Effective February 11, 2017, redemptions from the Vanguard Ohio Tax-Exempt Money Market Fund (“Ohio MM”) were suspended to ensure that final redemptions are processed in an orderly fashion and that all investors received fair and equal treatment.
When their shares are redeemed, shareholders received a trade date of February 15, 2017. Shareholders received their share of fund assets. Therefore, in addition to their redemption proceeds, shareholders received liquidation proceeds that may, in some cases, be taxable.
To offer more insight, here are answers to frequently asked questions:
The fund’s board of trustees has concluded that liquidating the fund is in the best interests of the fund’s shareholders. Factors considered included the fund’s relatively small and decreasing asset and shareholder bases and, given recent changes with money market reform, the low likelihood that the fund will be able to attract sufficient new assets in the short or long run. Importantly, the trustees believe that shareholders likely would be best served by redirecting their assets to other investments.
1. Why is Vanguard Ohio Tax-Exempt Money Market Fund being liquidated?
Because of greater than anticipated redemptions from the fund, the liquidation was moved up by about a week. The redemptions reduced the size of the fund to the point where a more immediate liquidation was in the best interest of shareholders.
2. Why did Vanguard expedite the liquidation of Ohio MM?
3. What are the key dates relating to the fund’s liquidation?
- November 22, 2016: The fund closed to new investors to prepare for the liquidation process. Existing shareholders were allowed to transact without restriction until January 18, 2017.
- January 18, 2017: All features of the account in the fund terminated, including check writing, direct deposits, automatic investments, automatic exchanges, and directed dividend payments.
- February 11, 2017: Redemptions were suspended to ensure that final redemptions were processed in an orderly fashion and that all investors received fair and equal treatment.
- Week of February 13, 2017: The fund was liquidated and proceeds for the redemptions were sent to shareholders. All shareholders will receive a trade date of February 15, 2017.
Yes, when the liquidation was announced, we notified shareholders that there could be a distribution. Shareholder letters read, “Distribution of liquidation proceeds, if any, may be a taxable event. Shareholders should consult their own tax advisors about any tax liability resulting from the receipt of liquidation proceeds.”
4. Will there be any distributions with the liquidation?
The liquidation proceeds were sent to clients through an increase in the daily dividend rate—which was identified as the best available channel through which to send clients the proceeds. Please note that these proceeds are taxable in the 2017 tax year for some clients.
Shareholders will see their redemption proceeds as one line on their paper statement or web activity. Their liquidation proceeds will appear on a second line. It’s important to note that, though these proceeds were paid through the dividend channel, they represent liquidation proceeds and not a traditional dividend.
For shareholders who have a Vanguard Brokerage Account, liquidation proceeds will be deposited into their settlement fund. All other shareholders will receive the proceeds by check.
5. How will clients receive their liquidated assets?
All existing investors received notification via email or phone on February 14, 2017, of the fund’s liquidation date.
6. How will clients be notified of the fund’s closure and liquidation?
We suggest you consider other investment options for your fund assets, but you should first talk with your tax advisor about any tax consequences that might apply to your situation. If you have a Vanguard Brokerage Account, liquidation proceeds will be deposited into your settlement fund. Otherwise, you’ll receive a check for the liquidated assets.
7. What can you do?
All investing is subject to risk, including the possible loss of the money you invest.
Vanguard Federal Money Market Fund: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Vanguard Prime Money Market Fund and Tax-Exempt Money Market Funds: The Fund is only available to retail investors (natural persons). You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Vanguard funds not held in a brokerage account are held by The Vanguard Group, Inc., and are not protected by SIPC. Brokerage assets are held by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC.