There’s A Way Into Windsor

Sat., Dec. 14, 1996

Brett D. Fromson Washington Post

Attention, mutual-fund investors: You may have a back-door entry into one of the better U.S. stock mutual funds that is officially closed to new investors.

The top-performing fund is Vanguard Windsor, which has beaten the Standard & Poor’s 500-stock index over the past 20 years as well as this year.

The back door is another Vanguard fund named Gemini II Capital that is most likely going to be rolled into Windsor in January. Gemini II is managed by the same team that picks stocks for Windsor.

Under the proposed conversion, Gemini II shareholders, beginning on Jan. 31, could exchange their shares for shares in Windsor.

Executives close to the funds say it is almost certain to be approved by the directors of the funds this month or by mid-January.

Gemini II is what is known on Wall Street as a closed-end mutual fund. That means Gemini has a fixed number of shares, and its market price fluctuates in response to investor demand rather than to changes in the value of portfolio of investments.

In an open-end mutual fund, additional shares can always be issued, and the value of your investment depends entirely on the value of the fund’s holdings.

Gemini II was launched in 1985 by Vanguard and is scheduled to be liquidated or converted into Windsor by the end of January.

There are two classes of shares: “capital” shares that have the right to any capital gains achieved by the fund, and “income” shares that get all the dividend and interest income yielded by the fund’s investment portfolio.

Investors seeking to join Windsor will want to consider the capital shares. Gemini II income shares will not be converted into Windsor shares.

Gemini II capital shares trade on the New York Stock Exchange. They closed Friday at $29.25. The net asset value of the fund’s investments was $30.16 per share, which means you could buy shares in Gemini II at roughly a 4.5 percent discount.

This year, through the end of November, Gemini II capital shares have gained 13.1 percent, while the fund’s net asset value has increased 15 percent, according to Morningstar Inc., a Chicago-based, mutual-fund-research company.

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