January 12, 2006
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 Morgan Growth Fund (the "Fund")
Dear Mr. Sandoe:
The following responds to your comments of January 6, 2006 on the post-effective
amendment of the registration statement of the above-referenced registrant. You
commented on Post-Effective Amendment No. 63 that was filed on November 21,
2005.
Comment 1: Prospectus: More on the Fund
Comment: Is the Fund's objective fundamental?
Response: The Fund's objective is fundamental, and is disclosed as such
in the Fund's Statement of Additional Information. No
additional Prospectus disclosure is required.
Comment 2: Prospectus: Other Investment Policies and Risks
Comment: On page 7 you state that Vanguard receives no additional
revenue from investing Fund assets in VIPER Shares of other
Vanguard funds. Do the Fund's advisors, other than Vanguard,
receive additional revenue from investing Fund assets in VIPER
Shares of other Vanguard funds? If so, please disclose.
Response: We think the disclosure is appropriate as written. The
sentences prior to the sentence referenced in this Comment
state that "Vanguard typically invests a small portion of the
Fund's assets in stock index futures and/or shares of
exchange-traded funds (ETFs), including VIPER Shares issues by
Vanguard stock index funds. Stock index futures and ETFs
provide returns similar to those of common stocks. Vanguard
may purchase
January 12, 2006
Christian Sandoe
Page 2 of 3
futures or ETFs when doing so will reduce the
Fund's transaction costs or add value because the instruments
are favorably priced." Since those sentences only reference
Vanguard and not the other advisers, we believe that it is
clear that only Vanguard invests in VIPER Shares. Accordingly,
the other advisers, by virtue of not investing in VIPER
Shares, would not receive any additional revenue from VIPER
Shares.
Comment 3: SAI - Investment Advisory Services
Comment: Include more information about the fees paid to each fund's
investment advisor(s). Add details about the performance fee
arrangements and include the fee schedules with asset and
performance based breakpoints for each advisor.
Response: We will file appropriate advisory fee disclosure in the SAI.
Vanguard operates a multi-manager structure for certain funds
pursuant to an exemptive order granted by the Commission in
2003 (the "2003 Order").(1) The funds are permitted under the
2003 Order to enter into and amend investment advisory
agreements with unaffiliated third-party advisors without
shareholder approval, provided certain conditions are met. The
2003 Order exempts multi-managed Vanguard funds from certain
disclosure requirements so that they are only required to
disclose advisory fees (as both a dollar amount and as a
percentage of a fund's net assets) as follows: (1) aggregate
fees paid by a fund to Vanguard and any affiliated advisors;
(2) aggregate fees paid by the fund to unaffiliated third-
party advisors; and (3) aggregate fees paid by the fund to all
investment advisors (collectively, the "Aggregate Fee
Disclosure"). A fund using Aggregate Fee Disclosure does not
have to include additional details, including asset-based and
performance fee schedules, about its advisory fees and fee
arrangements.
An Aggregate Fee Disclosure regime is in the best interests of
fund shareholders. In a recent proposal to codify
multi-manager exemptive orders, the Commission said that fund
sponsors (including Vanguard) have represented that they "are
able to negotiate lower fees with subadvisers if they do not
have to disclose those fees separately, and in our orders we
have provided them relief from our disclosure requirements. We
are proposing to codify this relief, which permits a manager
of managers fund to disclose only the aggregate amount of
advisory fees that it pays to subadvisers as a group."(2)
1 In the Matter of Vanguard Convertible Securities Fund, et al(.), File No.
812-12380, Inv. Co. Act Release Nos. 26062 (May 29, 2003) (Notice) and 26089
(June 25, 2003) (order).
2 Exemption from Shareholder Approval for Certain Subadvisory Contracts,
Securities Act Release No. 8312 (Oct. 23, 2003).
January 12, 2006
Christian Sandoe
Page 3 of 3
Tandy Requirements
Comment: The SEC is now requiring all registrants to provide at the end
of response letters to registration statement comments, the
following statements:
- The Fund 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
Commission from taking any action with respect to the
filing.
- The Fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under
the federal securities laws of the United States.
Response: As required by the SEC, we will provide the foregoing
acknowledgements.
* * * * *
As required by the SEC, the Fund acknowledges that:
- The Fund 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 Commission
from taking any action with respect to the filing.
- The Fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please contact me at (610) 669-5284 with any questions or comments
regarding the above responses. Thank you.
Sincerely,
/s/ Lisa Matson
Lisa Matson
Associate Counsel