[SHIP]
[THE VANGUARD GROUP LOGO]
March 23, 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 CALIFORNIA TAX-FREE FUNDS
VANGUARD FLORIDA TAX-FREE FUND
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS
VANGUARD NEW JERSEY TAX-FREE FUNDS
VANGUARD NEW YORK TAX-FREE FUNDS
VANGUARD OHIO TAX-FREE FUNDS
VANGUARD PENNSYLVANIA TAX-FREE FUNDS
Dear Mr. Sandoe:
The following responds to your comments of March 17, 2006, on the
post-effective amendments to the registration statements on Form N-1A of the
above-named registrants ("Post-Effective Amendments"). You commented on the
Post-Effective Amendments that were filed with the Commission on January 30,
2006, pursuant to Rule 485(a) under the Securities Act of 1933.
Set forth below are the staff's comments and the Funds' responses. In this
letter, the series of the registrants are referred to collectively as "Funds"
and individually as a "Fund."
COMMENT 1: PROSPECTUS - FUND PROFILE - PRIMARY INVESTMENT STRATEGIES (ALL FUNDS)
Comment: The Primary Investment Strategies section states that the Fund invests
at least 80% of its assets in municipal securities that are exempt
from federal and state taxes. Please indicate that the securities are
also exempt from alternative minimum tax.
Response: Each Fund's prospectus currently discloses, under the heading "More on
the Fund - Security Selection," (which appears on page 14 of the
prospectus for California Tax-Exempt Money Market Fund), that up to
20% of Fund assets may be invested in securities that are subject to
the alternative minimum tax. Each Fund's respective policy on
investing in securities subject to the alternative minimum tax is a
non-fundamental policy and complies with the Investment Company Names
Rule and related staff guidance. We believe that the current placement
of the disclosure on investing in securities subject to the
alternative minimum tax is appropriate.
March 24, 2006
Christian Sandoe, Esq.
Page 2 of 5
COMMENT 2:PROSPECTUS - FUND PROFILE - PRIMARY INVESTMENT STRATEGIES (CALIFORNIA
INTERMEDIATE-TERM TAX-EXEMPT FUND)
Comment: This section states that the dollar-weighted average maturity for the
Fund is expected to be between 6 and 12 years. The release adopting
Rule 35d-1 under the Investment Company Act refers to a
dollar-weighted average maturity of between 3 and 10 years for
intermediate-term bond funds.
Response: The guide referred to in the Rule 35d-1 adopting release assumes, with
respect to maturity, only three categories of bond funds: short-term,
intermediate-term, and long-term. Although this is a common
categorization, it is not the one Vanguard uses for its tax-exempt
bond funds. Vanguard offers four such categories, which are managed to
the following dollar-weighted average maturities:
Short-Term 1-2 years
Limited-Term 2-6
Intermediate-Term 6-12
Long-Term 12-25
Because four categories are used, rather than three, we believe that
any advantage gained by the application of the staff's uniform
standard is outweighed by the disadvantages of placing a fund into an
artificial, and inappropriate, maturity range.
Changing the maturity range for the fund to 3 to 10 years would not be
in shareholders' best interests because it would result in an overlap
in the maturity range between Vanguard's Limited-Term and
Intermediate-Term Tax-Exempt Funds. We think investors are better
served with a menu of offerings in which the average maturities of the
funds are clearly delineated and do not overlap.
We acknowledge that the staff should prevent funds from using names
that are potentially misleading. However, under any reasonable
interpretation of the applicable guide and Rule 35d-1, an average
maturity range of 6-12 years qualifies as "intermediate-term." The
name of Vanguard's California Intermediate-Term Tax-Exempt Fund is not
misleading, particularly in the context of the other tax-exempt funds
offered by Vanguard.
March 24, 2006
Christian Sandoe, Esq.
