a “Broker” for the purpose of this policy regardless of whether it is a registered broker-dealer. ²Refer to the policy on solicitation of donations from business associates of Granahan Investment Management for further details.

Code of Ethics

Please include:

your name,
a description of the item(s) received, with sufficient detail to determine an approximate value,
the name and company name of the person who gave the items, and
the date it was received.

Entertainment

Entertainment is acceptable provided it meets ALL of these criteria:

A representative of the brokerage or a business associate is present at the event. If not, it constitutes a gift and is bound by that policy.
The invitation to the event is unprompted. One may not request tickets or make other entertainment related requests to brokers.
The total value to you and your guest, of that particular event, is not expected to exceed that of a typical dinner. If it is, it must be pre-cleared prior to attending.
The entertainment is not so extensive or frequent as to raise questions of impropriety.
Travel or lodging expenses are paid by GIM. If the host inadvertently pays for travel or lodging, promptly notify the CCO.

All employees must obtain pre-approval from the CCO prior to accepting an invitation from a broker where the value to the GIM employee (and his or her guest) is likely to exceed that of a typical business dinner (roughly $100). Examples of events where pre-approval would be expected are:

Professional sporting events
Greens fees and/or access to an exclusive country club
Sold-out concerts or other professional performances
Combination of items which, when combined, will likely exceed the threshold for pre-clearance (e.g. dinner on a boat).

If you question whether a gift or entertainment invitation is acceptable under this policy, please consult the Chief Compliance Officer before accepting as he may be able to provide some insight.

Entertainment and Gifts provided by Granahan

Reasonable entertainment by GIM employees of a broker, or other vendor is allowed provided the event has a valid business purpose. If the entertainment provided exceeds $100, it must be reported to the CCO.

All gifts and entertainment provided to clients must be reported to the CCO. Gifts and entertainment exceeding $250 in one year provided to a union or its agent (including pension advisers, in some cases) are reportable to the Department of Labor within 90 days of the Company’s fiscal year end.

Code of Ethics

Charitable Contributions
Policy Statement

Granahan Investment Management’s business choices of brokers or other service providers or vendors are not influenced by giving to any particular charity. GIM does not solicit charitable donations from any firm with which it does business. GIM employees are prohibited from requesting anyone to make charitable donations by implying that such donations may affect their standing with GIM. GIM employees may of course be involved with charitable organizations, and a solicitation of support for such an organization coming from the organization itself or as part of a broad solicitation at the request of the charity would not violate this policy so long as there is no implication or appearance that a favorable response would enhance the ability of any firm to do business with GIM.

Submit a copy to the CCO

The CCO must receive a copy of any solicitation sent to any employee at a firm with whom GIM has a business relationship, not later than the time it is first distributed.

Guidelines for requests

This Code does not attempt to define absolutes in terms of language that must be used to comply with this policy, but an appropriate request should have the following characteristics:

Is clear that your request is on behalf of the charitable organization and NOT as an employee of Granahan Investment Management;
There is no implication of support for the charity by the Company itself;
The request serves as the primary means of communication, and is not accompanied by multiple phone calls or follow-up emails relating to the request;
The recipients are individuals, not companies with whom Granahan does business;
Recipients are NOT chosen based on the business relationship or level of business done with Granahan Investment Management;

Under NO circumstances will an employee:

Make promises relating to business done with Granahan in exchange for contributions;
Withhold or direct business based on the charitable giving decision by a business associate; or otherwise allow the donation to interfere with services being provided to Granahan Investment Management by a vendor.

Code of Ethics

POLITICAL Contributions and Fundraising Activities Policy

Origin/Background:

Effective September 13, 2010 the SEC adopted rules that:

1)	makes it unlawful for an adviser to receive compensation for providing advisory services to a government entity for a two year period after the adviser or any of its covered associates makes a political contribution to a public official of a government entity or candidate for such office who is or will be in a position to influence the award of advisory business.
2)	Prohibits advisers from paying third parties to solicit government entities for advisory business, unless such third party is itself a broker dealer or investment adviser covered by this or other equivalent rule.
3)	Prohibits an adviser or its covered associates from soliciting or coordinating contributions to 1) an official of a government entity where the adviser is providing or seeks to provide advisory services or, 2) a political party in a locality where the adviser is providing or seeking to provide advisory services to a government entity
4)	Makes it unlawful to do anything indirectly which if done directly would be prohibited by the above rules.
5)	Make the same prohibitions as the above for advisers to pooled investment vehicles where government entities invest or are solicited to invest.

March 14, 2011 is the compliance date for these rules.

Policy Statement

Employees of Granahan Investment Management must obtain Pre clearance from Compliance before the employee, or a member of their household, makes any political contribution which exceeds $150 to an incumbent or candidate for a federal, state, or local office.

Employees must also obtain pre clearance from Compliance before participating in any political fundraising activity.

Code of Ethics

Privacy

Privacy of Client Information and Records

This section discusses policies and procedures designed to protect the Firm’s clients' privacy. These include:

The prohibition of communicating private, 'inside', information to anyone inside or outside the firm [unless it is for the benefit of the client], or directed by the client;
The duty of all employees to refrain from disclosing any non-public client information, even beyond his/her employment period with Granahan Investment Management;
The duty to protect this information from misuse by keeping it physically secure from unauthorized access

Confidential Client Information

In the course of investment advisory activities of Granahan Investment Management, the firm gains access to non-public information about its clients. Such information may include a person's status as a client, client financial and account information, the allocation of assets in a client portfolio, the composition of investments in any client portfolio, information relating to services performed for or transactions entered into on behalf of clients, advice provided by Granahan Investment Management to clients, and data or analyses derived from such non-public client-specific information (collectively referred to as 'Confidential Client Information'). All Confidential Client Information, whether relating to the Firm’s current or former clients, is subject to the Code's policies and procedures. Any doubts about the confidentiality of information must be resolved in favor of confidentiality.

Non-Disclosure of Confidential Client Information

All information regarding the Firm’s clients is confidential. Information may only be disclosed when the disclosure is consistent with the firm's policy and the client's direction. Granahan Investment Management does not share Confidential Client Information with any third parties, except in the following circumstances:

As necessary to provide service that the client requested or authorized, or to maintain and service the client's account.
As required by regulatory authorities or law enforcement officials who have jurisdiction over Granahan Investment Management, or as otherwise required by any applicable law. In the event Granahan Investment Management is compelled to disclose Confidential Client Information, the firm shall provide prompt notice to the clients affected, so that the clients may seek a protective order or other appropriate remedy. If no protective order or other appropriate remedy is obtained, Granahan Investment Management shall disclose only such information, and only in such detail, as is legally required;
To the extent reasonably necessary to prevent fraud, unauthorized transactions or liability.

Code of Ethics

Employee Responsibilities

All Access persons are prohibited, DURING and AFTER their employment with Granahan Investment Management, from disclosing Confidential Client Information to any person or entity outside the firm, including family members, except under the circumstances described above. An access person is permitted to disclose Confidential Client Information only to such other Access persons who need to have access to such information to deliver the Firm’s services to the client.

Access persons are also prohibited from making unauthorized copies of any documents or files containing Confidential Client Information and, upon termination of their employment with Granahan Investment Management, must return all such documents to Granahan Investment Management.

Any supervised person who violates the non-disclosure policy described above will be subject to disciplinary action, including possible termination, whether or not he or she benefited from the disclosed information.

Security of Confidential Personal Information

Granahan Investment Management enforces the following policies and procedures to protect the security of Confidential Client Information:

The firm restricts access to Confidential Client Information to those Access persons who need to know such information to provide the Firm’s services to clients;
Any Access person who is authorized to have access to Confidential Client Information in connection with the performance of such person's duties and responsibilities is required to keep such information in a secure compartment, file or receptacle on a daily basis as of the close of each business day;
All electronic or computer files containing any Confidential Client Information shall be password secured and firewall protected from access by unauthorized persons;
Any conversations involving Confidential Client Information, if appropriate at all, must be conducted by Access persons in private, and care must be taken to avoid any unauthorized persons overhearing or intercepting such conversations.

Privacy Policy

As a registered investment adviser, Granahan Investment Management and all supervised persons, must comply with SEC Regulation S-P, which requires investment advisers to adopt policies and procedures to protect the 'nonpublic personal information' of natural person clients. 'Nonpublic information,' under Regulation S-P, includes personally identifiable financial information and any list, description, or grouping that is derived from personally identifiable financial information. Personally identifiable financial information is defined to include information supplied by individual clients, information resulting from transactions, any information obtained in providing products or services.

Enforcement and Review of Confidentiality and Privacy Policies

The Firm’s CCO is responsible for reviewing, maintaining and enforcing its confidentiality and privacy policies and is also responsible for conducting appropriate employee training to ensure adherence to these policies. Exceptions to this policy require the written approval of the firm's CCO.

Code of Ethics

Responsibility of Supervised Persons to Understand and Abide by Code

Initial Certification

All supervised persons will be provided with a copy of the Code and must initially certify in writing to the CCO that they have: (i) received a copy of the Code; (ii) read and understand all provisions of the Code; (iii) agreed to abide by the Code; and (iv) reported all account holdings as required by the Code.

Acknowledgement of Amendments

All supervised persons shall receive any amendments to the Code and must certify to the CCO in writing that they have: (i) received a copy of the amendment; (ii) read and understood the amendment; (iii) and agreed to abide by the Code as amended.

Annual Certification

All supervised persons must annually certify in writing to the CCO that they have: (i) read and understood all provisions of the Code; (ii) complied with all requirements of the Code; and (iii) submitted all holdings and transaction reports as required by the Code.

Duty to Report Violations of the Code

All supervised persons shall promptly report to the CCO or an alternate designee all apparent violations of the Code. Any retaliation for the reporting of a violation under this Code will constitute a violation of the Code.

The CCO shall promptly report to senior management all apparent material violations of the Code. When the CCO finds that a violation otherwise reportable to senior management could not be reasonably found to have resulted in a fraud, deceit, or a manipulative practice in violation of Section 206 of the Advisers Act, he or she may, in his or her discretion, submit a written memorandum of such finding and the reasons therefore to a reporting file created for this purpose in lieu of reporting the matter to senior management.

Senior management shall consider reports made to it hereunder and shall determine whether or not the Code has been violated and what sanctions, if any, should be imposed. Possible sanctions may include reprimands, monetary fine or assessment, or suspension or termination of the employee’s employment with the firm.

Record Keeping Requirements for Code

The CCO shall maintain and cause to be maintained in a readily accessible place the following records:

A copy of any code of ethics adopted by the firm pursuant to Advisers Act Rule 204A-1 which is or has been in effect during the past five years;

Code of Ethics

A record of any violation of the Firm’s Code and any action that was taken as a result of such violation for a period of five years from the end of the fiscal year in which the violation occurred;
A record of all written acknowledgements of receipt of the Code and amendments thereto for each person who is currently, or within the past five years was, a Access person which shall be retained for five years after the individual ceases to be a Access person of Granahan Investment Management;
A copy of each report made pursuant to Advisers Act Rule 204A-1, including any brokerage confirmations and account statements made in lieu of these reports;
A list of all persons who are, or within the preceding five years have been, access persons;
A record of any decision and reasons supporting such decision to approve a Access persons' acquisition of securities in IPOs and limited offerings within the past five years after the end of the fiscal year in which such approval is granted.

Further Information

The CCO will review and update this code annually, and as necessary.

Nothing contained in this Code shall be interpreted as relieving any supervised person from acting in accordance with the provision of any applicable law, rule or regulation or any other statement of policy adopted by GIM.

Supervised persons should contact the CCO regarding any inquiries pertaining to the Code or the policies established herein.

Code of Ethics

EX-99.P CODE ETH 7 kalmarcodeofethicsapril2012.htm CODE OF ETHICS kalmarcodeofethicsapril2012.htm - Generated by SEC Publisher for SEC Filing

Kalmar “Growth with Value”
CODE OF ETHICS

CODE OF ETHICS

Of Kalmar Pooled Investment Trust Kalmar Investment Advisers & Kalmar Investments Inc.

POLICY STATEMENT ON INSIDER TRADING

For Kalmar Investment Advisers & Kalmar Investments Inc. Revised: April 2012

Barley Mill House× 3701 Kennett Pike, Wilmington, DE 19807× p: 302.658.7575× f: 302.658.7513× kalmarinvestments.com

Kalmar “Growth with Value”
CODE OF ETHICS

CODE OF ETHICS

OF

KALMAR POOLED INVESTMENT TRUST

KALMAR INVESTMENT ADVISERS

KALMAR INVESTMENTS INC.

PREAMBLE

This Code of Ethics is being adopted in compliance with the requirements of Rule 17j 1 (the “Rule”) adopted by the United States Securities and Exchange Commission under the Investment Company Act of 1940 (the “Act”) to effectuate the purposes and objectives of that Rule. The Rule makes it unlawful for certain persons, in connection with purchase or sale by any such person of a security held or to be acquired by Kalmar Pooled Investment Trust (the “Trust”):


(1)	To employ a device, scheme or artifice to defraud the Trust;
(2)	To make to the Trust any untrue statement of a material fact or omit to state to the
	Trust a material fact necessary in order to make the statements made, in light of the
	circumstances in which they are made, not misleading;
(3)	To engage in any act, practice or course of business which operates or would
	operate as a fraud or deceit upon the Trust; or
(4)	To engage in a manipulative practice with respect to the Trust.

The Rule also requires the Trust, its investment adviser and its distributor to adopt a written Code of Ethics containing provisions reasonably necessary to prevent persons from engaging in acts in violation of the above standard and to use reasonable diligence, and institute procedures reasonably necessary, to prevent violations of the Code. Set forth below is the Code of Ethics adopted by the Board of Trustees of the Trust and by Kalmar Investment Advisers (the “Adviser”) and its affiliate, Kalmar Investments Inc., in compliance with the Rule. This Code is based upon the principle that the trustees and officers of the Trust, and certain affiliated persons of the Trust and the Adviser owe a fiduciary duty to, among others, the shareholders of the Trust to conduct their affairs, including their personal securities transactions, in such a manner to avoid (i) serving their own personal interests ahead of shareholders; (ii) taking inappropriate advantage of their position with the Trust; and (iii) any actual or potential conflicts of interest or any abuse of their position of trust and responsibility.


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1. DEFINITIONS

(a) “Access Person” means


(i)	any director, trustee, officer, general partner or Advisory Person of the Trust, or of the
	Adviser who, with respect to the Trust, makes any recommendation, participates in the
	determination of which recommendations will be made, or whose principal function or
	duties relate to the determination of which recommendation will be made, or who, in
	connection with his or her duties, obtains any information concerning recommendations on
	Covered Securities being made by the Adviser; and

(ii)	any director, officer or general partner of the Trust’s principal underwriter who, in the
	ordinary course of business, makes, participates in or obtains information regarding the
	purchase or sale of Covered Securities by the Trust, or whose functions or duties in the
	ordinary course of business relate to the making of any recommendation to the Trust
	regarding the purchase or sale of Covered Securities.

