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Date: Tue, 20 Jun 2000 07:59:00 -0700 (PDT)

Vanguard Files To Offer Exchange-Traded Shares For Five Index Funds

05/12/2000
Dow Jones Business News
(Copyright (c) 2000, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- Mutual-fund giant Vanguard Group is seeking regulatory 
permission to offfer a new type
of share class for five of its nine stock-index funds that would act like 
exchange-traded funds. 

Vanguard, which has thrived for years by offering low-cost stock funds, said 
the share class, called "Viper" shares
for Vanguard Index Participation Equity Receipts, will be listed on the 
American Stock Exchange. The funds which
filed to register a Viper class of exchange-traded shares are Vanguard 500 
Index Fund, Vanguard Growth Index
Fund, Vanguard Total Stock Market Index Fund, Vanguard Value Index Fund and 
Vanguard Small-Cap Index
Fund.

Index mutual funds, traditionally the lowest cost provider of mutual fund 
portfolios, are being challenged by
exchange-traded funds, which are mutual-fund-like vehicles that trade over an 
exchange like a stock.
Exchange-traded funds cost less than index funds because the asset-management 
firms that sponsor them don't
deal directly with the individual investor through expensive telephone 
centers and retail offices. 

The Viper shares differ from conventional mutual fund shares in that they 
trade continuously at market prices on the
American Stock Exchange rather than the calculated net asset value of the 
fund determined at the end of the
trading day. Given this flexibility, Vipers shares are expected to appeal 
primarily to short-term investors. Vanguard
has yet to determine the expense ratios for the Viper shares. 

The move by Vanguard, the second largest mutual fund company, comes amid 
heightened competition in the
marketplace for index investors. Barclays Global Investors, a huge presence 
in the pension-investing world. is
preparing over the next four weeks to unveil 28 new index funds that will 
also trade on the American Stock
Exchange. The exchange-traded funds will track everything from the total U.S. 
stock market to industrial and
Internet sectors. 

The flagship Barclays product, iShares S&P 500 Fund, will mirror the 
big-company Standard & Poor's 500-stock
Index and will have an annual expense ratio of 0.08% to 0.10% of assets, 
people familiar with the situation told The
Wall Street Journal. That's about half the price currently paid by investors 
in the $105 billion Vanguard 500 Index
Fund. 

(Compiled from Dow Jones Newswires and other sources) 

Copyright (c) 2000 Dow Jones & Company, Inc. 

All Rights Reserved.

Daily Update -- McGraw-Hill Sues Vanguard Over Planned Vipers Funds

06/08/2000
Dow Jones Business News
(Copyright (c) 2000, Dow Jones & Company, Inc.)

Dow Jones Interactive
Financial Services Update
For June 8, 2000
Today's top stories as of 4 p.m. EDT:

- McGraw-Hill Cos., on behalf of its Standard & Poor's Corp. unit, has filed 
a lawsuit in federal court charging the
Vanguard Group Inc. with breach of contract and trademark infringement in 
connection with the mutual fund
company's proposed new Vipers exchange-traded funds, or ETFs. 

McGraw-Hill's suit alleges Vanguard breached the companies' 1988 license 
agreement by using Standard & Poor's
proprietary indices and trademarks for the Vipers exchange-traded products 
without permission. 

Officials from Vanguard, the nation's second largest fund firm, weren't 
immediately available to comment on the
lawsuit. 

Exchange-traded funds are a hybrid version of index mutual funds that can be 
bought or sold during the day at
market prices instead of at the once-daily 4 p.m. price used by traditional 
mutual funds. ETFs are single shares of
stock that replicate an index such as the Standard & Poor's 500. 

Standard & Poor's currently has more than 400 license agreements for uses of 
its indices and trademarks, including
agreements related to ETFs, according to McGraw-Hill. 

McGraw-Hill wants to prevent Vanguard from using S&P's indices and trademarks 
in connection with Vipers or any
other exchange-traded security. The complaint also seeks an order requiring 
Vanguard to withdraw its Securities
and Exchange Commission application for Vipers, and seeks an order declaring 
Vanguard liable for unspecified
damages and attorneys' fees. 

- Liberty Financial Cos. confirmed it is in talks to acquire Wanger Asset 
Management L.P., which operates the
Acorn mutual funds. 

The Wall Street Journal reported Thursday that Liberty (L), a Boston-based 
asset-management company, would pay
about $450 million for Wanger, a Chicago investment company that has been on 
the SELLING block for several
months. 

The Journal said the reported price of the transaction, which equals about 6% 
of Wanger's $7.3 billion of assets
under management, would be considered a healthy one for a mutual-fund company 
and follows a recent trend of
well-priced deals. Pioneer Investment Management was bought last month for 
$1.2 billion, about 5% of assets, even
as the firm's management was being sharply criticized by shareholders and its 
funds were suffering big withdrawals.

The typical price for a fund firm had been about 3% of assets, depending on 
how the assets were invested. Wanger
was considered attractive because most of its assets are in highly profitable 
stock mutual funds. 

Liberty, majority owned by Liberty Mutual Insurance Co., has about $67 
billion in assets and 95 mutual funds. 

- Midwest bank National City Corp. will sell about $2 billion in student 
loans as part of a restructuring of its balance
sheet. The company said the sale, expected to close in the second quarter, 
will result in a pretax gain of about $75
million. 

In addition to the student loan sale, National City is also evaluating other 
alternatives. Some would require the
recognition of losses, given current market conditions. 

Cleveland-based National City (NCC) reported a decline in first quarter net 
income as borrowing costs rose more
than loan rates. Last November the bank warned analysts to reduce profit 
estimates as the spread between its
borrowing costs and lending rates shrank. The problem for National City and 
many banks is the failure of deposit
growth to keep pace with loan demand. That forces them to fund loans with 
money borrowed at higher rates in the
capital markets. 

National City expects its balance sheet reorganization to be complete by the 
end of the third quarter. 

- Led by a fall in the typical interest rate on a 30-year fixed mortgage, 
rates declined in a weekly survey from
Freddie Mac. 

The mortgage buyer (FRE) said the average rate lenders were seeking on a 
fixed, 30-year mortgage fell to 8.32% for
the week that ends Friday. That is down from 8.54% last week. 

The average rate for a fixed, 15-year mortgage was 8.04%, down from 8.24%. 
The rate for one-year, adjustable rate
mortgages, or ARMs, slipped to 7.24% from last week's 7.25%, which was the 
highest since April of 1991. 

The Freddie Mac survey appears to confirm that mortgage rates, which rose to 
their highest level in five years in
May, may have eased a bit. 

HSH Associates, a Butler, N.J. financial publisher, said the average rate for 
a 30-year fixed-rate mortgage fell to
8.4%, down from a high of 8.79% for the week ended May 19. 

"I wouldn't call it a rally, but we are getting some relief," Keith 
Gumbinger, an analyst at HSH told The Wall Street
Journal. 

Recent economic data - including a Labor Department report last week showing 
a rise in the unemployment rate -
suggest the economy is cooling. That has calmed fears about inflation, 
sending interest rates for Treasury bonds
and mortgage-backed securities - which mortgages follow - lower. 

--- 

This newsletter was assembled from Dow Jones Business News in the Newsstand 
section of Dow Jones Interactive,
http://djinteractive.com. 

Copyright (c) 2000 Dow Jones & Company, Inc. 

All Rights Reserved.

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.