497K 1 sp960final.htm UTILITIES ETF sp960final.htm - Generated by SEC Publisher for SEC Filing

 

Vanguard Utilities ETF
Summary Prospectus 
December 15, 2010
Exchange-traded fund shares that are not individually redeemable and are traded on
NYSE Arca
 
Vanguard Utilities Index Fund ETF Shares (VPU)
 
 
 
 
The Fund’s statutory Prospectus and Statement of Additional Information dated
December 15, 2010, and financial highlights from the most recent shareholder
report are incorporated into and made part of this Summary Prospectus
by reference.
Before you invest, you may want to review the Fund’s Prospectus, which
contains more information about the Fund and its risks. You can find
the Fund’s Prospectus and other information about the Fund online at
www.vanguard.com/prospectus. You can also get this information at no
cost by calling 866-499-8473 or by sending an e-mail request to
online@vanguard.com.
The Securities and Exchange Commission has not approved or disapproved these securities or passed
upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Investment Objective
Vanguard Utilities Index Fund seeks to track the performance of a benchmark index
that measures the investment return of utilities stocks.

Fees and Expenses
The following tables describe the fees and expenses you may pay if you buy and hold
ETF Shares of the Fund.

Shareholder Fees  
(Fees paid directly from your investment)  
Transaction Fee on Purchases and Sales None through Vanguard
  (Broker fees vary)
Transaction Fee on Reinvested Dividends None through Vanguard
  (Broker fees vary)
Transaction Fee on Conversion to ETF Shares None through Vanguard
  (Broker fees vary)

 

Annual Fund Operating Expenses  
(Expenses that you pay each year as a percentage of the value of your investment)  
Management Expenses 0.19%
12b-1 Distribution Fee None
Other Expenses 0.05%
Total Annual Fund Operating Expenses 0.24%

 

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Example

The following example is intended to help you compare the cost of investing in
Utilities ETF with the cost of investing in other funds. It illustrates the hypothetical
expenses that you would incur over various periods if you invest $10,000 in Utilities
ETF. This example assumes that Utilities ETF Shares provide a return of 5% a year and
that 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
$25 $77 $135 $306

 

This example does not include the brokerage commissions that you may pay to buy
and sell ETF Shares of the Fund.

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 higher 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 example, reduce the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was 8%.

Primary Investment Strategies
The Fund employs a “passive management”—or indexing—investment approach
designed to track the performance of the MSCI® US Investable Market Utilities
25/50 Index, an index made up of stocks of large, medium-size, and small U.S.
companies within the utilities sector, as classified under the Global Industry
Classification Standard (GICS). The GICS utilities sector is made up of electric, gas,
and water utility companies, as well as companies that operate as independent
producers and/or distributors of power. The sector includes both nuclear and
nonnuclear facilities.

The Fund attempts to replicate the target index by investing all, or substantially all, of
its assets in the stocks that make up the Index, holding each stock in approximately
the same proportion as its weighting in the Index.

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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’s performance could be hurt by:

• 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.

• Sector risk, which is the chance that significant problems will affect a particular
sector, or that returns from that sector will trail returns from the overall stock market.
Daily fluctuations in specific market sectors are often more extreme than fluctuations
in the overall market. Because the Fund invests all, or substantially all, of its assets in
the utilities sector, the Fund’s performance largely depends—for better or for worse—
on the general condition of that sector. Companies in the utilities sector could be
affected by government regulation, overall economic conditions, and fuel prices.

• Nondiversification risk, which is the chance that the Fund’s performance may be
hurt disproportionately by the poor performance of relatively few stocks or even a
single stock. The Fund is considered nondiversified, which means that it may invest a
greater percentage of its assets in the securities of a small number of issuers as
compared with other mutual funds. Because the Fund tends to invest a relatively high
percentage of its assets in its ten largest holdings, and in its single largest holding,
nondiversification risk is high for the Fund.

• Investment style risk, which is the chance that returns from small- and mid-
capitalization stocks (to the extent that the Fund’s assets are invested in small- and
mid-cap stocks) will trail returns from the overall stock market. Historically, these
stocks have been more volatile in price than the large-cap stocks that dominate the
overall market, and they often perform quite differently.

