[SHIP LOGO] [VANGUARD (R) LOGO]
February 24, 2006
Christian Sandoe, Esq.
Division of Investment Management
U.S. Securities and Exchange Commission via electronic filing
100 F Street, NE
Washington, DC 20549
Re: Vanguard Windsor Funds
Dear Mr. Sandoe:
The following responds to your comments of February 16, 2006 on the post-
effective amendment of the Vanguard Windsor Funds' (the "Registrant")
registration statement on Form N-1A. You commented on the post-effective
amendment that was filed on January 4, 2006 pursuant to Rule 485(a). As you
know, we have requested accelerated effectiveness to February 28, 2006 in
connection with this filing. Pursuant to your instructions, we will make another
485(a) filing on or before February 28 that responds to your comments and
contains a number of other non-material updates and changes.
Prospectus page references in this letter are references to the Investor and
Admiral Shares version of the prospectus. The series of the Registrant are
referred to individually as "Fund" and collectively as "Funds."
Comment 1: Prospectuses - Other Investment Policies and Risks
- -------------------------------------------------------------
Comment: Confirm that the investment strategies and policies discussed in
the "Other Investment Policies and Risks" section of the
prospectuses are non-principal strategies and policies of the
Funds.
Response: The strategies and policies disclosed in the "Other Investment
Policies and Risks" are not principal strategies and policies of
the Funds.
Christian Sandoe, Esq.
February 24, 2006
Page 2 of 5
Comment 2: Prospectuses - Plain Talk About The Fund's Portfolio Managers
- -------------------------------------------------------------------------
Comment: Describe the separate roles of each portfolio manager.
Response: We have disclosed that each portfolio manager is a "comanager"
of the portion of the Fund managed by a particular investment
advisor.
Comment 3: Statement of Additional Information
- -----------------------------------------------
Comment: Disclose in the SAI the details regarding each Fund's advisory
fee structure (including a breakdown of each advisor's fees
for the last three years).
Response: We currently have the appropriate level of disclosure.
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/
Pursuant to the order discussed above and in accordance with
the requirements of Form N-1A, we will disclose advisory fee
information for the Vanguard Windsor II Fund as shown below.
For the Vanguard Windsor Fund, we currently have the
appropriate level of disclosure because the aggregate advisory
fee rate (as a percentage of net assets) is shown in the
prospectus, and
- ------------------------
/1/ In the Matter of Vanguard Convertible Securities Fund, et al., File No.
812-12380, Inc. 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).
Christian Sandoe, Esq.
February 24, 2006
Page 3 of 5
the aggregate advisory fee amounts paid by the Fund for the
last three years are shown in dollars in the SAI.
Vanguard Windsor II Fund
For the fiscal years ended October 31, 2003, 2004, and 2005,
Vanguard Windsor II Fund incurred the following aggregate
investment advisory fees:
- ------------------------- -------------- -------------------- ----------------
2003 2004 2005
- ------------------------- -------------- -------------------- ----------------
- ------------------------- -------------- -------------------- ----------------
Basic Fee $27,447,000 $39,948,000 $44,005,000
- ------------------------- -------------- -------------------- ----------------
- ------------------------- -------------- -------------------- ----------------
Increase or Decrease 5,551,000 5,153,000 2,811,000
for Performance
Adjustment
- ------------------------- -------------- -------------------- ----------------
- ------------------------- -------------- -------------------- ----------------
Total $32,998,000 $45,101,000 $46,816,000
- ------------------------- -------------- -------------------- ----------------
Of the aggregate fees previously described, the investment
advisory fee paid to Vanguard for the fiscal year ended
October 31, 2005, was $765,000 (representing an effective
annual rate of less than 0.01%). The investment advisory fee
paid to the remaining advisors for the fiscal year ended
October 31, 2005, was $46,051,000 (representing an effective
annual rate of 0.13%).
Comment 4: Statement of Additional Information - Portfolio Manager Material
Conflicts
- ----------------------------------------------------------------------------
Comment: The SAI disclosure about each portfolio manager's
compensation, holdings, and material conflicts is incomplete
in the filing. Complete it before filing an effective
registration statement.
Response: We have completed the relevant disclosure and have included it
in the SAI that we will file in the Registrant's 485(a) filing
on or before February 28.
Comment 5: Statement of Additional Information - Portfolio Manager Compensation
- --------------------------------------------------------------------------------
Comment: If applicable, identify the benchmark indexes on which
portfolio manager compensation is based for each Fund's
portfolio manager(s).
Response: If a portfolio manager's compensation is based on a particular
index, we will identify it in the SAI.
Christian Sandoe, Esq.
February 24, 2006
Page 4 of 5
Comment 6: Statement of Additional Information - Portfolio Manager Compensation
- --------------------------------------------------------------------------------
Comment: Enhance the disclosure concerning portfolio manager
compensation at Tukman Capital Management, Inc.
Response: Form N-1A requires the Registrant to "[d]escribe the structure
of, and the method used to determine, the compensation of each
Portfolio Manager required to be identified in response to
Item 5(a)(2). For each type of compensation (e.g., salary,
bonus, deferred compensation, retirement plans and
arrangements), describe with specificity the criteria on which
that type of compensation is based, for example, whether
compensation is fixed, whether (and, if so, how) compensation
is based on Fund pre- or after-tax performance over a certain
time period, and whether (and, if so, how) compensation is
based on the value of assets held in the Fund's portfolio. For
example, if compensation is based solely or in part on
performance, identify any benchmark used to measure
performance and state the length of the period over which
performance is measured.
We believe that the compensation structure for Tukman's
portfolio managers is described as required by Item 15(b) of
Form N-1A. The disclosure states that portfolio managers
receive a base salary. In addition, they receive a bonus tied
to firm profitability. In the interest of clarity, the
disclosure adds that bonuses are not tied to any single Tukman
account. Finally, the disclosure states that the portfolio
managers participate in a retirement plan that is available to
all Tukman employees.
Comment 7: Tandy Requirement
- -----------------------------
Comment: The SEC is now requiring all registrants to provide at the end
of response letters to registration statement comments, the
following statements:
o The Fund is responsible for the adequacy and accuracy of the
disclosure in the filing.
o 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.
Response: We will provide the foregoing acknowledgements.
Christian Sandoe, Esq.
February 24, 2006
Page 5 of 5
* * * * *
As required by the SEC, the Fund acknowledges that:
o The Fund is responsible for the adequacy and accuracy of the
disclosure in the filing.
o 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.
o 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) 503-2320 with any questions or comments. Thank you.
Sincerely,
/s/ Christopher A. Wightman
Christopher A. Wightman
Associate Counsel
The Vanguard Group, Inc.