{SHIP GRAPHIC}
THE VANGUARD GROUP(R)
February 17, 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 Whitehall Funds
Dear Mr. Sandoe:
The following responds to your comments of February 2, 2006 on
the post-effective amendment of the registration statement of the Vanguard
Whitehall Funds (the "Trust"). You commented on Post-Effective Amendment No. 27
that was filed on December 19, 2005.
Comment 1: Selected Value Fund Prospectus: Profile
Comment: Define "medium-size U.S. companies".
Response: The prospectus for the Selected Value Fund (the "Value Fund")
states that the Fund invests in medium-size companies and that the
Fund's primary risks include mid-cap risk. The prospectus also
states that market capitalization ranges change over time and that
there are no "official" definitions of small- mid- or large-cap,
even among Vanguard advisers. We note that the asset-weighted
medium market cap of the Value Fund as of Oct. 31, 2005 was $4.3
billion. We believe this, as well as the other disclosure
contained in the Value Fund's prospectus, adequately describes the
Value Fund's investment strategies.
Comment 2: Selected Value Fund Prospectus: Profile
Comment: If Asset Concentration Risk is a primary risk of the Value Fund,
it should be included as a primary strategy.
Response: We have moved the last sentence of the Asset Concentration Risk
disclosure to the second-to the last sentence at the end of the
paragraph under Primary Investment Strategies on page 1. The
sentence states: "The Fund tends to invest a high percentage of
assets in its ten largest holdings."
February 17, 2006
Christian Sandoe
Page 2 of 6
Comment 3: Selected Value Fund Prospectus: Other Policies
Comment: Confirm to the SEC that the investment strategies and policies,
including investment in foreign securities, discussed in the
"Other Investment Policies and Risks" section of the prospectus
are non-principal Value Fund strategies and policies.
Response: The strategies and policies disclosed in the "Other Investment
Policies and Risks" are not principal strategies and policies of
the Value Fund.
Comment 4: Selected Value Fund Prospectus: Portfolio Manager Disclosure.
Comment: Describe the separate roles of each portfolio manager.
Response: We have disclosed that each portfolio manager is a "co-manager"
of the Value Fund.
Comment 5: Mid-Cap Growth Fund Prospectus: Portfolio Manager Disclosure
Comment: Describe the separate roles of each portfolio manager.
Response: We have disclosed that each portfolio manager is a "co-manager"
of the Growth Fund.
Comment 6: Mid-Cap Growth Fund Prospectus: Other Policies
Comment: Confirm to the SEC that the investment strategies and policies,
including investment in foreign securities, discussed in the
"Other Investment Policies and Risks" section of the prospectus
are non-principal Growth Fund strategies and policies.
Response: The strategies and policies disclosed in the "Other Investment
Policies and Risks" are not principal strategies and policies of
the Growth Fund.
Comment 7: International Explorer Fund Prospectus: General
Comment: Please provide to the SEC a breakdown of the different countries
in which the International Fund invests.
Response: As noted on page 10 in the International Fund's Annual Report
dated October 31, 2005, the country breakdown includes investment
in companies located in 14 European countries, 4 Pacific
countries, and 3 (plus a category of "Other") Emerging Markets
countries.
Comment 8: Statement of Additional Information
Comment: The detail regarding each Fund's advisory fee structure (base and
performance fee structure) should be included in the SAI.
Response: We currently have the appropriate level of disclosure. Vanguard
operates a multi-manager structure for certain funds pursuant to
an exemptive order
February 17, 2006
Christian Sandoe
Page 3 of 6
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)
Comment 9: Statement of Additional Information
Comment: Please clarify what the material conflicts of interest are that
each adviser seeks to eliminate.
Response: The following is added to Barrow, Hanley's disclosure under
Material Conflicts of Interest:
Actual or potential conflicts of interest may arise when a
portfolio manager has management responsibilities to more than one
account (including the Selected Value Fund). Barrow, Hanley
manages potential conflicts between funds or with other types of
accounts through allocation policies and procedures, internal
review processes and oversight by directors and independent third
parties to ensure that no client, regardless of type or fee
structure, is intentionally favored at the expense of another.
Allocation policies are designed to address potential conflicts in
situations
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(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).
