Vanguard Explorer Fund tax distributions

The Vanguard Explorer Fund is a problematic candidate for placement in taxable accounts. The fund has the virtue of a very low dividend yield, and under the current tax regime, has provided 100% qualified dividend status for dividend distributions. The fund also allows a foreign tax credit although historically foreign income has been a minimal portion of fund dividends. The distribution of realized gains is considerably higher than distributions from passive small cap index funds. Thus, the fund is usually recommended for placement in tax-advantaged accounts.

The fund is a Vanguard option for investors desiring an active small cap fund for a strategic asset allocation. The table below summarizes the fund's relation to a number of tax factors.

The following table provides long term data on the fund's history of both dividend and capital gains distributions. The first table also provides an estimate of the foreign tax credit. One should note that the fund has a fiscal year ending in October, so its reported distributions for a year reflect the prior year's December distribution of dividends and capital gains.