Because ETF Shares are traded on an exchange, they are subject to additional risks:

• Utilities ETF Shares are listed for trading on NYSE Arca and can be bought and sold
on the secondary market at market prices. Although it is expected that the market
price of a Utilities ETF Share typically will approximate its net asset value (NAV), there
may be times when the market price and the NAV vary significantly. Thus, you may
pay more or less than NAV when you buy Utilities ETF Shares on the secondary
market, and you may receive more or less than NAV when you sell those shares.

• Although Utilities ETF Shares are listed for trading on NYSE Arca, it is possible that
an active trading market may not be maintained.

• Trading of Utilities ETF Shares on NYSE Arca 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 Utilities ETF Shares may also be halted if (1) the
shares are delisted from NYSE Arca without first being listed on another exchange or

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(2) exchange officials determine that such action is appropriate in the interest of a fair
and orderly market or to protect investors.

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 ETF
Shares (based on NAV) has varied from one calendar year to another over the periods
shown. The table shows how the average annual total returns of the ETF Shares
compare with those of relevant market indexes. As of December 28, 2009, the Fund’s
benchmark was changed to the MSCI US Investable Market Utilities 25/50 Index. This
index is expected to be a more suitable index because it allows the Fund to better
achieve its objective of tracking its target index while continuing to provide exposure
to its relevant market sector. During the periods covered in the Average Annual
Returns table the MSCI US Investable Market Utilities 25/50 Index was not yet in
operation. 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—ETF Shares1


1 The year-to-date return as of the most recent calendar quarter, which ended on September 30, 2010, was 4.75%.

During the periods shown in the bar chart, the highest return for a calendar quarter
was 11.79% (quarter ended December 31, 2004), and the lowest return for a quarter
was –17.44% (quarter ended September 30, 2008).

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Average Annual Total Returns for Periods Ended December 31, 2009    
      Since
      Inception
      (Jan. 26,
  1 Year 5 Years 2004)
Vanguard Utilities Index Fund ETF Shares      
Based on NAV      
Return Before Taxes 11.45% 5.55% 8.06%
Return After Taxes on Distributions 10.76 5.05 7.56
Return After Taxes on Distributions and Sale of Fund Shares 8.21 4.77 7.00
Based on Market Price      
Return Before Taxes 11.41 5.54 8.06
Comparative Indexes      
(reflect no deduction for fees, expenses, or taxes)      
MSCI US IMI/Utilities Index 11.70% 5.76% 8.29%
Spliced US IMI Utilities 25/50 Index 11.70 5.76 8.29

 

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
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 will 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.

5

 

Investment Advisor
The Vanguard Group, Inc.

Portfolio Manager

Michael D. Eyre, CFA, CPA, Portfolio Manager. He has managed the Utilities Index
Fund since 2010.

Purchase and Sale of Fund Shares
You can buy and sell ETF Shares of the Fund through a brokerage firm. The firm may
charge you a commission to execute the transaction. Unless imposed by your brokerage
firm, there is no minimum dollar amount you must invest and no minimum number of
shares you must buy. The price you pay or receive for ETF Shares will be the prevailing
market price, which may be more or less than the NAV of the shares.

ETF Shares of the Fund cannot be purchased or redeemed directly with the Fund,
except by certain authorized broker-dealers. These broker-dealers may purchase and
redeem ETF Shares only in large blocks (Creation Units) worth several million dollars,
and only in exchange for baskets of securities rather than cash. For this Fund, the
number of ETF Shares in a Creation Unit is 100,000.

Tax Information
The Fund’s distributions may be taxable as ordinary income or capital gain. A sale of
ETF Shares is a taxable event, which means that you may have a capital gain to report
as income, or a capital loss to report as a deduction, when you complete your federal
income tax return. Dividend and capital gain distributions that you receive, as well as
your gains or losses from any sale of ETF Shares, may also be subject to state and
local income taxes.

Payments to Financial Intermediaries
The Fund and its investment advisor do not pay financial intermediaries for sales of
Fund shares.

 

Vanguard Utilities Index Fund ETF Shares—Fund Number 960
 
 
CFA® is a trademark owned by CFA Institute. The Funds or securities referred to herein are not sponsored, endorsed, or
promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities. For any such funds or securities, the
Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with The Vanguard
Group and any related funds
 
© 2010 The Vanguard Group, Inc. All rights reserved.
U.S. Pat. No. 6,879,964 B2, 7,337,138
Vanguard Marketing Corporation, Distributor.
SP 960 122010