(b) “Advisory Person” means

(i) any employee of the Trust or the Adviser (or of any company in a control relationship to the

Trust or the Adviser) who, in connection with his regular functions or duties, makes,

participates in, or obtains current information regarding the purchase or sale of a Covered

Security by the Trust, or whose functions relate to the making of any recommendations with

respect to such purchases or sales; and

(ii) any natural person in a control relationship to the Trust or the Adviser who obtains

information concerning recommendations made to the Trust with regard to the purchase or

sale of a Covered Security by the Trust.

recommendation to purchase or sell the security has been made and communicated to the Trading

Desk, which includes when the Trust has a pending “buy” or “sell” order with respect to a security, and,

with respect to the person making the recommendation, when such person seriously considers making

such a recommendation.

(d) “Beneficial ownership” shall be as defined in, and interpreted in the same manner as it would be in

determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act

of 1934 and the rules and regulations thereunder which, generally speaking, encompasses those

situations where the beneficial owner has the right to enjoy some economic benefit from the ownership

of the security regardless of who is the registered owner. This would include:

(i) securities which a person holds for his or her own benefit either in bearer form, registered

in his or her own name or otherwise regardless of whether the securities are owned

individually or jointly;

(ii) securities held in the name of a member of his or her immediate family (spouse or minor

child) sharing the same household;

(iii) securities held by a trustee, executor, administrator, custodian or broker;


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		CODE OF ETHICS



	(iv)	securities owned by a general partnership of which the person is a member or a limited
		partnership of which such person is a general partner;

	(v)	securities held by a corporation which can be regarded as a personal holding company of a
		person; and

	(vi)	securities recently purchased by a person and awaiting transfer into his or her name.

(e) “Control” shall have the same meaning as that set forth in Section 2(a)(9) of the Act.

(f) “Chief Compliance Officer” means Ms. Kimberly Portmann or her successor appointed by the Trustees.

(g) “Covered Security” means a security, except that it shall not include

(i) direct obligations of the Government of the United States;

(ii) bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short

term debt instruments, including repurchase agreements; and

(iii) shares issued by registered, open end investment companies which are not advised by the

Adviser.

(h) “Independent Trustee” means a Trustee of the Trust who is not an “interested person” of the Trust

within the meaning of Section 2(a)(19) of the Act.

(i) “Initial Public Offering” (“IPO”) means an offering of securities registered under the Securities Act of

1933 (“Securities Act”), the issuer of which, immediately before the registration, was not subject to the

reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934.

(j) “Investment Personnel” means:

(i) any Advisory Person who, in connection with his regular functions or duties, makes or

participates in making recommendations regarding the purchase or sale of securities by the

Trust;

(ii) any natural person who controls the Trust or the Advisor and who obtains information

concerning recommendations made to the Trust regarding the purchase or sale of securities

by the Trust.

(k) “Limited Offering” means an offering that is exempt from registration under the Securities Act pursuant

to Section 4(2) or Section 4(6) or pursuant to rule 504, rule 505 or rule 506 under the Securities Act.

(l) “Purchase or Sale of a Covered Security” includes the writing of an option to purchase or sell a Covered

Security.

(m)“Security Held or to be Acquired” by the Trust means:

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CODE OF ETHICS

(i)	any Covered Security which, within the most recent fifteen (15) days:


	(A)	is or has been held by the Trust; or

	(B)	is being or has been considered by the Trust or the Adviser for purchase by
		the Trust; and

	(ii) any option to purchase or sell, and any security convertible into or exchangeable for, a
	Covered Security described in paragraph (m)(i) of this section.

	(n) “security” as defined in Section 2(a)(36) of the Act means any note, stock, exchange traded funds
	(ETF’s), treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or
	participation in any profit sharing agreement, collateral trust certificate, pre organization certificate or
	subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a
	security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option,
	or privilege on any security (including a certificate of deposit) or on any group or index of securities
	(including any interest therein or based on the value thereof), or any put, call, straddle, option, or
	privilege entered into in a national securities exchange relating to foreign currency, or, in general, any
	interest or instrument commonly known as a “security,” or any certificate of interest or participation in,
	temporary or interim certificate for, receipt for, guarantee of , or warrant or right to subscribe to or
	purchase, any of the foregoing.


2.	PROHIBITED TRANSACTIONS

	(a) No access Person shall engage in any act, practice or course of conduct, which would violate the provisions
	of Rule 17j 1 set forth above in the Code’s Preamble or any applicable federal securities law.

	(b) No Access Person shall:

	(i) purchase or sell, directly or indirectly, any security in which he has or by reason of such
	transaction acquires, any direct or indirect beneficial ownership and which to his or her
	actual knowledge at the time of such purchase or sale:

	(A)	is being considered for purchase or sale by the Trust, or

	(B)	is being purchased or sold by the Trust;

	(ii) disclose to other persons the securities activities engaged in or contemplated for the Trust;

	(iii) seek or accept anything of value, either directly or indirectly, from broker dealers or other
	persons providing services to the Trust because of such person’s association with the Trust.
	For the purposes of this provision, the following gifts from broker dealers or other persons
	providing services to the Trust will not be considered to be in violation of this section:

	(A)	an occasional meal;


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		CODE OF ETHICS


		(B) an occasional ticket to a sporting event, the theater or comparable
		entertainment;

		(C) a holiday gift of fruit or other foods, or other comparable gift.

	(c) No Investment Personnel shall:

	(i)	acquire directly or indirectly any beneficial ownership in any securities in an IPO or in a
		Limited Offering without prior approval of the Chief Compliance Officer or other person
		designated by the Board of Trustees. Any person authorized to purchase securities in a
		Limited Offering shall disclose that investment when they play a part in any subsequent
		consideration of an investment by the Trust in the issuer. In such circumstances, the
		Adviser’s decision to purchase securities of the issuer shall be subject to independent
		review by the Adviser’s officers with no personal interest in the issuer.

	(ii)	buy or sell a Covered Security within at least seven (7) calendar days before and after the
		Trust trades in that security. Any profits realized on trades within the proscribed period
		are required to be disgorged. The Chief Compliance Officer may permit exceptions to this
		prohibition in writing, on a case by case basis, when no abuse is involved and the
		circumstances of the subject trades support an exemption.

	(iii)	profit in the purchase and sale, or sale and purchase, of the same (or equivalent) Covered
		Securities within thirty (30) calendar days if such securities are owned by the Trust. Any
		profits realized on such short term trades shall be subject to disgorgement. The Chief
		Compliance Officer may permit exceptions to this prohibition in writing, on a case by case
		basis, when no abuse is involved and the circumstances of the subject trades support an
		exemption.

	(iv)	serve on the board of directors of any publicly traded company without prior authorization
		of the Chairman and/or President of the Trust. Any such authorization shall be based upon
		a determination that the board services would be consistent with the interests of the Trust
		and its shareholders.


3.	EXEMPTED TRANSACTIONS

	The prohibitions of Sections 2(b) and 2(c) shall not apply to:

(a) purchases or sales effected in any account over which the Access Person has no direct or indirect

influence or control;

(b) purchases or sales which are non volitional on the part of either the Access Person or the Trust;

rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were

acquired from such issuer, and sales of such rights so acquired

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CODE OF ETHICS




4.		COMPLIANCE PROCEDURES

(a) Pre clearance

With the exception of the Independent Trustees, all Access Persons shall receive prior approval from

the Chief Compliance Officer or other officer designated by the Board of Trustees before purchasing or

selling securities.

(b) Reporting Requirements

Initial & Annual Reports All Access Persons, except Independent Trustees, shall disclose to the Chief

Compliance Officer within 10 days of becoming an Access Person, current as of a date not more than 45

days before the person becomes and access person and thereafter on an annual basis as of December

31 (i) the name, number of shares and principal amount of each Covered Security in which the Access

Person has any direct or indirect beneficial ownership and (ii) the name of any broker, dealer or bank

with whom the Access Person maintains a securities account. The initial holdings report shall be made

on the form attached as Exhibit A, and the annual holdings report shall be made on the form attached as

Exhibit B.

Quarterly Reports Every Access Person shall report to the Chief Compliance Officer the information

described below with respect to transactions in any Covered Security in which such person has, or by

reason of such transaction acquires, any direct or indirect beneficial ownership in the security;

provided, however, that an Access Person shall not be required to make a report with respect to

transactions effected for any account over which such person has no direct or indirect influence or

control.

(i) Each Independent Trustee need only report a transaction in a Covered Security if such

Trustee, at the time of that transaction, knew, or, in the ordinary course of fulfilling his

official duties as a trustee, should have known that during the 15 day period immediately

before or after the date of the Trustee’s transaction, such Covered Security was purchased

or sold by the Trust or was being considered for purchase or sale by the Trust or Adviser.

(ii) Reports required to be made this Paragraph (b) shall be made not later than 30 days after

the end of the calendar quarter. Every Access Person shall be required to submit a report

for all periods, including those periods in which no securities transactions were effected. A

report shall be made on the form attached hereto as Exhibit C or on any other form

containing the following information:

(iii) With respect to any transaction during the quarter in a Covered Security in which the Access

Person had any direct or indirect beneficial ownership:

A. The date of the transaction, the name, the interest rate and maturity date (if

applicable), the number of shares, and the principal amount of each Covered

Security involved;

B. The nature of the transaction (i.e., purchase, sale or any other type of

acquisition or disposition);

Kalmar “Growth with Value”
CODE OF ETHICS

C. The price of the Covered Security at which the transaction was effected;

D. The name of the broker, dealer or bank with or through which the

transaction was effected; and

E. The date that the report is submitted by the Access Person.

With respect to any securities account established at a broker, dealer, or bank during the

quarter for the direct or indirect benefit of the Access Person:

A. The name of the broker, dealer or bank with whom the Access Person

established the account;

B. The date the account was established; and

C. The date that the report is submitted by the Access Person.

Any report may contain a statement that the report shall not be construed as an admission

by the person making such report that he or she has any direct or indirect beneficial

ownership in the security to which the report relates.

With the exception of the Independent Trustees, every Access Person shall direct their brokers to

supply to the Chief Compliance Officer, on a timely basis, duplicate copies of the confirmation of all

personal securities transactions and copies of all periodic statements for all securities accounts.

(d) Duty of Confidentiality

Confidentiality is a cornerstone of the Adviser’s fiduciary obligation to its clients. Kalmar’s access

persons owe a duty of confidentiality to both Kalmar and its clients. Information acquired in the course

of employment by Kalmar, including but not limited to information regarding actual or contemplated

investment decisions, securities under active consideration, portfolio composition, client interests, non

public client information, research, research recommendations, Adviser activities and new business

initiatives is confidential.

Access persons must not discuss client business (e.g., strategy, holdings, assets under management,

etc.), including the existence of a client relationship, with outsiders except as necessary to perform his

or her job responsibilities.

(e) Notification of Reporting Obligations

The Chief Compliance Officer shall notify each Access Person that he or she is subject to these reporting

requirements, and shall deliver a copy of this Code of Ethics to each such person upon request.

Kalmar “Growth with Value”
CODE OF ETHICS

(f) Certification of Compliance with Code of Ethics



	With the exception of the Independent Trustees, every Access Person shall certify in an annual report
	that:

	(i) they have read and understand the Code of Ethics and recognize that they are subject
	thereto;

	(ii) they have complied with the requirements of the Code of Ethics; and

	(iii) they have reported all personal securities transactions required to be reported pursuant to
	the requirements of the Code of Ethics.

	(g) Conflict of Interest

	Every Access Person shall notify the Chief Compliance Officer of any personal conflict of interest
	relationship which may involve the Trust, such as the existence of any economic relationship between
	their transactions and securities held or to be acquired by the Trust. Such notification shall occur in the
	pre clearance process.

	(h) Review of Reports

	The Chief Compliance Officer or his designate shall review all personal holdings reports, submitted by
	each Access Person, including confirmations of personal securities transactions, to ensure no trading
	has taken place in violation of Rule 17j 1 or the Code of Ethics. Any violations of the Code of Ethics
	shall be reported to the Board in accordance with Section 5 of the Code. The Chief Compliance Officer
	shall maintain a list of the personnel responsible for reviewing the transactions and personal holdings
	reports.


5.	REPORTING OF VIOLATIONS TO THE BOARD OF TRUSTEES

	(a) The Chief Compliance Officer shall promptly report to the Board of Trustees:

	(i) all apparent violations of this Code of Ethics and the reporting requirements; and

	(ii) any reported transaction in a Covered Security which was purchased or sold by the Trust
	within fifteen (15) days before or after the date of the reported transactions.

	(b) When the Chief Compliance Officer finds that a transaction otherwise reportable to the Board of
	Trustees under Paragraph (a) of this Section could not reasonably be found to have resulted in a fraud,
	deceit or manipulative practice in violation of Rule 17j 1(a), such officer may, in her discretion, record a
	written memorandum of such finding and the reasons therefore with the reports made pursuant to this
	Code of Ethics, in lieu of reporting the transaction to the Board of Trustees.

Kalmar “Growth with Value”
CODE OF ETHICS


	(c) The Board of Trustees shall consider reports made to the Board of Trustees hereunder and shall
	determine whether or not this Code of Ethics has been violated and what sanctions, if any, should be
	imposed.


6. ANNUAL REPORTING TO THE BOARD OF TRUSTEES

(a) The Chief Compliance Officer and the Adviser shall furnish to the Board of Trustees, and the Board of
	Trustees must consider, an annual report relating to this Code of Ethics. Such annual report shall:

	(i) describe any issues arising under the Code of Ethics or procedures during the past year.

	(ii) identify any material violations of this Code or procedures, including sanctions imposed in
		response to such violations during the past year.

	(iii)	identify any recommended changes in the existing restrictions or procedures based upon
		the Trust’s experience under its Code of Ethics, evolving industry practices or developments
		in applicable laws or regulations; and

	(iv)	certify that the Trust and the Adviser have adopted procedures reasonably necessary to
		prevent Access Persons from violating the Code of Ethics.


7.	SANCTIONS

	Upon discovering a violation of this Code, the Board of Trustees may impose such sanctions as they deem
appropriate, including, among other things, a letter of censure or suspension or termination of the employment of
the violator.


8.	RETENTION OF RECORDS

	This Code of Ethics, a list of all persons required to make reports hereunder from time to time, a copy of
each report made by an access person hereunder, a list of all persons responsible for reviewing the reports
required hereunder, a record of any decision and the reasons supporting the decision to approve the acquisition by
Investment Personnel of securities in an IPO or limited offering, each memorandum made by the Chief Compliance
Officer hereunder and a record of any violation hereof and any action taken as a result of such violation, shall be
maintained by the Trust as required under Rule 17j 1.


9.	ADOPTION AND AMENDMENTS

	The Board of Trustees, including a majority of Independent Trustees, shall approve this Code of Ethics and
any material changes to the Code. The Board of Trustees shall approve any material change to the Code no later
than six (6) months after adoption of the material change.

Kalmar “Growth with Value”
CODE OF ETHICS

Before approving this Code or any amendment to this Code, the Board of Trustees shall have received a certification from the Trust or the Adviser that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code.

Kalmar “Growth with Value”
CODE OF ETHICS




	KALMAR INVESTMENT ADVISERS
	&
	KALMAR INVESTMENTS INC.



	POLICY STATEMENT ON INSIDER TRADING


SECTION I.	POLICY STATEMENT ON INSIDER TRADING


A.	Policy Statement on Insider Trading

	Kalmar Investment Advisers and Kalmar Investments Inc. (each referred to herein as the “Adviser”) forbids
any managing member or employee from trading, either personally or on behalf of a Client Account, on material
nonpublic information, or communicating material nonpublic information to other persons in violation of the law.
This conduct is frequently referred to as “insider trading”. The Adviser’s policy applies to every managing member
and employee and extends to activities within and outside their duties for the Adviser. Every managing member
and employee must read and retain a copy of this policy statement. Any questions regarding the Adviser’s policy
and procedures should be referred to the Chief Compliance Officer.