February 17, 2006
Christian Sandoe
Page 4 of 6
where two or more funds or accounts participate in
investment decisions involving the same securities.
The following is added to Donald Smith's disclosure under Material
Conflicts of Interest:
Donald Smith & Co. is an independent investment advisor with no
parent or subsidiary organizations. Additionally, it has no
affiliated organizations, brokerage, or investment banking
activities.
Clients include mutual funds, public and corporate pension plans,
endowments and foundations, and other separate accounts. Because
the portfolio managers manage other accounts in addition to the
Fund, conflicts of interest may arise in connection with the
portfolio manager's management of the Fund's investment on the one
hand and the investments of such other accounts on the other
hand. Donald Smith & Co. has put in place systems, policies, and
procedures, which have been designed to maintain fairness in
portfolio management across all clients. Potential conflicts
between the Fund or with other types of accounts are managed in
accordance with trade aggregation and allocation policies and
procedures, internal review processes, and direct oversight by
Donald G. Smith, President.
The following disclosure is added to Schroders' Material Conflicts
of Interest:
Whenever the portfolio manager of the International Explorer Fund
manages other accounts, potential conflicts of interest exist,
including potential conflicts between the investment strategy of
the Fund and the investment strategy of the other accounts. For
example, in certain instances, a portfolio manager may take
conflicting positions in a particular security for different
accounts, by selling a security for one account and continuing
to hold it for another account. In addition, the fact that other
accounts require the portfolio manager to devote less than all of
his time to the Fund may be seen itself to constitute a conflict
with the interest of the Fund.
The portfolio manager may also execute transactions for another
fund or account at the direction of such fund or account that may
adversely impact the value of securities held by the Fund.
Securities selected for funds or accounts other than the Fund may
outperform the securities selected for the Fund. Finally, if the
portfolio manager identifies a limited investment opportunity
that may be suitable for more than one fund or other account, the
Fund may not be able to take full advantage of that opportunity
due to an allocation of that opportunity across all eligible
funds and accounts.
At Schroders, individual portfolio managers may manage multiple
accounts for multiple clients. In addition to mutual funds, these
other accounts may include separate accounts, collective trusts,
or offshore
February 17, 2006
Christian Sandoe
Page 5 of 6
funds. Certain of these accounts may pay a performance fee, and
portfolio managers may have an incentive to allocate investment to
these accounts.
Schroders manages potential conflicts between funds or with other
types of accounts through allocation policies and procedures,
internal review processes, and oversight by directors. Schroders
has developed trade allocation systems and controls to ensure
that no one client, regardless of type, is intentionally favored
at the expense of another. Allocation policies are designed to
address potential conflicts in situations where two or more
funds or accounts participate in investment decisions involving
the same securities.
The structure of each portfolio manager's compensation may
give rise to potential conflicts of interest. Each portfolio
manager's base pay tends to increase with additional and more
complex responsibilities that include increased assets under
management, which indirectly links compensation to sales.
Schroders has adopted certain compliance procedures that are
designed to address these, and other, types of conflicts. However,
there is no guarantee that such procedures will detect each and
every situation where a conflict arises.
The following disclosure is added to Provident's disclosure under
Material Conflicts of Interest:
At Provident, individual portfolio managers may manage multiple
accounts for multiple clients. Managing multiple accounts may
give rise to potential conflicts of interest including, for
example, conflicts in the allocation of investment opportunities.
Comment 10: Statement of Additional Information
Comment: Please state whether Barrow, Hanley's base salary is fixed.
Response: The revised disclosure under Description of Compensation states:
"In addition to a fixed base salary, all..."
Comment 11: Statement of Additional Information
Comment: Under Description of Compensation for Donald Smith, the text
states that a discretionary bonus can exceed 100% of the base
salary if "performance for clients exceeds established
benchmarks." Please state whether there is a performance period
determining this bonus.
February 17, 2006
Christian Sandoe
Page 6 of 6
Response: The next sentence after the above-referenced sentence in the SAI
states "The current benchmark utilized is various Russell Indexes,
measured over a one-year period." (emphasis added)
Comment 12: 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 Trust 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 Trust 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 Trust acknowledges that:
- The Trust 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 Trust 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