Page 3 of 5
COMMENT 3:PROSPECTUS - FREQUENT TRADING OR MARKET-TIMING (ALL FUNDS)
Comment: Each Fund's broad policies with respect to frequent trading and
market-timing are disclosed in the prospectus under the heading
"Frequent Trading or Market-Timing." However, specific policies
applicable to discrete types of investors are disclosed in various
places throughout the "Investing with Vanguard" section. All of a
Fund's policies concerning frequent trading and market-timing should
be disclosed together under the heading "Frequent Trading or
Market-Timing."
Response: We believe that each Fund's policies against frequent trading and
market-timing are properly disclosed in the prospectus pursuant to
Item 6(e)(4) of Form N-1A. Item 6(e)(4) does not require that the
specific policies applicable to each type of shareholder be disclosed
in one place in the prospectus. As such, we believe that it is
appropriate to have the general discussion of fund policies against
frequent trading and market-timing under the heading "Frequent Trading
or Market-Timing" with a reference to the "Investing With Vanguard"
section where specific policies applicable to different types of
shareholders and transactions are disclosed.
We believe that removing the disclosure from the "Investing With
Vanguard" section and combining the disclosure into a single "Frequent
Trading or Market-Timing" section would make the discussion of
transaction policies incomplete in the "Investing with Vanguard"
section. Repeating the specific policies in both the "Investing with
Vanguard" section and under the "Frequent Trading or Market-Timing"
heading would unnecessarily clutter the prospectus with duplicative
disclosure.
COMMENT 4:STATEMENT OF ADDITIONAL INFORMATION - PORTFOLIO MANAGER MATERIAL
CONFLICTS (ALL FUNDS)
Comment: The Statement of Additional Information states that the portfolio
managers manage other accounts and as a result, conflicts of interest
may arise. Please identify the conflicts that may arise.
Response: The portfolio managers may manage multiple accounts for multiple
clients, including other mutual funds, separate accounts, collective
trusts, and offshore funds. The conflicts of interest that may arise
relate to allocation of investment opportunities and aggregation of
trades. The Statement of Additional Information currently discloses
that potential conflicts of interest are addressed through trade
March 24, 2006
Christian Sandoe, Esq.
Page 4 of 5
allocation policies and procedures that are designed to address
situations where two or more funds or accounts participate in
investment decisions involving the same securities. We believe that
because we mention policies to address conflicts related to trade
allocation and aggregation, there is no need to disclose one sentence
earlier that the conflicts are in fact trade allocation and
aggregation.
COMMENT 5:STATEMENT OF ADDITIONAL INFORMATION - PORTFOLIO MANAGER COMPENSATION
(ALL FUNDS)
Comment: Enhance the disclosure concerning portfolio manager compensation.
Response: Form N-1A requires the registrant to describe "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 description of the compensation structure for the
portfolio managers of the Funds is consistent with the requirements of
Item 15(b) of Form N-1A. The Statement of Additional Information
discloses that the portfolio managers receive a base salary that is
generally a fixed amount and a bonus that is determined by a number of
factors, including pre-tax performance of the Fund. We state that the
performance factor is not based on the value of assets held in the
portfolio. We further state that, for intermediate- and long-term
tax-exempt funds, the performance factor depends on how successfully
the portfolio manager outperforms expectations for how the Fund should
have performed and maintains the risk parameters of the Fund over a
three-year period. For tax-exempt money market funds, the performance
factor depends on how successfully the portfolio manager maintains the
credit quality of the Fund and, consequently, how the Fund performs
relative to the expectations over a one-year period. Finally, we
provide disclosure of the additional factors that determine a
portfolio manager's bonus. The current disclosure also includes a
description of the long-term incentive compensation program.
March 24, 2006
Christian Sandoe, Esq.
Page 5 of 5
TANDY REQUIREMENTS
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Comment: The Commission is now requiring all registrants to provide, at the end
of response letters to registration statement comments, the following
statements:
o Each 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 Each 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: We will provide the foregoing acknowledgements.
* * *
As required by the SEC, the Funds acknowledge that:
o Each 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 Each 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) 503-5693 with any questions or comments
regarding the above responses. Thank you.
Sincerely,
Natalie S. Bej
Associate Counsel