	The term “insider trading” is not defined in the federal securities laws, but generally is used to refer to the
use of material nonpublic information to trade in securities (whether or not one is an “insider”) or to
communications of material nonpublic information to others.

	While the law concerning insider trading is not static, it is generally understood that the law prohibits:

	(i) trading by an insider, while in possession of material nonpublic information, or

	(ii) trading by a non insider, while in possession of material nonpublic information, where the
	information either was disclosed to the non insider in violation of an insider’s duty to keep it
	confidential or was misappropriated, or

	(iii) communicating material nonpublic information to others.


	The elements of insider trading and the penalties for such unlawful conduct are discussed below. If, after
reviewing this policy statement, you have any questions, you should consult the Adviser’s Chief Compliance Officer,
Kimberly Portmann.

1. Who is an Insider?

Kalmar “Growth with Value”
CODE OF ETHICS

The concept of “insider” is broad. It includes partners and employees of a company. In addition, a person can be a “temporary insider” if he or she enters into a special confidential relationship in the conduct of a company’s affairs and as a result is given access to information solely for the company’s purposes. A temporary insider can include, among others, a company’s attorneys, accountants, consultants, bank lending officers, and the employees of such organizations. In addition, the Adviser may become a temporary insider of a company it advises or for which it performs other services. According to the U.S. Supreme Court, the company must expect the outsider to keep the disclosed nonpublic information confidential and the relationship must at least imply such a duty before the outsider will be considered an insider. 2. What is Material Information?

Trading on inside information is not a basis of liability unless the information is material. “Material information” generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company’s securities. Information that managing members and employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments.

Material information does not have to relate to a company’s business. For example, in Carpenter v. U.S., 108 U.S. 316 (1987), the Supreme Court considered material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a Wall Street Journal reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journal and whether those reports would be favorable or not. 3. What is Nonpublic Information?

Information is nonpublic until it has been effectively communicated to the market place. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications of general circulation would be considered public. 4. Basis for Liability

i) fiduciary duty theory In 1980, the Supreme Court found that there is no general duty to disclose before trading on material nonpublic information, but that such a duty arises only where there is a fiduciary relationship. That is, there must be a relationship between the parties to the transaction such that one party has a right to expect that the other party will disclose any material nonpublic information or refrain from trading. Chiarella v. U.S. 445 U.S. 22 (1980). In Dirks v. SEC, 463 U.S. 646 (1983), the Supreme Court stated alternate theories under which non insiders can acquire the fiduciary duties of insiders: they can enter into a confidential


		Kalmar “Growth with Value”
		CODE OF ETHICS


		relationship with the company through which they gain information (i.e., attorneys, accountants),
		or they can acquire a fiduciary duty to the company’s shareholders as “tippees” if they are aware
		or should have been aware that they have been given confidential information by an insider who
		has violated his fiduciary duty to the company’s shareholders.

		However, in the “tippee” situation, a breach of duty occurs only if the insider personally benefits,
		directly or indirectly from the disclosure. The benefit does not have to be pecuniary, but can be a
		gift, a reputational benefit that will translate into future earnings, or even evidence of a
		relationship that suggests a quid pro quo.

	(ii)	misappropriation theory

Another basis for insider trading liability is the “misappropriation” theory, where liability is

established when trading occurs on material nonpublic information that was stolen or

misappropriated from any other person. In U.S. v. Carpenter supra, the Court found, in 1987, a

columnist defrauded The Wall Street Journal when he stole information from the Journal and

used it for trading in the securities markets. It should be noted that the misappropriation theory

can be used to reach a variety of individuals not previously thought to be encompassed under the

fiduciary duty theory.

5. Penalties for Insider Trading

Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include:


(i)	civil injunctions

(ii)	treble damages

(iii) disgorgement of profits

(iv) jail sentences

(v)	fines for the person who committed the violation of up to three times the profit gained or loss

avoided, whether or not the person actually benefited, and

(vi) fines for the employer or other controlling person of up to the greater of $1,000,000 or three

times the amount of the profit gained or loss avoided.

In addition, any violation of this policy statement can be expected to result in serious sanctions by the Adviser, including dismissal of the persons involved.

Kalmar “Growth with Value”
CODE OF ETHICS

SECTION II. PROCEDURES TO IMPLEMENT INSIDER TRADING POLICY

The following procedures have been established to aid the managing members and employees of each Adviser to avoid insider trading, and to aid the Adviser in preventing, detecting and imposing sanctions against insider trading. Every officer, director, managing member or employee of Kalmar Investment Advisers and Kalmar Investments Inc. must follow these procedures or risk serious sanctions, including dismissal, substantial personal liability and criminal penalties. If you have any questions about these procedures, you should consult the Adviser’s Chief Compliance Officer, Ms. Kimberly Portmann.

1. Identifying Inside Information

Before trading for yourself or others, including Client Accounts, in the securities of a company about which you may have potential inside information, ask yourself the following questions:


	i) Is the information material? Is this information that an investor would consider important in
	making his or her investment decisions? Is this information that would substantially affect the
	market price of the securities if generally disclosed?

	ii) Is the information nonpublic? To whom has this information been provided? Has the information
	been effectively communicated to the marketplace by being published in Reuters, The Wall Street
	Journal, or other publications of general circulation?


	If, after consideration of the above, you believe that the information is material and nonpublic, or if you

have questions as to whether the information is material and nonpublic, you should take the following steps:

i) Report the matter immediately to Ms. Kimberly Portmann.

ii) Do not purchase or sell the securities on behalf of yourself or others, including Client Accounts.

iii) Do not communicate the information inside or outside the Adviser, other than to Ms. Portmann.

iv) After Ms. Portmann has reviewed the issue, you will be instructed to continue the prohibitions

against trading and communications, or you will be allowed to trade and communicate the information.

Personal Security Trading

All managing members and employees of the Adviser (other than managing members and employees who are required to report their securities transactions to a registered investment company in accordance with a Code of Ethics) shall submit to the chief compliance officer, on a quarterly basis, a report of every securities transaction in which they, their families (including the spouse, minor children and adults living in the same household as the managing member or employee), and trusts of which they are

Kalmar “Growth with Value”
CODE OF ETHICS

trustees or in which they have a beneficial interest or have participated, or at such lesser intervals as may be required from time to time. The report shall include the name of the security, date of the transaction, quantity, price, and broker dealer through which the transaction was effected. All managing members and employees must also instruct their broker(s) to supply the chief compliance officer, on a timely basis, with duplicate copies of confirmations of all personal securities transactions and copies of all periodic statements for all securities accounts.

3. Restricting Access to Material Non public Information

Any information in your possession that you identify as material and non public may not be communicated other than in the course of performing your duties to anyone, including persons within your company, except as provided in paragraph 1 above. In addition, care should be taken so that such information is secure. For example, files containing material non public information should be sealed and access to computer files containing material non public information should be restricted.


4.	Resolving Issues Concerning Insider Trading
	If, after consideration of the items set forth in paragraph 1, doubt remains as to whether

information is material or non public, or if there is any unresolved question as to the applicability or interpretation

of the foregoing procedures, or as to the propriety of any action, it must be discussed with the chief compliance

officer before trading or communicating the information to anyone.

SECTION III. SUPERVISION

The role of the chief compliance officer is critical to the implementation and maintenance of this

Statement on Insider Trading. These supervisory procedures can be divided into two classifications, (1) the

prevention of insider trading, and (2) the detection of insider trading.


1.	Prevention of Insider Trading To prevent insider trading the chief compliance officer should: (a) answer promptly and questions regarding the Statement on Insider Trading; (b) resolve issues of whether information received by a managing member or employee is material and non public;
	(c) review and ensure that managing members and employees review, at least annually, and update as necessary, the Statement on Insider Trading; and
	(d) when it has been determined that a managing member or employee has material non public information,


	(i) implement measures to prevent dissemination of such information, and
	(ii) if necessary, restrict officers, directors, and employees from trading the securities.


		Kalmar “Growth with Value”
		CODE OF ETHICS


2.		Detection of Insider Trading

		To detect insider trading, the chief compliance officer should:
		(a) review the trading activity reports filed by each managing member and employee, to ensure no
		trading took place in securities in which the Adviser has material non public information;
		(b) review the trading activity of the mutual funds managed by the Adviser;
		(c) coordinate, if necessary, the review of such reports with other appropriate officers, members,
trustees or employees of the Adviser and Kalmar Pooled Investment Trust.

3.		Special Reports to Management

		Promptly, upon learning of a potential violation of the Statement on Insider Trading, the

compliance officer must prepare a written report to management of the Adviser, and provide a copy of such report

to the Board of Trustees of Kalmar Pooled Investment Trust, providing full details and recommendations for

further action.



	The Undersigned has read, understands and agrees to abide by the foregoing Insider Trading Policy

and has retained a copy of the said document.

Date: _________________________ Signature: ____________________________________________

EX-99.P CODE ETH 8 codeofethicsapril2012final-s.htm CODE OF ETHICS codeofethicsapril2012final-s.htm - Generated by SEC Publisher for SEC Filing

Stephens Investment Management Group, LLC

Code of Ethics

April 2012


STEPHENS INVESTMENT MANAGEMENT GROUP, LLC.
CODE OF ETHICS

TABLE OF CONTENTS

Statement of Policy				1
I.	Definitions			2
II.	Standards of Conduct			3
	A. Your Responsibilities			4
	B.	Conflicts of Interest		4
		1.	Conflicts Among Client Interests	4
		2.	Conflicts with SIMG Interests	4
		3.	Competing with Client Trades	4
	C.	Inside Information and Insider Trading		4
	D. Personal Transactions			6
		1.	Prohibited Securities Transactions	6
		2.	General Trading Restrictions	7
		3.	Exempted Transactions/Securities	8
	E.	Gifts and Entertainment		9
		1.	General Statement	9
		2.	Accepting Gifts	10
		3.	Solicitation of Gifts	10
		4.	Giving Gifts	10
		5.	Cash	10
		6.	Entertainment	10
	F.	Political Contributions		11
	G. Confidentiality			11
	H. Service as a Director			11
	I.	Outside Business Activities		12
	J.	Outside Employment		12
	K. Undue Influence			12
	L.	Proxy Voting		12


III.	Compliance and Reporting Procedures			13
	A. Preclearance Requirements			13
		1.	Trade Authorization Request Form	13
		2.	Review of Proposed Investment	13
		3.	No Explanation Required for Refusals	13
	B.	Reporting Requirements		13
		1.	Initial and Periodic Disclosure of Personal Holdings by Access
			Persons	13
		2.	Transactions and Periodic Statement Reporting Requirements	14
		3.	Reporting Exemptions	15
		4. Availability of Reports		15
	C.	Required Acknowledgements and Certifications		15
IV.	Recordkeeping			15
V.	Compliance With The Code Of Ethics			16
	A. Training and Education			16
	B.	Review of Transactions		16
	C.	Investigating Violations of the Code		16
	D. Annual Reports			16
VI.	Failure To Comply With The Code Of Ethics			17
	A. Duty To Report			17
	B.	Sanctions		17
VII.	Further Information			17
Appendix I				18
Trade Authorization Request
Appendix II				19
Acknowledgement and Certification

STEPHENS INVESTMENT MANAGEMENT GROUP, LLC

CODE OF ETHICS

STATEMENT OF POLICY

Stephens Investment Management Group, LLC (“SIMG”) has adopted this Code of Ethics (“Code”), which sets forth requirements relating to personal trading and defines requirements and expectations for the business conduct of all of its Supervised Persons. The Code is intended as a complement to, and in no way supersedes or replaces other compliance policies and procedures manuals that may be applicable to a particular Supervised Person, including but not limited to the SIMG Compliance Manual, Stephens Inc. Compliance Manual, Stephens Inc. Advisory Code of Ethics, and Stephens Inc. Investment Advisory Policies and Procedures Manual. Furthermore, all Supervised Persons are expected to adhere to the Stephens’ Mission and Values Statement and Code of Professional Conduct.

The fundamental position of SIMG is that all aspects of its business are to be conducted in an ethical and legal manner in accordance with federal law and the laws of all states where it does business. In accordance with that position, general principles apply:

1. SIMG has a fiduciary relationship with its clients. The interests of our clients always come first.

2. All personal securities transactions should be conducted in such a manner as to be consistent with the Code and to avoid actual or potential conflicts of interest or abuse of a Supervised Person’s knowledge of customer information or customer transactions.

3. SIMG personnel should not take inappropriate advantage of their positions. Information concerning the identity of security holdings and financial circumstances of clients is confidential.

Accordingly, there are certain standards of conduct that SIMG Supervised Persons must follow so as not to conflict with the interests of our clients.

This Code does not attempt to identify all possible conflicts of interest, and literal compliance with each of its specific provisions will not shield Supervised Persons from liability for personal trading or other conduct that violates a fiduciary duty to advisory clients.

SIMG Code of Ethics April 2012

I. DEFINITIONS

When used in the Code, the following terms have the meanings set forth below:

“Access Person” means:

Any officer or Manager of SIMG;
any Supervised Person who has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any Reportable Fund;
any Supervised Person who is involved in making securities recommendations to clients, or has access to such recommendations that are nonpublic; and
such other persons as the Legal and Compliance Department shall designate, including certain employees of Stephens Inc. who, in connection with their regular functions or duties, make, participate in, or obtain information regarding the purchase or sale of securities by any SIMG sub-advised mutual fund.

Any uncertainty as to whether an individual is an Access Person should be brought to the attention of the SIMG Compliance Department. Such questions will be resolved in accordance with, and this definition shall be subject to, the definitions of Access Person found in rules promulgated under the Investment Company Act of 1940 and the Investment Advisers Act of 1940, as amended.

“Automatic Investment Plan” means: a program in which regular periodic purchases (or withdrawals) are made automatically in (or from) investment accounts in accordance with a predetermined schedule and allocation. An automatic investment plan includes a dividend reinvestment plan.

“Beneficial Ownership” means: any direct or indirect pecuniary interest in a security, which includes the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the security. (Note: An individual is presumed to be a beneficial owner of securities that are held by immediate family members sharing the individual’s household.)

“Investment Personnel” and “Investment Person” means:

each Portfolio Manager and any Access Person who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by any advisory account; or
any person who controls SIMG and obtains information concerning recommendations made to a mutual fund sub-advised by SIMG regarding the purchase or sale of securities by the fund.

“Manager” means:

• any person appointed and serving on the Board of Managers of SIMG.

SIMG Code of Ethics April 2012

“Portfolio Manager” means: any person who has or shares principal direct day-to-day responsibility for managing the portfolios or investments of SIMG advisory client(s), account(s), or fund(s).

“Preclearance Officer” means: the persons designated as a Preclearance Officer, or such person’s designee.

“Reportable Fund” means: any registered investment company for which SIMG (or an affiliate) serves as investment adviser, sub-adviser or principal underwriter. (For these purposes, Hotchkis and Wiley Capital Management, LLC (“H&W”) is considered an affiliate.)

