2013 Foreign Tax Paid

*** This statement is intended for individual taxpayers whose qualified dividend income (QDI) is taxed at the 20% rate. If any portion of your QDI is taxed at the 0% or 15% tax rate, the figures in the “Foreign Income After QDI Adjustment” column may be different. If you have questions please see the instructions to Form 1116 or speak to a qualified tax advisor.

Instructions for Recipients

Foreign Tax Paid Information Your account, listed on the previous page(s), is invested in a Vanguard mutual fund (including Exchange-Traded funds) that has elected to pass through to its shareholders the ability to take a credit or deduction for taxes paid by the fund to foreign countries. Your portion of the fund’s foreign taxes is reported on the previous page(s) under the heading “Foreign tax paid (amount included in Form 1099-DIV Box 6)”.

Following are answers to some commonly asked questions about reporting foreign tax paid:

What is foreign tax paid? Foreign tax paid is your portion of the taxes your mutual fund paid or ETF paid to foreign countries that the fund has elected to pass through to you. You may claim a credit or deduction on your tax return for your share of foreign tax paid by the fund, subject to certain requirements. By taking a credit or deduction on your U.S. income tax return, you, as a mutual fund shareholder, do not pay U.S. tax on investment income that was also taxed by a foreign country.

Note: Vanguard is no longer required to report foreign taxes paid by country. As a result, foreign taxes paid from Vanguard funds will be reported to shareholders in aggregate. Some states still require country-by-country reporting on individual income tax returns if a foreign tax credit is claimed. The country-by-country information is available on our website. Go to Vanguard.com and click “Go to the Personal Investors site”, then under Insights, click on Tax Center. Under the Information for specific Vanguard funds, click “More”, then “Foreign Tax Credit Information”.

How do I claim a tax credit or tax deduction? Tax Credit Simplified Method: If you are an individual and meet certain conditions, you may be eligible to elect a simplified method to claim a foreign tax credit by reporting your Foreign tax paid (Form 1099-DIV Box 6) on the appropriate line of Form 1040 or Form 1040NR. Tax Credit Form 1116, Foreign Tax Credit: If you are not eligible for the simplified method, you may be able to claim a foreign tax credit by filing Form 1116 with your federal tax return. If you file Form 1116, you report your foreign source income and your foreign tax paid on the appropriate lines. See the Instructions for Form 1040 (or Form 1040NR, if applicable) and Form 1116, Foreign Tax Credit. Tax Deduction: Instead of claiming a tax credit for foreign taxes paid, you may deduct them. To take a deduction, you must itemize deductions on Schedule A of your tax return and list foreign taxes paid along with other deductible taxes (such as state income taxes and real estate taxes). Taking a deduction saves only a portion of your taxes.

How does qualified dividend income (QDI) affect my foreign tax credit claim? If you need to file Form 1116 to claim a foreign tax credit (because you are not eligible for the simplified method described above and you do not elect to deduct foreign taxes on Schedule A), you may be required to multiply your foreign QDI eligible income by 50.51% for that portion of your QDI taxed at the 20% rate (or 37.88% for the portion taxed at the 15% rate) (as provided in the instructions to Form 1116). This adjustment is intended to eliminate the double tax benefit of this income resulting from the reduced tax rate on QDI and the foreign tax credit. Vanguard provided your adjusted foreign QDI eligible income in the last column of the Foreign Tax Paid statement (on previous pages).

What do the columns on the previous page represent? Foreign tax paid (amount included in Form 1099-Div Box 6) - represents your total portion of foreign tax paid by the fund. This amount is included in the amount reported on Form 1099-DIV, Box 6, Foreign Tax Paid.

Foreign Income - represents your portion of the total foreign income earned by the fund. The foreign income will not match Form 1099-DIV, Box 1a, Total Ordinary Dividends, or Box 1b, Qualified Dividends. In addition to foreign income, the amount reported in Box 1a includes your portion of foreign tax paid and domestic (US) income and net short-term capital gain, if any, earned by the fund. The amount reported in Box 1b represents the total ordinary dividends reported in Box 1a that are eligible to be treated as qualified dividend income (QDI), including dividends paid by qualified foreign corporations.

QDI-Eligible Foreign Income - represents your portion of the total QDI eligible foreign income earned by the fund. The QDI eligible foreign income will not match Form 1099-DIV, Box 1b, Qualified Dividends. In addition to QDI-eligible foreign income, the amount reported in Box 1b includes your portion of foreign tax paid on QDI-eligible foreign income and domestic (US) QDI-eligible income.

Foreign Income After QDI Adjustment - represents your portion of the total foreign income which is includable in gross income from foreign sources on Form 1116, Part 1, Line 1a [Foreign income after QDI adjustment = ((Foreign income - QDI Eligible foreign income) + (QDI Eligible foreign income x .5051))].

Where can I find additional information? If you have questions, call our Investor Information Department at 1-800-662-7447 on business days from 8 a.m. to 10 p.m. or on Saturdays from 9 a.m. to 4 p.m., Eastern Time. Note, however, that our associates cannot provide tax advice; if your tax situation is complex or you are uncertain about the interpretation of a specific rule, we recommend that you seek advice from a qualified tax professional. You can find a wide array of general tax-preparation data and tools in the Tax Services area on our website at www.vanguard.com, including Vanguard’s Qualified Dividend Income Tax tool, which is a personal QDI calculator for Vanguard mutual fund shareholders.