SHIP LOGO VANGUARD
July 26, 2005
Christian Sandoe, Esq.
Division of Investment Management
U.S. Securities and Exchange Commission via electronic filing
450 Fifth Street,
N.W., Fifth Floor
Washington, D.C. 20549
Re: Vanguard Specialized Funds; File No. 2-88116
Dear Mr. Sandoe:
Thank you for your comments of July 19, 2005 on the post-effective
amendment of the registration statement of Vanguard Fixed Income Securities
Funds. You commented to Frances Han on post-effective amendment number 52 that
was filed on June 6, 2005 pursuant to Rule 485(a). The following are our
responses to each of your comments. I am responding in Frances's absence. Please
contact me at the number below with any further comments or questions.
Comment 1: Energy Fund prospectus (p. 1)
Comment: The Primary Investment Strategies section states that "the
Fund invests at least 80% of its assets in the common stocks
of companies principally engaged in energy-related
activities." Define "energy-related" activities.
Response: "Energy-related" activities are described in the second half
of the sentence quoted above to include "production and
transmission of energy or energy fuels; the making of
component products for such activities; energy research; and
energy conservation or pollution control."
Comment 2: Energy Fund prospectus (p. 1)
Comment: Disclose the Fund's market-capitalization strategy in the
Primary Investment Strategies section. To the extent
applicable, add mid- and small-cap risk.
Response: As provided in our response letter to your comments on
Vanguard Specialized Funds dated May 20, 2005, we explained
that the Fund does not have a specific market-capitalization
strategy and will invest across all market capitalization
segments. The Fund will not focus on any particular market
segment at any particular time for any reason other than to
focus on its stated primary investment strategies and
objectives. As such, we believe that it would be misleading to
characterize a specific market cap as a part of the primary
investment strategies, or a particular market cap risk as a
primary risk of investing in the Fund.
Christian Sandoe, Esq.
U.S. Securities and Exchange Commission
July 26, 2005
Page 2
Comment 3: Energy Fund prospectus (p. 2)
Comment: In the Annual Total Returns - Investor Shares bar chart in the
Performance/Risk Information section of the prospectus, update
the year-to-date return as of the most recent calendar quarter
from the figure as of March 31, 2005 to June 30, 2005.
Response: We will update the sentence immediately below the bar chart to
read as follows: "The year-to-date return as of the most
recent calendar quarter, which ended on June 30, 2005, was
22.70%."
Comment 4: Energy Fund prospectus (p. 12)
Comment: In the Plain Talk About The Fund's Portfolio Managers section,
clarify that Karl E. Bandtel has been Fund Manager for this
Fund since 2002. Also, identify how long James A. Bevilacqua
has managed the Fund, and clarify each portfolio manager's
role in the management of the Fund.
Response: We will revise the disclosure regarding the Fund's portfolio
managers as follows:
Karl E. Bandtel, Senior Vice President of Wellington
Management Company, LLP. He has worked in investment
management with Wellington Management since 1990; had been
Assistant Fund Manager since 1992; has been Fund Manager of
the Fund since 2002; and has co-managed a portion of the
Fund since 2005. Education: B.S. and M.S., University of
Wisconsin.
James A. Bevilacqua, Senior Vice President of Wellington
Management Company, LLP. He has worked in investment
management with Wellington Management since 1994; has been
involved in the portfolio management and securities analysis
of the Fund since 1998; and has co-managed a portion of the
Fund since 2005. Education: B.S. and M.S., Massachusetts
Institute of Technology; M.B.A., Stanford Graduate School of
Business.
Joel M. Dickson, Principal of Vanguard. He has worked in
investment management for Vanguard since 1996 and has managed
a portion of the Fund since 2005. Education: A.B., Washington
University in St. Louis; Ph.D., Stanford University.
Comment 5: SAI (p. B-31)
Comment: The disclosure concerning Vanguard's portfolio management
compensation program discusses bonus payments for portfolio
managers. Disclose whether the bonus paid to Joel Dickson as a
portfolio manager of the Energy Fund is based on a benchmark
over a specified period of time.
Response: We have added the following statement to the SAI disclosure
concerning the portfolio manager's compensation: "For the
Energy Fund, the bonus is based in part on the performance of
the Vanguard-managed portion of the fund relative to a
benchmark over a trailing three-year period. The benchmark is
derived from certain energy stocks in the MSCI All Country
Index."
Christian Sandoe, Esq.
U.S. Securities and Exchange Commission
July 26, 2005
Page 3
Comment 6: SAI (p. B-33)
Comment: The disclosure concerning M&G Investment Management Limited's
portfolio management compensation program discusses a bonus
payment based in part on investment performance. The
disclosure states that "the performance factor of the fund
manager's bonus is dependent on the Fund's performance over
one- and three-year periods compared with a representative
group of competitor funds." If applicable, identify with more
specificity the benchmark used, such as the Fund's Morningstar
or Lipper peer group.
Response: We will respond to this comment in a separate letter and, if
applicable, address any disclosure changes in future filings.
Comment 7: Tandy requirements
Comment: Include the requisite "Tandy" language at the end of any
correspondence with the SEC staff related to the filing.
Response: As required by the SEC, we will provide the appropriate
acknowledgements.
* * * * *
As required by the SEC staff, each series of the Registrant acknowledges that:
- - It is responsible for the adequacy and accuracy of the disclosure in the
filing.
- - Staff comments or changes in response to staff comments in the filings
reviewed by the staff do not foreclose the Securities and Exchange Commission
from taking any action with respect to the filing.
- - It may not assert staff comments as a defense in any proceeding initiated by
the Securities and Exchange Commission or any person under the federal
securities laws of the United States.
Please call me at (610) 503-2320 if you have any questions.
Sincerely,
Christopher A. Wightman
Associate Counsel
The Vanguard Group, Inc.