“Reportable Security” means: a security as defined in section 202(a)(18) of the Investment Advisers Act of 1940, except that it does not include:

direct obligations of the Government of the United States;
banker’s acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;
shares issued by money market funds; and
shares issued by open-end funds other than (i) Reportable Funds and (ii) exchange- traded open-end funds.

“Supervised Person(s)” means:

any officer, Manager or employee of SIMG; or
any person who provides advice on behalf of SIMG and is subject to the supervision and control of SIMG.

II. STANDARDS OF CONDUCT

All Access and Supervised Persons must comply with applicable federal and state securities law.

Under these laws, it is unlawful for Access and Supervised Persons:

to employ any device, scheme or artifice to defraud any client account;
to make any untrue statement of a material fact to any client or omit to state a material fact necessary in order to make statements made to a client, in light of the circumstances under which they are made, not misleading;
to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any client;
to engage in any manipulative practice with regard to any client account in connection with the purchase or sale, directly or indirectly by such client, of a security held or to be acquired by any client account; or

SIMG Code of Ethics April 2012

to engage in any manipulative practice with respect to securities, including price manipulation.

In the above statements of legal principles and the following specific examples, the terms "client" and "client account" include potential clients and client accounts in addition to existing clients and client accounts. Access and Supervised Persons should take care to follow these requirements in any conversation or written correspondence with any clients or potential clients.

A. Your Responsibilities

As an Access or Supervised Person, you are responsible for:

following the Code of Ethics;
obtaining any necessary approvals; and
reporting any suspected fraudulent or illegal activity to the Chief Compliance Officer.

B. Conflicts of Interest

To ensure full compliance with securities rules and regulations, as well as to maintain the confidence of our clients, conflicts of interest should be avoided or managed. A conflict of interest generally is a situation where your private, personal or outside interests or the interests of SIMG interfere with your duties and responsibilities to a client(s) of SIMG or raise a reasonable question of such interference.

1. Conflicts Among Client Interests. Conflicts of interest may arise where the interest of one client is favored over another client (e.g., larger accounts over smaller accounts, accounts compensated by performance fees over accounts not so compensated, accounts of close friends or relatives of SIMG). You should not favor one client over another client.

2. Conflicts with SIMG Interests. Conflicts of interest may arise where the interest of SIMG (or its affiliates) may be adverse to the interests of the client (e.g., selling the stock of an issuer in which an SIMG affiliate has an ownership interest). Client interests should not be placed behind the interests of the firm (or those of its affiliates).

3. Competing with Client Trades. You should not use knowledge about pending or currently considered securities transactions for clients to profit personally, directly or indirectly.

C. Inside Information and Insider Trading

You must not reveal any material non-public information (also called inside information) about a company to any person who would be likely to trade on such information, and you may not use this information in buying or selling (whether for your own account or for a client’s), or in recommending to others to buy or sell, any security of such company.

SIMG Code of Ethics April 2012

Information is “material” if there is the likelihood that a reasonable investor would consider it important in deciding whether to buy, sell, or hold the security. Information is “non-public” if it has not been disclosed to the public. This includes not only information related to issuers but also to SIMG’s securities recommendations and client securities holdings and transactions.

If at any time you believe that you have come into possession of material non-public information, notify the Chief Compliance Officer so that appropriate security measures can be implemented. Do not discuss the non-public information except as required by this policy.

In addition to, and in conjunction with, the requirements set forth herein, all Access and Supervised Persons should read, understand and follow the provisions of Chapter 1 of the Stephens Inc. (“Stephens”) Compliance Manual (“The Handling of Sensitive Information”). It sets forth in detail obligations related to inside information and insider trading to which all such persons are subject.

Stephens and SIMG follow various procedures designed to deter potential insider trading, including among other things, maintaining and publishing lists of securities that may not be purchased or sold at a particular time. The two primary restricted lists affecting SIMG are the Compliance Restriction List and the Research Restriction List. Each of these lists is prepared and maintained by Stephens in connection with its investment banking and/or broker-dealer activities.^*

With respect to the Compliance Restriction List:

SIMG and Access and Supervised Persons may not trade in the securities on this list for any account (affiliated or otherwise). Trading may take place after the security is removed from the list as long as there are no other restrictions.

^*Stephens maintains a Research Restriction list, pursuant to which Stephens restricts employee personal trading in securities for a period of two business days following (a) the publication of an initial research report by the Stephens Research Department on such securities or (b) the publication by the Stephens Research Department of a research report changing the rating of such securities. During the restricted period, employees and their related accounts are prohibited from trading in such securities in accordance with the newly published research rating but are permitted to trade against the newly published research rating. Customer accounts other than employee-related accounts are not restricted as to their trading activity in such securities.

Stephens maintains a Compliance Restriction list to address situations in which it could be inappropriate for Stephens or its employees to engage in normal brokerage activities with respect to certain securities. Employees are not permitted (a) to trade securities included on the Compliance Restriction list for their own accounts or for employee-related accounts or (b) to effect trades in such securities on a discretionary basis in customer accounts or (c) to solicit customer accounts to trade in such securities. However, employees are permitted to execute unsolicited trades in such securities for customer accounts other than employee-related accounts. The Compliance Restriction list is used primarily to satisfy the firm’s obligations under Reg M in connection with securities offerings and to protect the firm against trading or making solicitations based upon “inside information” that may have become known within the firm without the protections of the firm’s Chinese Wall procedures.

SIMG Code of Ethics April 2012

With respect to the Research Restriction list:

SIMG and Access and Supervised Persons may not trade in any security on this list for any employee, officer or related party account if the trade is consistent with the research recommendation for the security; if the trade for any such account is “against” the research recommendation, SIMG and/or any Access and Supervised Person may trade in the security. SIMG may trade in securities on this list for other client accounts.

D. Personal Transactions

All personal securities transactions of Access and Supervised Persons should:

be consistent with this Code of Ethics;
avoid any actual or potential conflict of interest;
avoid the abuse of job knowledge or responsibilities; and
avoid taking inappropriate advantage of your position with SIMG or Stephens Inc.

While the complete scope of transactions that might be detrimental or potentially detrimental to a client‘s account cannot be defined, the following are examples of situations that should be avoided:

knowingly purchasing or selling securities, directly or indirectly, ahead of client accounts or otherwise in such a way as to personally compete in the market with any client account;
using knowledge of securities transactions by a client account to profit personally, directly or indirectly, by the market effect of such transactions; or
providing information about client transactions or holdings to any person except to the extent necessary to effect such transactions or administer the account.

If you have any question about the application of any of these conduct principles to a particular fact pattern, you should speak to your supervisor or the SIMG Chief Compliance Officer.

1. Prohibited Securities Transactions. The following securities transactions are prohibited and will not be authorized under any circumstances:

a. Inside Information. Any transaction in a security by an individual who possesses material nonpublic information regarding the security or the issuer of the security.

b. Market Manipulation. Transactions intended to raise, lower, or maintain the price of any security or to create a false appearance of active trading.

c. Others. Any other transaction deemed by the Preclearance Officer to involve a conflict of interest, possible diversions of corporate opportunity, or an appearance of impropriety.

SIMG Code of Ethics April 2012

2.	General Trading Restrictions.

As noted above in the Statement of Policy, the requirements set forth below do not supersede or replace any policy or procedure applicable to Stephens Inc. employees.

a. Accounts. All Access and Supervised Persons must arrange for copies of their statements for any account in which they hold Reportable Securities (including 401(k) plans) to be provided to the Compliance Department. (With respect to brokerage accounts maintained at Stephens, this happens automatically.) This includes all confirmations received for each executed trade. (Any position in a mutual fund advised or sub-advised by SIMG, Stephens or H&W must be held in a Stephens’ brokerage account except for shares held through a 401(k) plan.) b. Accounts Include the Accounts of Certain Family Members and Other Accounts. Accounts of Access and Supervised Persons include any account holding any Reportable Security in which such person has Beneficial Ownership.

c. Preclearance. Investment Persons must obtain approval from the Preclearance Officer or preclearance delegatee prior to entering into any securities transaction (with the exception of exempted securities listed below and shares of Reportable Funds) in any account. Approval of a transaction, once given, is effective for that business day only. Any transaction not completed within that time period will require reapproval by the Preclearance Officer or preclearance delegatee prior to execution. Notwithstanding the foregoing, any purchase or sale transaction that does not exceed $15,000 and involves the common stock of an issuer that has a market capitalization in excess of $20 billion at the time of the transaction does not require preclearance approval. Investment Persons may not effect separate transactions in the same security in reliance on this exception as a means of avoiding the preclearance requirement.

d. Restrictions on Transactions. No Investment Person may purchase or sell any security which at the time is being purchased or sold, or to the Investment Person’s knowledge is being considered for purchase or sale, by any account managed by SIMG.

e. Restrictions on Related Securities. The restrictions and procedures applicable to the transactions in securities set forth in this Code of Ethics shall similarly apply to securities that are issued by the same issuer and whose value or return is related, in whole or in part, to the value or return of a security purchased or sold or being contemplated for purchase or sale during the relevant period by a client account. For example, options or warrants to purchase common stock, and convertible debt and convertible preferred stock of a particular issuer would be considered related to the underlying common stock of that issuer for purposes of this policy. In sum, the related security would be treated as if it were the underlying security for the purpose of the pre-clearance procedures described herein.

SIMG Code of Ethics April 2012

f. Limited Offerings and Private Placements. Any purchase or sale of limited offerings and “private placement” securities (including all private equity partnerships, hedge funds, limited partnership or venture capital funds) by any Access or Supervised Person must be precleared with an SIMG Preclearance Officer prior to the transaction.

If, after receiving the required approval, an Access or Supervised Person has any material role in the subsequent consideration by any advised fund/separate account of an investment in the same or affiliated issuer, the person must disclose his or her interest in the private placement investment to the SIMG Chief Compliance Officer (“CCO”) and the employee’s manager. The decision to purchase securities of the issuer by a fund/separate account must be independently reviewed and authorized by such person’s manager.

g. Initial Public Offerings. No Access or Supervised Person shall acquire any security in an initial public offering.

h. Blackout Periods. Investment Personnel may not buy or sell a security within 7 calendar days either before or after a purchase or sale of the same or related security by a fund or other advised account. For example, if a fund trades a security on day 0, day 8 is the first day the Investment Person may trade the security for his or her own account. Personal trades for Investment Persons, however, shall have no effect on the fund’s or separate account’s ability to trade. Investment Persons should expect that they will be required by SIMG to disgorge any profits from any trade effected in violation of the blackout period.

i. Short-Term Trading. As a general policy matter, SIMG discourages short term trading by its Investment Persons and senior officers (i.e., President, Chief Operating Officer, Treasurer, Chief Investment Officer, Secretary and Chief Compliance Officer). Accordingly, no Investment Person or senior officer may purchase and subsequently sell (or sell and purchase) the same security within any 60-day period, unless such transaction is approved in advance in writing by the Preclearance Officer or preclearance delegatee. In reviewing any such proposed transaction, the Preclearance Officer (or delegatee) shall consider the totality of the circumstances, including whether the trade would involve a breach of any fiduciary duty, whether it would otherwise be inconsistent with applicable laws and/or SIMG’s policies and procedures, whether the trade would create an appearance of impropriety and whether there is any unexpected circumstance that suggests not approving that the trade would result in a hardship on the requesting party. Based on his/her consideration of these issues, the Preclearance Officer (or delegatee) shall have the sole authority to grant or deny permission to execute the trade. Note: Proposed trades that appear to have been designed to result in short-term trading profits are not likely to be approved.

3. Exempted Transactions/Securities. SIMG has determined that the following securities transactions do not present the opportunity for improper trading activities that Rule 17j-1 is designed to prevent; therefore, the restrictions set forth in Section 2 of this Code (including preclearance, prohibition on short-term trading and blackout periods) shall not apply.

SIMG Code of Ethics April 2012

a.	Purchases or sales of securities that are not Reportable Securities.
b.	Employer stock purchased and sold through employer-sponsored benefit plans in

which the spouse of an Investment Person may participate (e.g., employee stock purchase plans or 401(k) plans) and sales of employer stock (or the exercise of stock options) that is received as compensation by an Investment Person’s spouse.

c. Purchases or sales which are non-volitional on the part of the Investment Person (e.g., an in-the-money option that is automatically exercised by a broker; a security that is called away as a result of an exercise of an option; or a security that is sold by a broker, without Investment Person consultation, to meet a margin call not met by the Investment Person).

d. Purchases which are made by reinvesting cash dividends pursuant to an automatic dividend reinvestment plan.

e. Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer.

f. Purchases or sales of commodities, futures (including currency futures and futures on broad-based indices), options on futures and options on broad-based indices. Currently, “broad-based indices” include only the S&P 100, S&P 500, FTSE 100 and Nikkei 225.

g.	Exchange-traded-funds and options on exchange traded funds.
h.	The receipt of a bona fide gift of securities. (Donations of securities by Investment Persons, however, require preclearance.)
i.	Such other transactions or situations as may be approved by the SIMG Chief Compliance Officer from time to time.

NOTE: The reporting requirements listed in Section III of this Code do apply to certain of the securities and transaction types set forth in paragraphs b-i of this section.

E. Gifts and Entertainment

The following provisions on gifts apply to all Supervised Persons.

1. General Statement. A conflict of interest occurs when the personal interests of employees interfere or could potentially interfere with their responsibilities to the firm and its clients. The overriding principle is that you should not accept inappropriate gifts, favors, entertainment, special accommodations, or other things of material value that could influence or appear to influence your decision-making or make you feel beholden to a person or firm. Similarly, you should not offer gifts,

SIMG Code of Ethics April 2012

favors, entertainment or other things of value that could be viewed as overly generous or aimed at or appear to be aimed at influencing decision-making or could be viewed as making or appear to be making a client feel beholden to the firm or you. In addition to the provisions set forth herein related to Gifts and Entertainment, Supervised Persons must comply with the provisions of the Stephens Compliance Manual related to Gifts and Gratuities (currently found in Section 3.04).

2. Accepting Gifts. On occasion, because of their position, Supervised Persons may be offered, or may receive without notice, gifts from clients, brokers, vendors or other persons. Acceptance of extraordinary or extravagant gifts is not permissible. Any such gifts must be declined or returned in order to protect the reputation and integrity of SIMG. Gifts of a nominal value (i.e., gifts whose reasonable value is no more than $100 a year), and customary business meals, entertainment (e.g., sporting events), and promotional items (e.g., pens, mugs, T-shirts) may be accepted.

If a Supervised Person receives any gift that might be prohibited under this Code, the Supervised Person must immediately inform the SIMG Chief Compliance Officer.

3.	Solicitation of Gifts. Supervised Persons may not solicit gifts or gratuities.
4.	Giving Gifts. Supervised Persons may not give gifts with a aggregate value in excess of

$100 per year to persons associated with securities or financial organizations, including exchanges, other member organizations, commodity firms, news media, or clients of the firm.

5. Cash. Supervised Persons may not give or accept cash gifts or cash equivalents to or from a client, prospective client, or any entity that does business with or on behalf of the firm.

6. Entertainment. Supervised Persons may not provide or accept extravagant or excessive entertainment to or from a client, prospective client, or any person or entity that does or seeks to do business with or on behalf of SIMG. Supervised Persons may provide or accept a business entertainment event, such as dinner or a sporting event, of reasonable value, if the person or entity providing the entertainment is present.

SIMG Code of Ethics April 2012

F. Political Contributions

No SIMG employee may make a political contribution for the purpose of obtaining or retaining investment advisory business with government entities. SIMG’s current or anticipated business relationships should not be a consideration for you in your decision to make any political or charitable contribution. SEC Rule 206(4)-5 restricts many political contributions by investment advisers and their employees, and all SIMG employees must comply with SIMG’s Pay-to-Play procedures which are an attachment to SIMG’s Compliance Manual. Further, all Supervised Persons must comply with all relevant provisions of Stephens’ Policies and Procedures Regarding Political Contributions as provided in the Stephens Compliance Manual. SIMG and Stephens procedures require that SIMG employees must seek pre-approval for any political contributions they wish to make, or political fund-raising and volunteer activities in which they wish to participate.

G. Confidentiality

Access Persons and Supervised Persons are prohibited from revealing information relating to the investment intentions, activities or portfolios of any advisory client, except to persons whose responsibilities require knowledge of the information to provide investment account services. Information concerning portfolio holdings may only be disclosed in accordance with the SIMG portfolio holdings disclosure policies. Confidential information that is not public is considered to be proprietary to SIMG and/or Stephens. This includes information about SIMG and Stephens, and their respective clients, potential clients, business, policies, procedures, practices and employees. The privacy of records and other information regarding clients, potential clients, and employees must be maintained.

Proprietary information may not be used for personal advantage or revealed to anyone outside the company without legal due process or as required by law; any outside requests for such information must be approved by the Stephens and SIMG Compliance Departments.

If your employment with SIMG is terminated, you may not keep any originals or copies of any information (notes, proposals, statements, etc.) belonging to the company, or use any confidential or proprietary information for your own or another’s gain.

These confidentiality provisions apply both during the term of your employment with SIMG and/or Stephens and following the termination of your employment with SIMG and/or Stephens.

As noted above in Section II.C., all Access and Supervised Persons are subject to the provisions of Section 1 of the Stephens Compliance Manual (“The Handling of Sensitive Information”).

H. Service as a Director

No Supervised Person may serve on the board of directors of a publicly-held company absent prior written authorization by the Chief Operating Officer of Stephens. This authorization will rarely, if

SIMG Code of Ethics April 2012

ever, be granted and, if granted, will normally require that the individual be isolated, through a Chinese Wall or other procedures, from those making investment decisions related to the issuer on whose board the individual sits.

Every Supervised Person of SIMG is required to disclose the holding of any outside directorates or offices in other companies, including public companies, at the time of employment. After that time, if you wish to hold any outside directorates or offices in other companies, including public companies, you must make a written request and obtain prior written approval from your departmental supervisor and from the Chief Operating Officer of Stephens, with copies to the Stephens and SIMG Compliance Departments.

Any Supervised Person who is a director of a publicly held company may not participate in any investment decisions regarding such company.

I. Outside Business Activities

Supervised Persons must comply with Section 3.05 of the Stephens Compliance Manual with regard to outside business activities.

J. Outside Employment

Before pursuing any outside employment, a Supervised Person must make a written request and obtain prior written approval from his or her departmental supervisor and the Chief Operating Officer of Stephens, with copies to the Human Resources Department and SIMG Compliance Department.

K. Undue Influence

Supervised Persons may not cause or attempt to cause SIMG to purchase, sell or hold any security in a manner calculated to create any personal benefit to the Supervised Person. If a Supervised Person stands to benefit materially from an investment decision for a client and the Supervised Person is making or participating in the investment decision, the Supervised Person must disclose the potential benefit to the SIMG Chief Compliance Officer prior to acting.

L. Proxy Voting

It is the policy of SIMG to vote all proxies on securities held in advisory accounts over which SIMG has voting authority in the best economic interests of its clients in accordance with SIMG’s Proxy Voting Policies and Procedures. Supervised Persons involved in the proxy voting determination process should not be influenced by the interest of SIMG or Stephens Inc. (or its affiliates) in connection with any such determination.

SIMG Code of Ethics April 2012

III.	COMPLIANCE AND REPORTING PROCEDURES
A.	Preclearance Requirements
	1.	Trade Authorization Request Form.
		(a)	Investment Persons. Prior to directly or indirectly acquiring or disposing of Beneficial
		Ownership	in any security (except those described in Section II.D.3. of this Code, shares of any

Reportable Fund and securities excepted from the preclearance approval requirement in Section II.D.2.), an Investment Person must complete a Trade Authorization Request form (Appendix I) and submit the completed form to a Preclearance Officer. The form requires certain information and certain representations.

(b) Access and Supervised Persons. Prior to directly or indirectly acquiring Beneficial Ownership in any privately placed security, an Access or Supervised Person must complete a Trade Authorization Request form (Appendix I) and submit the completed form to a Preclearance Officer. The form requires certain information and certain representations. Proposed securities transactions of a Preclearance Officer that require preclearance must be submitted to another Preclearance Officer.

2. Review of Proposed Investment. After receiving a completed Trade Authorization Request form, a Preclearance Officer will (a) review the information set forth in the form, (b) review information regarding past, pending, and contemplated transactions by any relevant advisory account(s), as necessary, and (c) as soon as reasonably practicable, determine whether to authorize the proposed securities transactions. The granting of authorization, and the date and time that authorization was granted must be reflected on the form. The Preclearance Officer should keep one copy of the completed form for the Compliance Department and provide one copy to the person seeking authorization. Authorization, if granted, is good for the day of grant only.

No order for a securities transaction for which preclearance authorization is required may be placed prior to the receipt of written authorization of the transaction by a Preclearance Officer. Verbal approvals are not permitted.

3. No Explanation Required for Refusals. In some cases, a Preclearance Officer may refuse to authorize a securities transaction for a reason that is confidential. Preclearance Officers are not required to give an explanation for refusing to authorize any securities transactions.

B.	Reporting Requirements
	1. Initial and Periodic Disclosure of Personal Holdings by Access Persons. Before the close of
business	on the tenth (10^th) day after being designated as an Access Person and on an annual basis

thereafter, an Access Person must disclose to the SIMG Compliance Department all Reportable Securities in which such Access Person has a Beneficial Ownership. (See the Acknowledgement and Certification (Appendix II)). The report of securities holdings must include (i) the title and exchange ticker symbol or CUSIP number, type of security, number of shares and principal amount (if

SIMG Code of Ethics April 2012

applicable) of each Reportable Security in which the Access Person has any direct or indirect Beneficial Ownership; (ii) the name of any broker, dealer or bank with which the Access Person maintains an account in which any securities are held for the Access Person’s direct or indirect benefit; and (iii) the date the report is submitted. The information supplied must be current as of a date no more than 45 days before the annual report is submitted. For new Access Persons, the information must be current as of the date the person became an Access Person. (Note: With respect to accounts maintained at Stephens coded as accounts in which the Access Person has Beneficial Ownership, no separate reporting is required.)

2. Transactions and Periodic Statement Reporting Requirements. Each Access Person must arrange for the Stephens Compliance Department to receive from any broker, dealer or bank that maintains a securities account in which such person has a Beneficial Ownership copies of each confirmation and periodic statement (monthly or quarterly) pertaining to the account no later than 30 days after the end of each calendar quarter. (Note: With respect to accounts maintained at Stephens coded as accounts in which the Access Person has Beneficial Ownership, no separate reporting is required.) In addition, each Access Person must arrange for the Stephens Inc. Compliance Department to receive from any 401(k) or other retirement plan recordkeeper that maintains an account holding any Reportable Security in which such person has a Beneficial Ownership (e.g., an employee’s 401(k) account that holds shares of an SIMG or H&W advised mutual fund; a 401(k) account in a former employer’s plan that holds company stock; a spouse’s 401(k) plan that holds company stock) copies of each account statement pertaining to such account no later than 30 days after the end of each calendar quarter. If, in any case, delivery directly from any such broker, dealer, bank or 401(k) or other retirement plan recordkeeper to the Stephens Compliance Department is not possible, then the Access Person himself/herself must deliver any such confirmations or statements to the Stephens Compliance Department directly within the same time period. The following information must be provided:

With respect to confirmations and statements, (i) the date of the transaction, the title and exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and the principal amount (if applicable) of each security involved; (ii) the nature of the transaction (e.g., purchase, sale); (iii) the price of the security at which the transaction was effected; (iv) the name of the broker, dealer, or bank with or through which the transaction was effected; and (v) the date the report is submitted; and
With respect to holdings statements, (i) the title and type of security, the exchange ticker symbol or CUSIP number, number of shares and principal amount (if applicable) of each security in which the Access Person has Beneficial Ownership, and (ii) the name of the financial institution with which the Access Person maintains an account in which any security is held.

Stephens Inc. requires all employees of Stephens and SIMG to maintain their brokerage accounts, and the accounts of certain closely related parties (e.g., accounts of spouses and dependent children and accounts for which the employee serves as trustee) at Stephens, unless the employee’s Department Head and the Stephens Chief Operating Officer have granted written approval. Such approval will be

SIMG Code of Ethics April 2012

granted only in limited instances, based on whether adherence to the policy would be unreasonable in the circumstances.

3.	Reporting Exemptions. You need not report:
	a.	securities transactions in accounts over which the Access Person has no direct or
	indirect influence or control;
	b.	transactions effected pursuant to an automatic investment plan such as a dividend
	reinvestment plan;
4.	Availability of Reports. All information supplied pursuant to this Code may be made

available for inspection to the management of SIMG and/or Stephens and their respective legal and compliance personnel.

C. Required Acknowledgement and Certification

SIMG shall provide a copy of the Code (including any amendments thereto) to Access Persons and Supervised Persons. Access Persons and Supervised Persons must, among other things, annually acknowledge receipt of the Code and certify that they have read, understood, and complied with the Code. (See attached Appendix II.) Access Persons may be required to certify quarterly as to the activity (or lack thereof) in their securities accounts.

IV. RECORDKEEPING

SIMG will maintain the following records in a readily accessible place:

A copy of each Code that has been in effect at any time during the past five years;
A record of any violation of the Code and any action taken as a result of such violation for five years from the end of the fiscal year in which the violation occurred;
A record of all written acknowledgements of receipt of the code and amendments for each person who is currently, or within the past five years was, a Supervised Person;
Holdings and transactions reports made pursuant to the Code, including any brokerage confirmation and account statements made in lieu of these reports;
A list of the names of persons who are currently, or within the past five years were, Access Persons and/or Investment Persons;
A record of any decision and supporting reasons for approving the acquisition of securities by any personnel in private placements for at least five years after the end of the fiscal year in which approval was granted; and

SIMG Code of Ethics April 2012

		Any decisions that grant any Supervised Person or Access Person a waiver from or exception to the Code.
V.	COMPLIANCE WITH THE CODE OF ETHICS
A.	Training and Education

Training will occur periodically on this Code. All Access and Supervised Persons are required to attend any applicable training sessions and/or read any applicable material.

B. Review of Transactions

The Compliance Department will review securities transactions for compliance with this Code. Particular attention will be paid to transactions in securities traded in client portfolios when such personal transactions occur within close proximity of any transaction in the same security in a client account. Securities transactions for the Chief Compliance Officer will be reviewed by SIMG’s Compliance Analyst for compliance with this Code.

C. Investigating Violations of the Code

The SIMG Chief Compliance Officer is responsible for investigating any suspected violation of the Code and shall report the results of each investigation to SIMG management and in appropriate circumstances to Legal Counsel.

D. Annual Reports

The SIMG Chief Compliance Officer will review the Code at least once a year to assess the adequacy of the Code and the effectiveness of its implementation, in light of legal and business developments and experience in implementing the Code, and will report his/her findings to SIMG management. The report will include:

1. A summary of existing procedures concerning personal investing and any changes in the procedures made during the past year;

2.	Identification of any violation requiring significant remedial action during the past year; and
3.	Identification of any recommended changes based on his/or experience under the Code,

evolving industry practices, or developments in applicable laws or regulations.

SIMG Code of Ethics April 2012

VI.	FAILURE TO COMPLY WITH THE CODE OF ETHICS
A.	Duty To Report

Supervised Persons must report violations, including apparent or suspected violations of the SIMG Code of Ethics, promptly to the SIMG Chief Compliance Officer. Such reports, which may be submitted anonymously, will be treated confidentially to the extent permitted by law and investigated promptly and appropriately.

B. Sanctions

Any violation of this Code of Ethics or applicable rules and regulations shall result in sanctions which may include, but are not limited to, fines, suspension from employment, a letter of censure, restitution to any client account of an amount equal to the advantage gained by reason of such violation, and/or termination.

VII. FURTHER INFORMATION

If at any time you have any questions regarding the policies, procedures or requirements of this Code of Ethics, please discuss them with your manager, the SIMG Chief Compliance Officer or Stephens Ethics Officer.

SIMG Code of Ethics April 2012

Appendix I
TRADE AUTHORIZATION REQUEST

1.	Name of Person:
2.	Account Title:
3.	Firm and Account Number:
4.	Name of Security:
5.	Maximum number of shares or units to be purchased or sold or amount of bond:
6.	Approximate dollar value of transaction:

7. Check applicable boxes:

Purchase

Sale

In connection with the foregoing transaction, I hereby make the following representations:

I do not possess any material nonpublic information regarding the Security or the issuer of the Security.

I am not aware that any SIMG advisory account has an open order to buy or sell the Security or an Equivalent Security or that any SIMG portfolio manager is contemplating making a trade in the Security or an Equivalent Security.

By entering this order, I am not using knowledge of any open, executed, or pending transaction by SIMG, Stephens or any client account to profit by the market effect of such transaction.

I believe that the proposed trade fully complies with the requirements of the SIMG Code of Ethics.


*
Signature	Date	Time

* This document may be submitted electronically by email or via facsimile. By typing your name on the signature line you represent, by electronic signature, your understanding and agreement to the representations contained on this form.

TRADE AUTHORIZATION OR DENIAL

(to be completed by Preclearance Officer)


Name of Preclearance Officer	Date		Time

*		Approved	Denied
Signature of Preclearance Officer
Preclearance Officers:
David Prince		Laura Neve
Phone: 2151		Phone: 2203
Fax: 377-2677		Fax:	377-2327
Email: david.prince@stephens.com		Email:	laura.neve@stephens.com


SIMG Code of Ethics April 2012

Appendix II

Acknowledgement and Certification

I have read the Code of Ethics, and I understand that it applies to me and to all securities in which I have or acquire any Beneficial Ownership.
I have read the definition of “Beneficial Ownership” and understand that I may be deemed to have a Beneficial Ownership in securities owned by members of my immediate family and that securities transactions effected by members of my immediate family may therefore be subject to this Code.
I acknowledge that in accordance with this Code, I will obtain prior written authorization for all securities transactions required to have preclearance in which I have or acquire a Beneficial Ownership.
I agree to disgorge and forfeit any profits on prohibited transactions in accordance with the requirements of the Code.
As a new employee and annually thereafter, I will read the Code and complete an Acknowledgment and Certification.
To the extent applicable, I certify that I have complied with the Code during the

applicable time frame.

____________________________________________________________ Name

____________________________________________________________ Signature

_____________________________________
Date

SIMG Code of Ethics April 2012

EX-99.P CODE ETH 9 wmc_codeofethicspolicy080120.htm CODE OF ETHICS wmc_codeofethicspolicy080120.htm - Generated by SEC Publisher for SEC Filing

WELLINGTON M ANAGEMENT

Code of Ethics

Personal Investing

Gifts and Entertainment

Outside Activities

Client Confidentiality

1 August 2013

“The reputation of a thousand years may be determined by the conduct of one hour.”

– Ancient proverb

A Message from Our CEO

Wellington Management’s reputation is our most valuable asset, and it is built on trust –trust that we will always put our clients’ interests first and that our actions will fully meet our obligations as fiduciaries for our clients.

Our personnel around the world play a critical role in ensuring that we continue to earn this trust. We must all adhere to the highest standards of professional and ethical conduct. We must be sensitive to situations that may give rise to an actual conflict or the appearance of a conflict with our clients’ interests, or have the potential to cause damage to the firm’s reputation. To this end, each of us must act with integrity, honesty, and dignity.

We must all remain vigilant in protecting the interests of our clients before our own, as reflected in our guiding principle: “client, firm, self.” If our standards slip or our focus wanes, we risk the loss of everything we have worked so hard to build together over the years.

Please take the time to read this Code of Ethics, learn the rules, and determine what you need to do to comply with them and continue to build on our clients’ trust and confidence in Wellington Management.

Perry M. Traquina

Chairman and Chief Executive Officer


Table of Contents
Standards of Conduct	3
Who Is Subject to the Code of Ethics?	3
Personal Investing	4
Which Types of Investments and Related Activities Are Prohibited?	4
Which Investment Accounts Must Be Reported?	4
What Are the Reporting Responsibilities for All Personnel?	5
What Are the Preclearance Responsibilities for All Personnel?	6
What Are the Additional Requirements for Investment Professionals?	8
Gifts and Entertainment	9
Outside Activities	10
Client Confidentiality	10
How We Enforce Our Code of Ethics	10
Closing	10

Before You Get Started: Accessing the Code of Ethics System

The Code of Ethics System is accessible through the Intranet under Applications or direct access: https://wellmanage.ptaconnect.com/pta/pages/logon.jsp.

Wellington Management

Code of Ethics

Standards of Conduct

Our standards of conduct are straightforward and essential. Any transaction or activity that violates either of the standards of conduct below is prohibited, regardless of whether it meets the technical rules found elsewhere in the Code of Ethics.

We act as fiduciaries to our clients. Each of us must put our clients’ interests above our own and must not take advantage of our management of clients’ assets for our own benefit. Our firm’s policies and procedures implement these principles with respect to our conduct of the firm’s business. This Code of Ethics implements the same principles with respect to our personal conduct. The procedures set forth in the Code govern specific transactions, but each of us must be mindful at all times that our behavior, including our personal investing activity, must meet our fiduciary obligations to our clients.

We act with integrity and in accordance with both the letter and the spirit of the law. Our business is highly regulated, and we are committed as a firm to compliance with those regulations. Each of us must also recognize our obligations as individuals to understand and obey the laws that apply to us in the conduct of our duties. They include laws and regulations that apply specifically to investment advisors, as well as more broadly applicable laws ranging from the prohibition against trading on material nonpublic information and other forms of market abuse to anticorruption statutes such as the US Foreign Corrupt Practices Act and the Council of Europe’s Criminal Law Convention on Corruption. The firm provides training on their requirements. Each of us must take advantage of these resources to ensure that our own conduct complies with the law.

Who Is Subject to the Code of Ethics?

Our Code of Ethics applies to all partners and employees of Wellington Management Company, llp, and its affiliates around the world. Its restrictions on personal investing also apply to temporary personnel (including co-ops and interns) and consultants whose tenure with Wellington Management exceeds 90 days and who are deemed by our Chief Compliance Officer to have access to nonpublic investment research, client holdings, or trade information.

All Wellington Management personnel receive a copy of the Code of Ethics (and any amendments) and must certify, upon joining the firm and annually thereafter, that they have read and understood it and have complied with its requirements.

Adherence to the Code of Ethics is a basic condition of employment. Failure to adhere to our Code of Ethics may result in disciplinary action, including termination of employment.

If you have any doubt as to the appropriateness of any activity, believe that you have violated the Code, or become aware of a violation of the Code by another individual, you should consult the manager of the Code of Ethics Team, Chief Compliance Officer, General Counsel, or Chair of the Ethics Committee.

General questions regarding our Code of Ethics may be directed to the Code of Ethics Team via email at #Code of Ethics Team or through the Code of Ethics hotline, 617-790-8330 (x68330).

Code of Ethics

Wellington Management


Personal Investing	Short-Term Trading You are prohibited from profiting from the
As fiduciaries, each of us must avoid taking personal advantage of our knowledge of investment activity in client accounts. Although our Code of Ethics sets out a number of specific restrictions on personal investing designed to reflect this principle, no set of rules can anticipate every situation. Each of us must adhere to the spirit, and not just the letter, of our Code in meet- ing this fiduciary obligation to our clients.	purchase and sale (or sale and purchase) of the same or equivalent securities within 60 calendar days. For example, if you buy shares of stock (or options on such shares) and then sell those shares within 60 days at a profit, an exception will be identified and any gain from the transactions must be surrendered. Gains are calculated based on a last in, first out (LIFO) method for purposes of this restriction. This short-term trad- ing rule does not apply to securities exempt from
Which Types of Investments and Related Activities Are Prohibited? Our Code of Ethics prohibits the following personal investments and investment-related activities: • Purchasing or selling the following:	the Code’s preclearance requirements. • Taking a profit from any trading activity within a 60 calendar day window (see circle for more detail)
– Initial public offerings (IPOs) of any securities – Securities of an issuer being bought or sold on behalf of clients until one trading day after such buying or selling is completed or canceled – Securities of an issuer that is the subject of a new, changed, or reissued but unchanged action recommendation from a global industry research or fixed income credit analyst until two business days following issuance or reissu- ance of the recommendation – Securities of an issuer that is mentioned at the Morning Meeting or the Early Morning Meeting until two business days following the meeting	• Using a derivative instrument to circumvent a restriction in the Code of Ethics Which Investment Accounts Must Be Reported? You are required to report any investment account over which you exercise investment discretion or from which any of the following individuals enjoy economic benefits: (i) your spouse, domestic partner, or minor children, and (ii) any other dependents living in your household, and that holds or is capable of holding any of the following covered investments:
– Securities that are the subject of a firmwide	• Shares of stocks, ADRs, or other equity securities
restriction	(including any security convertible into equity
– Single-stock futures	securities)
– Options with an expiration date that is within 60 calendar days of the transaction date – HOLDRS (HOLding Company Depositary ReceiptS) – Securities of broker/dealers (or their affiliates) that the firm has approved for execution of cli- ent trades – Securities of any securities market or exchange on which the firm trades on behalf of clients • Effective 1 September 2013, purchasing an equity security if your aggregate ownership of the equity security exceeds 0.5% of the total shares outstand- ing of the issuer	• Bondsornotes(otherthansovereigngovernment bonds issued by Canada, France, Germany, Italy, Japan, the United Kingdom, or the United States, as well as bankers’ acceptances, CDs, commercial paper, and high-quality, short-term debt instruments) • Interest in a variable annuity product in which the underlying assets are held in a subaccount managed by Wellington Management • Shares of exchange-traded funds (ETFs) • Shares of closed-end funds • Options on securities • Securities futures

Wellington Management

Code of Ethics


	Although these accounts do not need to be reported,
Web Resource: Wellington-Managed Fund List	your investment activities in these accounts must
	comply with the standards of conduct embodied in
An up-to-date list of funds managed by Wellington	our Code of Ethics.
Management is available through the Code of Ethics System
under Documents. Please note that any transactions in	Managed Account Exemptions
Wellington-Managed funds must comply with the funds' rules
on short-term trading of fund shares.	An account from which you or immediate family
	members could benefit financially, but over which
	neither you nor they have any investment discretion
• Interest in private placement securities (other than	or influence (a managed account), may be exempted
Wellington Management Sponsored Products)	from the Code of Ethics’ personal investing re-
• Shares of funds managed by Wellington	quirements upon written request and approval. An
Management (other than money market funds)	example of a managed account would be a profes-
Please see Appendix A for a detailed summary of	sionally advised account about which you will not
reporting requirements by security type.	be consulted or have any input on specific transac-
	tions placed by the investment manager prior to
For purposes of the Code of Ethics, these invest-	their execution. To request a managed account
ment accounts are referred to as reportable accounts.	exemption, you must complete a Managed Account
Examples of common account types include broker-	Letter (available online via the Code of Ethics
age accounts, retirement accounts, employee stock	System) and return it the Code of Ethics Team.
compensation plans, and transfer agent accounts.
Reportable accounts also include those from which	Web Resource: Managed Account Letter
you or an immediate family member may benefit
indirectly, such as a family trust or family partner-	To request a managed account exemption, complete the
ship, and accounts in which you have a joint owner-	Managed Account Letter available through the Code of Ethics
ship interest, such as a joint brokerage account.	System under Documents.
Please contact the Code of Ethics Team for guidance
if you hold any securities in physical certificate form.	What Are the Reporting Responsibilities for All
	Personnel?
Still Not Sure? Contact Us
	Initial and Annual Holdings Reports
If you are not sure if a particular account is
required to be reported, contact the Code of Ethics	You must disclose all reportable accounts and all
Team by email at #Code of Ethics Team or through the	covered investments you hold within 10 calendar
Code of Ethics hotline, 617-790-8330 (x68330).	days after you begin employment at or association
	with Wellington Management. You will be required
Accounts Not Requiring Reporting	to review and update your holdings and securities
	account information annually thereafter.
You do not need to report the following accounts
via the Code of Ethics System since the administra-	For initial holdings reports, holdings information
tor will provide the Code of Ethics Team with access	must be current as of a date no more than 45 days
to relevant holdings and transaction information:	prior to the date you became covered by the Code of
• Accounts maintained within the Wellington	Ethics. Please note that you cannot make personal trades
Retirement and Pension Plan or similar firm-	until you have filed an initial holdings report via the
sponsored retirement or benefit plans identified	Code of Ethics System on the Intranet.
by the Ethics Committee	For subsequent annual reports, holdings informa-
• Accounts maintained directly with Wellington	tion must be current as of a date no more than 45
Trust Company or other Wellington Management	days prior to the date the report is submitted. Please
Sponsored Products	note that your annual holdings report must account for
	both volitional and non-volitional transactions.

Code of Ethics

Wellington Management

QuarterlyTransactions Reports

Non-volitional transactions include:

Investments made through automatic dividend reinvestment or rebalancing plans and stock purchase plan acquisitions

Transactions that result from corporate actions applicable to all similar security holders (such as splits, tender offers, mergers, and stock dividends)

At the time you file your initial and annual reports, you will be asked to confirm that you have read and understood the Code of Ethics and any amendments.

Duplicate Statements and Trade Confirmations

For each of your reportable accounts, you are required to provide duplicate statements and duplicate trade confirmations to Wellington Management. To arrange for the delivery of duplicate statements and trade confirmations, please contact the Code of Ethics Team for the appropriate form. Return the completed form to the Code of Ethics Team, which will submit it to the brokerage firm on your behalf. If the brokerage firm or other firm from which you currently receive statements is not able to send statements and confirmations directly to Wellington Management, you will be required to submit copies promptly after you receive them, unless you receive an exemption from this requirement under the procedures outlined on page 7.

Web Resource: How to File Reports on the Code of Ethics System

Required reports must be filed electronically via the Code of Ethics System. Please see the Code of Ethics System’s homepage for more details.

You must submit a quarterly transaction report no later than 30 calendar days after quarter-end via the Code of Ethics System on the Intranet, even if you did not make any personal trades during that quarter. In the reports, you must either confirm that you did not make any personal trades (except for those resulting from non-volitional events) or provide information regarding all volitional transactions in covered investments.

What Are the Preclearance Responsibilities for All Personnel?

Preclearance of Publicly Traded Securities

You must receive clearance before buying or selling stocks, bonds, options, and most other publicly traded securities in any reportable account. A full list of the categories of publicly traded securities requiring preclearance, and of certain exceptions to this requirement, is included in Appendix A. Transactions in accounts that are not reportable accounts do not require preclearance or reporting.

Preclearance requests must be submitted online via the Code of Ethics System, which is accessible through the Intranet. If clearance is granted, the approval will be effective for a period of 24 hours. If you preclear a transaction and then place a limit order with your broker, that limit order must either be executed or expire at the end of the 24-hour period.

If you want to execute the order after the 24-hour period expires, you must resubmit your preclearance request.

If you have questions regarding the preclearance requirements, please refer to the FAQs available on the Code of Ethics System or contact the Code of Ethics Team.

Please note that preclearance approval does not alter your responsibility to ensure that each personal securities transaction complies with the general standards of conduct, the reporting requirements, the restrictions on short-term trading, or the special rules for investment professionals set out in our Code of Ethics.

Wellington Management

Code of Ethics

Web Resource: How to File a Preclearance
Request

Preclearance must be obtained using the Code of Ethics System.
Once the necessary information is submitted, your preclearance
request will be approved or denied within seconds.

Caution on Short Sales, Margin Transactions,
and Options
You may engage in short sales and margin transac-
tions and may purchase or sell options provided
you receive preclearance and meet all other applica-
ble requirements under our Code of Ethics (includ-
ing the additional rules for investment professionals
described on page 8). Please note, however, that these
types of transactions can have unintended consequences.
For example, any sale by your broker to cover a
margin call or to buy in a short position will be in
violation of the Code unless precleared. Likewise,
any volitional sale of securities acquired at the expi-
ration of a long call option will be in violation of
the Code unless precleared. You are responsible for
ensuring any subsequent volitional actions relating
to these types of transactions meet the requirements
of the Code.

Preclearance of Private Placement Securities
You cannot invest in securities offered to poten-
tial investors in a private placement without first
obtaining prior approval. Approval may be granted
after a review of the facts and circumstances,
including whether:

To request approval, you must submit a Private
Placement Approval Form (available online via the
Code of Ethics System) to the Code of Ethics Team.
Investments in our own privately offered investment
vehicles (our Sponsored Products), including collec-
tive investment funds and common trust funds
maintained by Wellington Trust Company, na, our
hedge funds, and our non-US domiciled funds
(Wellington Management Portfolios), have been
approved under the Code and therefore do not
require the submission of a Private Placement
Approval Form.

Web Resource: Private Placement Approval Form

To request approval for a private placement, complete the
Private Placement Approval Form available through the Code of
Ethics System under Documents.

Requests for Exceptions to Preclearance Denial,
Other Trading Restrictions, and Certain Reporting
Requirements
The Chief Compliance Officer may grant an excep-
tion from preclearance, other trading restrictions,
and certain reporting requirements on a case-by-
case basis if it is determined that the proposed con-
duct involves no opportunity for abuse and does not
conflict with client interests. Exceptions are expected
to be rare. If you wish to seek an exception to these
restrictions, you must submit a written request to
the Code of Ethics Team describing the nature of the
exception and the reason(s) it is being sought.

an investment in the securities is likely to result in future conflicts with client accounts (e.g., upon a future public offering), and
you are being offered the opportunity due to your employment at or association with Wellington Management.

If you have questions regarding whether an invest-
ment would be deemed a private placement security
under the Code, please refer to the FAQs about
private placements available on the Code of Ethics
System, or contact the Code of Ethics Team.

Code of Ethics

Wellington Management

What Are the Additional Personal Trading Requirements for Investment Professionals?

If you are a portfolio manager, research analyst, or other investment professional who has portfolio management responsibilities for a client account (e.g., designated portfolio managers, backup portfolio managers, investment team members), or who otherwise has direct authority to make decisions to buy or sell securities in a client account (referred to here as an investment professional), you are required to adhere to additional rules and restrictions on your personal securities transactions. However, as no set of rules can anticipate every situation, you must remember to place our clients’ interests first whenever you transact in securities that are also held in client accounts you manage.

The following provisions of the code are intended to allow investment professionals to make long-term investments in securities. However, you may not be able to sell personal investments for extended periods of time and therefore should consider the liquidity, tax planning, market, and similar risks associated with making personal investments in securities of an issuer that are or may be held in client accounts.


•Investment Professional Blackout Periods – You	up to the client transactions. However,
cannot buy or sell a security for a period	unanticipated cash flows and redemptions
of seven calendar days before or after	in client accounts and unexpected market
any transaction in the same issuer by a	events do occur from time to time, and a
client account for which you serve as an	personal trade made in the prior seven (or
investment professional. Effective 1	14) days should never prevent you from
September 2013, you cannot buy or sell a	buying or selling a security in a client
security for a period of 14 calendar days	account if the trade would be in the client’s
before or after any transaction in the	best interest. If you find yourself in that sit-
same issuer by a client account for which	uation and need to buy or sell a security in
you serve as an investment professional.	a client account within the seven (or 14) cal-
In addition, effective 1 September 2014,	endar days following your personal trans-
you may not sell personal holdings in a	action in a security of the same issuer, you
security of the same issuer that is held by	should notify the Code of Ethics Team (by
a client account for which you serve as	email at #Code of Ethics Team or through
an investment professional until the later	the Code of Ethics Hotline, 617-790-8330
of the following periods: (i) one calendar	[x68330]) or your local compliance officer in
year from the date of your last purchase	advance of placing the trade. If you are
and (ii) 90 calendar days after all of your	unable to reach any of those individuals
client accounts liquidate all holdings of	and the trade is time sensitive, you should
the same issuer.	proceed with the client trade and notify the
If you anticipate receiving a cash flow or	Code of Ethics Team promptly after submit-
redemption request in a client portfolio	ting it.
that will result in the purchase or sale of	• Short Sales by an Investment Professional – An
securities that you also hold in your per-	investment professional may not person-
sonal account, you should take care to	ally take a short position in a security of an
avoid transactions in those securities in	issuer in which he or she holds a long posi-
your personal account in the days leading	tion in a client account.

Wellington Management

Code of Ethics


Gifts and Entertainment	Lodging and Air Travel – You may not accept a gift of
	lodging or air travel in connection with any entertain-
Our guiding principle of “client, firm, self” also	ment opportunity. If you participate in an entertain-
governs the receipt of gifts and entertainment from	ment opportunity for which lodging or air travel is
clients, consultants, brokers, vendors, companies in	paid for by the host, you must reimburse the host for
which we may invest, and others with whom the	the equivalent cost, as determined by Wellington Man-
firm does business. As fiduciaries to our clients, we	agement’s travel manager.
must always place our clients’ interests first and	Additional Reimbursement Requirements – You must
cannot allow gifts or entertainment opportunities to	receive prior approval from your business manager
influence the actions we take on behalf of our clients.	and reimburse the host for the full face value of any
In keeping with this standard, you must follow sev-	entertainment ticket(s) if:
eral specific requirements:	• the entertainment opportunity requires a ticket
Accepting Gifts – You may only accept gifts of	with a face value of more than US$200 or the local
nominal value, which include promotional items,	equivalent, or is a high-profile event (e.g., a major
flower arrangements, gift baskets, and food, as well	sporting event),
as other gifts with an approximate value of less than	• you wish to accept more than one ticket, or
US$100 or the local equivalent. You may not ac-
cept a gift of cash, including a cash equivalent such	• the host has invited numerous Wellington
as a gift certificate or a security, regardless of the	Management representatives.
amount. If you receive a gift that violates the Code,	Business managers must clear their own participa-
you must return the gift or consult with the Chief	tion under the circumstances described above with
Compliance Officer to determine appropriate action	the Chief Compliance Officer or Chair of the Ethics
under the circumstances.	Committee.
Accepting Entertainment Opportunities – The firm	Please note that even if you pay for the full face
recognizes that participation in entertainment op-	value of a ticket, you may attend the event only if
portunities with representatives from organizations	the host is present. Whenever possible, you should
with which the firm does business, such as consul-	arrange for any required reimbursement prior to
tants, brokers, vendors, and companies in which we	attending an entertainment event.
may invest, can help to further legitimate business
interests. However, participation in such entertain-	Soliciting Gifts, Entertainment Opportunities, or
ment opportunities should be infrequent, and you	Contributions – In your capacity as a partner or
may participate only if:	employee of the firm, you may not solicit gifts,
1	entertainment opportunities, or charitable or politi-
a representative of the hosting organization is present,	cal contributions for yourself, or on behalf of clients,
	prospects, or others, from brokers, vendors, clients, or
2	consultants with whom the firm conducts business or
the primary purpose of the event is to discuss busi-	from companies in which the firm may invest.
ness or to build a business relationship,
and	Sourcing Entertainment Opportunities – You may
3	not request tickets to entertainment events from the
the opportunity meets the additional requirements	firm’s Trading department or any other Wellington
below.	Management department, partner, or employee, nor
	from any broker, vendor, company in which we may
	invest, or other organization with which the firm
	conducts business.

Code of Ethics

Wellington Management


Outside Activities	It is our collective responsibility to uphold the Code
	of Ethics. In addition to the formal reporting require-
While the firm recognizes that you may engage in busi-	ments described in this Code of Ethics, you have a
ness or charitable activities in your personal time, you	responsibility to report any violations of the Code. If
must take steps to avoid conflicts of interest between	you have any doubt as to the appropriateness of any
your private interests and our clients’ interests. As a	activity, believe that you have violated the Code, or
result, all significant outside business or charitable	become aware of a violation of the Code by another
activities (e.g., directorships or officerships) must be	individual, you should consult the manager of the
approved by your business manager and by the Chief	Code of Ethics Team, Chief Compliance Officer,
Compliance Officer, General Counsel, or Chair of the	General Counsel, or Chair of the Ethics Committee.
Ethics Committee prior to the acceptance of such a	Potential violations of the Code of Ethics will be
position (or if you are new, upon joining the firm).	investigated and considered by representatives of
Approval will be granted only if it is determined that	Legal and Compliance and/or the Ethics Committee.
the activity does not present a significant conflict of	All violations of the Code of Ethics will be reported
interest. Directorships in public companies (or compa-	to the Chief Compliance Officer. Violations are
nies reasonably expected to become public companies)	taken seriously and may result in sanctions or other
will generally not be authorized, while service with	consequences, including:
charitable organizations generally will be permitted.	• a warning
Officers of the firm can only seek additional employ-	• referral to your business manager, senior manage-
ment outside of Wellington Management with the	ment, and/or the Managing Partners
prior written approval of the Human Resources
department. All new employees are required to	• reversal of a trade or the return of a gift
disclose any outside employment to the Human	• disgorgement of profits or of the value of a gift
Resources department upon joining the firm.	• a limitation or restriction on personal investing
	• a fine

ClientConfidentiality	• termination of employment
	• referral to civil or criminal authorities
Any nonpublic information concerning our clients	If you become aware of any potential conflicts of
that you acquire in connection with your employ-	interest that you believe are not addressed by our
ment at the firm is confidential. This includes infor-	Code of Ethics or other policies, please contact the
mation regarding actual or contemplated investment	Chief Compliance Officer, the General Counsel, or
decisions, portfolio composition, research recommen-	the manager of the Code of Ethics Team.
dations, and client interests. You should not discuss
client business, including the existence of a client
relationship, with outsiders unless it is a necessary	Closing
part of your job responsibilities.
	As a firm, we seek excellence in the people we
	employ, the products and services we offer, the way
How We Enforce Our	we meet our ethical and fiduciary responsibilities,
Code of Ethics	and the working environment we create for our-
	selves. Our Code of Ethics embodies that commit-
Legal and Compliance is responsible for monitor-	ment. Accordingly, each of us must take care that
ing compliance with the Code of Ethics. Members	our actions fully meet the high standards of conduct
of Legal and Compliance will periodically request	and professional behavior we have adopted. Most
certifications and review holdings and transac-	importantly, we must all remember “client, firm,
tion reports for potential violations. They may also	self” is our most fundamental guiding principle.
request additional information or reports.

Wellington Management

Appendix A – Part 1


No Preclearance or Reporting Required:	Preclearance and Reporting of Securities Transactions Required:

Open-end investment funds not managed by Wellington Management¹	Bonds and notes (other than direct obligations of the US government
Interests in a variable annuity product in which the underlying assets	or the governments of Canada, France, Germany, Italy, Japan, or the
are held in a fund not managed by Wellington Management	United Kingdom, as well as bankers’ acceptances, CDs, commercial
	paper, and high-quality, short-term debt instruments)
Direct obligations of the US government (including obligations issued
by GNMA and PEFCO) or the governments of Canada, France, Germany,	Stock (common and preferred) or other equity securities, including any
Italy, Japan, or the United Kingdom	security convertible into equity securities

Cash	Closed-end funds
Money market instruments or other short-term debt instruments rated	ETFs not listed in Appendix A – Part 2
P-1 or P-2, A-1 or A-2, or their equivalents²	American Depositary Receipts

Bankers’ acceptances, CDs, commercial paper	Options on securities (but not their non-volitional exercise or expiration)
Wellington Trust Company Pools	Warrants
Wellington Sponsored Hedge Funds	Rights
Securities futures and options on direct obligations of the US govern-	Unit investment trusts
ment or the governments of Canada, France, Germany, Italy, Japan, or the
United Kingdom, and associated derivatives	Prohibited Investments and Activities:

Options, forwards, and futures on commodities and foreign exchange,	Initial public offerings (IPOs) of any securities
and associated derivatives	HOLDRS (HOLding Company Depositary ReceiptS)

Transactions in approved managed accounts	Single-stock futures
	Options expiring within 60 days of purchase
Reporting of Securities Transactions Required (no need to preclear
and not subject to the 60-day holding period):	Securities being bought or sold on behalf of clients until one trading day
	after such buying or selling is completed or canceled
Open-end investment funds managed by Wellington Management¹
(other than money market funds)	Securities of an issuer that is the subject of a new, changed, or reissued
	but unchanged action recommendation from a global industry research or
Interests in a variable annuity or insurance product in which the underly-	fixed income credit analyst until two business days following issuance or
ing assets are held in a fund managed by Wellington Management	reissuance of the recommendation

Futures and options on securities indices	Securities of an issuer that is mentioned at the Morning Meeting or the
ETFs listed in Appendix A – Part 2 and derivatives on these securities	Early Morning Meeting until two business days following the meeting
Gifts of securities to you or a reportable account	Securities on the firmwide restricted list
Gifts of securities from you or a reportable account	Profiting from any short-term (i.e., within 60 days) trading activity
Non-volitional transactions (splits, tender offers, mergers, stock divi-	Securities of broker/dealers or their affiliates with which the firm
dends, dividend reinvestments, etc.)	conducts business

	Securities of any securities market or exchange on which the firm trades
	Using a derivative instrument to circumvent the requirements of the
	Code of Ethics

Appendix A – Part 1

This appendix is current as of October 1, 2008, and may be amended at the discretion of the Ethics Committee.

¹A list of funds advised or subadvised by Wellington Management (“Wellington-Managed Funds”) is available online via the Code of Ethics System. However, you remain responsible for confirming whether any particular investment represents a Wellington-Managed Fund.

²If the instrument is unrated, it must be of equivalent duration and comparable quality.


Appendix A – Part 2					Wellington Management

Appendix A – Part 2


ETFs Approved for Personal Trading Without Preclearance (but Requiring Reporting)
Country in category title indicates location of listing exchange.

TICKER	NAME	TICKER	NAME	TICKER	NAME
United States: Equity		RSX	MARKET VECTORS RUSSIA ETF	VCSH	VANGUARD SHORT-TERM CORPORATE
AAXJ	ISHARES MSCI ALL COUNTRY ASIA	RWM	PROSHARES SHORT RUSS	United States: Commodity Trusts and ETNs
ACWI	ISHARES MSCI ACWI INDEX FUND	RWR	SPDR DOW JONES REIT ETF	AMJ	JPMORGAN ALERIAN MLP INDEX ETN
BRF	MARKET VECTORS BRAZIL SMALL-CA	RWX	SPDR DJ INTL REAL ESTATE	CORN	CORN ETF
DIA	SPDR DJIA TRUST ETF	SCZ	ISHARES MSCI EAFE SMALL CAP IN	COW	IPATH DJ-UBS LIVESTOCK SUBINDX
DVY	ISHARES DOW JONES SELECT DIVID	SDS	PROSHARES ULTRASHORT S&P500	DBA	POWERSHARES DB AGRICULTURE FND
ECH	ISHARES MSCI CHILE INVESTABLE	SDY	SPDR DIVIDEND ETF	DBB	POWERSHARES DB BASE METALS FUN
EEB	GUGGENHEIM BRIC ETF	SH	PROSHARES SHORT S&P500	DBC	DB COMMODITY INDEX TRACKING FU
EEM	ISHARES MSCI EMERGING MARKETS	SKF	PROSHARES ULTRASHORT FINANCIAL	DBE	POWERSHARES DB ENERGY FUND
EFA	ISHARES MSCI EAFE INDEX FUND	SPY	SPDR S&P 500 ETF TRUST	DBO	POWERSHARES DB OIL FUND
EFG	ISHARES MSCI EAFE GROWTH INDEX	SRS	PROSHARES ULTRASHORT REAL ESTA	DBP	POWERSHARES DB PRECIOUS METALS
EFV	ISHARES MSCI EAFE VALUE INDEX	SSO	PROSHARES ULTRA S&P500	DGZ	POWERSHARES DB GOLD SHORT ETN
EPI	WISDOMTREE INDIA EARNINGS FUND	TWM	PROSHARES ULTRASHORT RUSS2000	DJP	IPATH DJ-UBS COMMIDTY
EPP	ISHARES MSCI PAC EX-JAPAN FD	UWM	PROSHARES ULTRA RUSSELL	DNO	UNITED STATES SHORT OIL FUND L
EWA	ISHARES MSCI AUSTRALIA INDEX F	UYG	PROSHARES ULTRA FINANCIALS	GAZ	IPATH DJ-UBS NAT GAS SUBINDEX
EWC	ISHARES MSCI CANADA INDEX FUND	VB	VANGUARD SMALL-CAP VIPERS	GLD	SPDR GOLD SHARES
EWG	ISHARES MSCI GERMANY INDEX FD	VBK	VANGUARD SMALL-CAP GROWTH VIPE	GLL	PROSHARES ULTRASHORT GOLD
EWH	ISHARES MSCI HONG KONG IDX FD	VBR	VANGUARD SMALL-CAP VALUE VIPER	GSG	ISHARES S&P GSCI COMMODITY IND
EWJ	ISHARES MSCI JAPAN IDX FD	VEA	VANGUARD MSCI EAFE ETF	JJA	IPATH DJ-UBS AGRICULTURE SUBIN
EWM	ISHARES MSCI MALAYSIA IDX FUND	VEU	VANGUARD FTSE ALL-WORLD EX-US	JJC	IPATH DJ-UBS COPPER SUBINDEX
EWS	ISHARES MSCI SINGAPORE INDEX F	VGK	VANGUARD MSCI EURO ETF	JJE	IPATH DJ-UBS ENERGY SUBINDEX
EWT	ISHARES MSCI TAIWAN INDEX FUND	VIG	VANGUARD DIVIDEND APPRECIATION	JJG	IPATH DJ-UBS GRAINS SUBINDEX
EWU	ISHARES MSCI UK INDEX FUND	VNQ	VANGUARD REIT VIPERS	JJM	IPATH DJ-UBS INDUSTRIAL METALS
EWY	ISHARES MSCI SOUTH KOREA INDEX	VO	VANGUARD MID-CAP VIPERS	JJN	IPATH DJ-UBS NICKEL SUBINDEX
EZU	ISHARES MSCI EMU INDEX FUND	VPL	VANGUARD MSCI PACIFIC ETF	JJS	IPATH DJ-UBS SOFTS SUBINDEX
FXI	ISHARES FTSE CHINA 25 INDEX	VTI	VANGUARD TOTAL STOCK MARKET	JJU	IPATH DJ-UBS ALUMINUM SUBINDEX
GDX	MARKET VECTORS GOLD MINERS	VTV	VANGUARD VALUE VIPERS	SGG	IPATH DJ-UBS SUGAR SUBINDEX TR
GDXJ	MARKET VECTORS JUNIOR GOLD MIN	VUG	VANGUARD GROWTH VIPERS	SLV	ISHARES SILVER TRUST
IBB	ISHARES BIOTECH INDEX FUND	VV	VANGUARD LARGE-CAP VIPERS	UCO	PROSHARES ULTRA DJ-UBS CRUDE
ICF	ISHARES COHEN & STEERS REALTY	VWO	VANGUARD MSCI EM MAR	UGA	UNITED STATES GASOLINE FUND LP
IEV	ISHARES S&P EUROPE 350 INX FD	VXX	IPATH S&P 500 VIX	UGL	PROSHARES ULTRA GOLD
IGE	ISHARES S&P GSSI NAT RES IDX	XLB	MATERIALS SEL SECTOR SPDR FUND	UHN	UNITED STATES HEATING OIL LP
IJH	ISHARES S&P MIDCAP 400 IDX FD	XLE	ENERGY SELECT SECTOR SPDR FUND	UNG	UNITED STATES NATL GAS FUND LP
IJJ	ISHARES S&P MIDCAP 400/VALUE	XLF	FINANCIAL SEL SECTOR SPDR FD	USO	UNITED STATES OIL FUND LP
IJK	ISHARES SP MCAP 400/BARRA GTH	XLI	INDUSTRIAL SELECT SECTOR SPDR	ZSL	PROSHARES ULTRASHORT SILVER
IJR	ISHARES SP SMALLCAP 600 IDX FD	XLK	TECHNOLOGY SELECT SECTOR SPDR	United States: Currency Trusts
IJS	ISHARES S&P SMALLCAP 600/BARRA	XLP	CONSUMER STAPLES SELECT SPDR	DBV	POWERSHARES DB G10 CURRENCY HA
IJT	ISHARES SP SMCAP 600/BARRA GTH	XLU	UTILITIES SELECT SECTOR SPDR	EUO	PROSHARES ULTRASHORT EURO
ILF	ISHARES S&P LATIN AMER 40 IDX	XLV	HEALTH CARE SELECT SECTOR SPDR	FXA	CURRENCYSHARES AUD TRUST
INP	IPATH MSCI INDIA INDEX ETN	XLY	CONSUMER DISCRETIONARY SPDR	FXB	CURRENCYSHARES GBP STERL TRUST
IOO	ISHARES S&P GLOBAL 100 INDEX F	XME	SPDR S&P METALS & MINING ETF	FXC	CURRENCYSHARES CAD
IVE	ISHARES SP 500/BARRA VALUE	XOP	SPDR S&P OIL & GAS EXPL AND PROD	FXE	CURRENCYSHARES EURO TRUST
IVV	ISHARES S&P 500 INDEX FUND	United States: Fixed Income		FXF	CURRENCYSHARES SWISS FRANC
IVW	ISHARES S&P 500/BARRA GRTH IDX	AGG	ISHARES BARCLAYS AGGREGATE	FXM	CURRENCYSHARES MEXICAN PESO
IWB	ISHARES RUSSELL 1000 INDEX	BIV	VANGUARD INTERMEDIATE-TERM BON	FXS	CURRENCYSHARES SWEDISH KRONA
IWD	ISHARES RUSSELL 1000 VALUE IND	BND	VANGUARD TOTAL BOND MARKET	FXY	CURRENCYSHARES JPY TRUST
IWF	ISHARES RUSSELL 1000 GROWTH	BOND	PIMCO TOTAL RETURN BOND ETF	UDN	POWERSHARES DB US DOLLAR IND
IWM	ISHARES RUSSELL 2000 INDEX	BSV	VANGUARD SHORT-TERM BOND ETF	UUP	POWERSHARES DB US DOL IND BU
IWN	ISHARES RUSSELL 2000 VALUE	BWX	SPDR BARCLAYS INT TREA BND ETF	YCS	PROSHARES ULTRASHORT YEN
IWO	ISHARES RUSSELL 2000 GROWTH	BZF	WISDOMTREE DREYFUS BRAZILIAN REAL FUND	Australia: Equity
IWP	ISHARES RUSSELL MIDCAP GROWTH	CYB	WISDOMTREE DREYFUS CHINESE YUA	STW.AX	SPDR S&P/ASX 200 FUND
IWR	ISHARES RUSSELL MIDCAP INDEX F	ELD	WISDOMTREE EMERGING MARKETS LO	England: Equity
IWS	ISHARES RUSSELL MIDCAP VALUE I	EMB	JPM EMERGING MARKETS BOND ETF	EUN LN	ISHARES STOXX EUROPE 50
IWV	ISHARES RUSSELL 3000 INDEX	HYG	ISHARES IBOXX $ HIGH YIELD COR	IEEM LN	ISHARES MSCI EMERGING MARKETS
IXC	ISHARES S&P GLOBAL ENERGY SECT	IEF	ISHARES BARCLAYS 7-10 YEAR	FXC LN	ISHARES FTSE CHINA25
IYR	ISHARES DOW JONES US RE IDX	IEI	ISHARES BARCLAYS 3-7 YEAR TREA	IJPN LN	ISHARES MSCI JAPAN FUND
IYW	ISHARES DJ US TECH SECTOR IDX	JNK	SPDR BARCLAYS HIGH YIELD BOND	ISF LN	ISHARES PLC- ISHARES FTSE 100
MDY	SPDR S&P MIDCAP 400 ETF TRUST	LQD	ISHARES IBOXX INVESTMENT GRADE	IUSA LN	ISHARES S&P 500 INDEX FUND
MOO	MARKET VECTORS-AGRI	MBB	ISHARES MBS BOND FUND	IWRD LN	ISHARES MSCI WORLD
OEF	ISHARES S&P 100 INDEX FUND	MUB	ISHARES S&P NATIONAL MUNICIPAL	England Fixed Income
PBW	POWERSHARES WILDERHILL CLEAN E	PCY	POWERSHARES EM MAR SOV DE PT	IEBC LN	ISHARES BARCLAYS CAPITAL EURO
PFF	ISHARES S&P US PREFERRED STOCK	PST	PROSHARES ULTRASHORT LEH 7	Hong Kong: Equity
PGX	POWERSHARES PREFERRED PORTFOLI	SHY	ISHARES BARCLAYS 1-3 YEAR TREA	2800 HK	TRACKER FD OF HONG KONG
PHO	POWERSHARES GLOBAL WATER PORTF	TBF	PROSHARES SHORT 20+ TREASURY	2823 HK	ISHARES FTSE/ XINHUA A50 CHINA
QID	PROSHARES ULTRASHORT QQQ	TBT	PROSHARES ULTRASHORT LEHMAN	2827 HK	BOCI-PRUDENTIAL - W.I.S.E. - C
QLD	PROSHARES ULTRA QQQ	TIP	ISHARES BARCLAYS TIPS BOND FUN	2828 HK	HANG SENG INVESTMENT INDEX FUN
This^QQQappendix^POWERSHARESis current as^QQQTRUSTof October 1, 2008, and may be		^TLTat the	^ISHARESBARCLAYSof the 20+ YEAR ^TREA.	2833 HK	HANG SENG INVESTMENT INDEX FD
RSP	RYDEX S&P EQUAL WEIGHT

12

This appendix is current as of October 22, 2012, and may be amended at the discretion of the Ethics Committee.

G2529_2


Explorer Fund Investor Shares
			Year Ended October 31,
For a Share Outstanding Throughout Each Period	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$78.03	$73.02	$66.02	$51.77	$45.54
Investment Operations
Net Investment Income	.219¹	.108	.077	.109	.178
Net Realized and Unrealized Gain (Loss)
on Investments	32.286	4.998	7.029	14.239	6.334
Total from Investment Operations	32.505	5.106	7.106	14.348	6.512
Distributions
Dividends from Net Investment Income	(.272)	(.096)	(.106)	(.098)	(.282)
Distributions from Realized Capital Gains	(2.303)	—	—	—	—
Total Distributions	(2.575)	(.096)	(.106)	(.098)	(.282)
Net Asset Value, End of Period	$107.96	$78.03	$73.02	$66.02	$51.77

Total Return²	42.89%	7.00%	10.76%	27.74%	14.46%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$5,573	$5,008	$5,864	$6,290	$5,677
Ratio of Total Expenses to
Average Net Assets³	0.50%	0.49%	0.50%	0.49%	0.54%
Ratio of Net Investment Income to
Average Net Assets	0.27%¹	0.16%	0.12%	0.19%	0.38%
Portfolio Turnover Rate	65%	59%	89%⁴	82%	95%


Contacting Vanguard


Web
Vanguard.com	For the most complete source of Vanguard news
	For fund, account, and service information
	For most account transactions
	For literature requests
	24 hours a day, 7 days a week

Phone
Vanguard Tele-Account^®800-662-6273	For automated fund and account information
	Toll-free, 24 hours a day, 7 days a week
Investor Information 800-662-7447	For fund and service information
(Text telephone for people with hearing	For literature requests
impairment at 800-749-7273)	Hours of operation: Monday–Friday, 8 a.m. to 10 p.m.,
	Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
Client Services 800-662-2739	For account information
(Text telephone for people with hearing	For most account transactions
impairment at 800-749-7273)	Hours of operation: Monday–Friday, 8 a.m. to 10 p.m.,
	Eastern time; Saturday, 9 a.m. to 4 p.m., Eastern time
Institutional Division	For information and services for large institutional investors
888-809-8102	Hours of operation: Monday–Friday, 8:30 a.m. to 9 p.m.,
	Eastern time
Financial Advisor and Intermediary	For information and services for financial intermediaries
Sales Support 800-997-2798	including financial advisors, broker-dealers, trust institutions,
	and insurance companies
	Hours of operation: Monday–Friday, 8:30 a.m. to 7 p.m.,
	Eastern time


Explorer Fund Investor Shares
			Year Ended October 31,
For a Share Outstanding Throughout Each Period	2013	2012	2011	2010	2009
Net Asset Value, Beginning of Period	$78.03	$73.02	$66.02	$51.77	$45.54
Investment Operations
Net Investment Income	.219¹	.108	.077	.109	.178
Net Realized and Unrealized Gain (Loss)
on Investments	32.286	4.998	7.029	14.239	6.334
Total from Investment Operations	32.505	5.106	7.106	14.348	6.512
Distributions
Dividends from Net Investment Income	(.272)	(.096)	(.106)	(.098)	(.282)
Distributions from Realized Capital Gains	(2.303)	—	—	—	—
Total Distributions	(2.575)	(.096)	(.106)	(.098)	(.282)
Net Asset Value, End of Period	$107.96	$78.03	$73.02	$66.02	$51.77

Total Return	42.89%	7.00%	10.76%	27.74%	14.46%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$5,573	$5,008	$5,864	$6,290	$5,677
Ratio of Total Expenses to
Average Net Assets²	0.50%	0.49%	0.50%	0.49%	0.54%
Ratio of Net Investment Income to
Average Net Assets	0.27%¹	0.16%	0.12%	0.19%	0.38%
Portfolio Turnover Rate	65%	59%	89%³	82%	95%
1 Net investment income per share and the ratio of net investment income to average net assets include $0.038 and 0.03%,
respectively, resulting from a special dividend from HFF Inc. in December 2012.
2 Includes performance-based investment advisory fee increases (decreases) of 0.00%, (0.03%), 0.00%, (0.01%), and
(0.01%).
3 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the Fund’s
capital shares.


Regular Mail (Individuals)	The Vanguard Group
	P.O. Box 1110
	Valley Forge, PA 19482-1110
Regular Mail (Institutions and Intermediaries)	The Vanguard Group
	P.O. Box 2900
	Valley Forge, PA 19482-2900
Registered, Express, or Overnight Mail	The Vanguard Group
	455 Devon Park Drive
	Wayne, PA 19087-1815


Additional Information

	Inception	Suitable	Newspaper	Vanguard	CUSIP
	Date	for IRAs	Abbreviation	Fund Number	Number
Explorer Fund
Investor Shares	12/11/1967	Yes	Explr	24	921926101
Admiral Shares	11/12/2001	Yes	ExplrAdml	5024	921926200


For More Information	If you are a current Vanguard shareholder and would

If you would like more information about Vanguard	like information about your account, account

Explorer Fund, the following documents are available	transactions, and/or account statements, please call:

free upon request:
	Client Services Department

Annual/Semiannual Reports to Shareholders	Telephone: 800-662-2739

Additional information about the Fund’s investments is	Text telephone for people with hearing impairment:

available in the Fund’s annual and semiannual reports	800-749-7273

to shareholders. In the annual report, you will find a
	Information Provided by the Securities and
discussion of the market conditions and investment
	Exchange Commission (SEC)
strategies that significantly affected the Fund’s
	You can review and copy information about the Fund
performance during its last fiscal year.
	(including the SAI) at the SEC’s Public Reference Room

Statement of Additional Information (SAI)	in Washington, DC. To find out more about this public

The SAI provides more detailed information about the	service, call the SEC at 202-551-8090. Reports and

Fund and is incorporated by reference into (and thus	other information about the Fund are also available in

legally a part of) this prospectus.	the EDGAR database on the SEC’s website at

	www.sec.gov, or you can receive copies of this
To receive a free copy of the latest annual or semiannual
	information, for a fee, by electronic request at the
report or the SAI, or to request additional information
	following e-mail address: publicinfo@sec.gov, or by
about the Fund or other Vanguard funds, please visit
	writing the Public Reference Section, Securities and
vanguard.com or contact us as follows:
	Exchange Commission, Washington, DC 20549-1520.

The Vanguard Group
	Fund’s Investment Company Act file number: 811-01530
Investor Information Department

P.O. Box 2600

Valley Forge, PA 19482-2600

Telephone: 800-662-7447

Text telephone for people with hearing impairment:

800-749-7273