[GRAPHIC OMITTED][GRAPHIC OMITTED]
P.O. Box 2600
Valley Forge, PA 19482-2600
610-503-5693
Natalie_S_Bej@vanguard.com
Christian Sandoe, Esq.
Securities and Exchange Commission VIA ELECTRONIC FILING
100 F Street, NE
Washington, D.C. 20549
Re: Vanguard Montgomery Funds (the "Trust")
File No. 333-145624
Dear Mr. Sandoe,
The following responds to your comments of September 13, 2007, to the
Trust's Registration Statement on Form N-14 (the "Registration Statement"), that
was filed with the Commission on August 22, 2007. Set forth below are the
staff's comments and the Trust's responses. In this letter, Vanguard(R) Market
Neutral Fund, the series of the Trust, is referred to as the "Fund."
GENERAL
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1. Comment: Please request acceleration of effectiveness in a
pre-effective amendment to the Registration Statement.
Response: The Trust will file Pre-Effective Amendment No. 1 to the
Registration Statement today and will request acceleration of
effectiveness to 9:00 a.m. on September 24, 2007 or as soon thereafter
as possible.
PROSPECTUS
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Investment Advisory Arrangements
2. Comment: Please explain how the Fund's assets will be allocated
between the two advisers for investment management purposes after the
reorganization of Laudus Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund (the "Laudus Fund") into the Fund (the
"Reorganization").
Response: We have added the requested disclosure on page 17 of the
prospectus to explain that it is currently anticipated that, after the
Reorganization, the assets of the Fund will be allocated approximately
equally between AXA Rosenberg Investment Management LLC ("AXA
Rosenberg") and The Vanguard Group Inc. ("Vanguard") Quantitative
Equity Group. The disclosure also provides that the allocations may be
changed from time to time and at any time. It is anticipated that,
immediately after the Reorganization, AXA Rosenberg will manage the
assets transferred to the Fund from the Laudus Fund as a result of the
Reorganization and that thereafter new assets of the Fund as a result
of subscriptions will be allocated to Vanguard until such time as the
assets of the Fund are allocated approximately equally between the two
advisers.
Christian Sandoe, Esquire
Securities and Exchange Commission
September 20, 2007
Page 2
How the Reorganization Will Affect the Laudus Fund - Comparing Investment
Objectives, Strategies, and Policies
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3. Comment: Please highlight the differences, if any, between the
investment objectives, strategies and policies of the Fund and the
Laudus Fund.
Response: Vanguard believes that the proposed investment objective,
policies and strategies of the Fund are substantially similar to those
of the Laudus Fund and, thus, does not believe that there are any
differences that would need to be highlighted.
Comparing Risk Factors
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4. Comment: The description of short selling risk states in part: "The
Vanguard Fund may not always be able (or find it economically
attractive) to sell short a security the Adviser believes to be
particularly undervalued. In that case, the Vanguard Fund may
establish a short position in a different security, and that short
position may be less profitable for the Vanguard Fund than if the
Vanguard Fund had shorted the security the Adviser believed was more
undervalued." Please correct the term "undervalued" to "overvalued" in
these sentences.
Response: The corrections have been made. Please see page 8 of the
prospectus.
Fee Table
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5. Comment: The disclosure indicates that both the Laudus Fund and the
Fund may invest in ETFs. Please include the line item "Acquired Fund
Fees and Expenses" in the fee table for the Laudus Fund and/or the
Fund, as applicable, as required pursuant to Item 3 of Form N-1A,
unless the fees and expenses indirectly incurred by the Laudus Fund
over the past year, or anticipated to be incurred by the Fund in its
current year, as a result of investment in shares of other investment
companies do not exceed 0.01 per cent of the average net assets of the
Laudus Fund or the Fund, respectively.
Response: The Fund does not expect to indirectly incur fees and
expenses as a result of its investment in other investment companies
in its current year that exceed 0.01 per cent of its average net
assets. Counsel to the Laudus Fund has confirmed that the Laudus Fund
has not indirectly incurred fees and expenses as a result of
investment in other investment companies that exceed 0.01 per cent of
its average net assets. Therefore, the line item has not been added to
the fee table.
6. Comment: Please reformat the fee table by share class, so that the
current fees and expenses for the Institutional share class of the
Laudus Fund, the estimated fees and expenses for the Institutional
share class of the Fund and the pro forma fees and expenses for the
Institutional share class after the Reorganization are side by side
and the current fees and expenses for the Investor share class of the
Laudus Fund, the estimated fees and expenses for the Investor share
class of the Fund and the pro forma fees and expenses for the Investor
share class after the Reorganization are side by side.
Response: The requested change has been made. See page 11 of the
prospectus.
Christian Sandoe, Esquire
Securities and Exchange Commission
September 20, 2007
Page 3
7. Comment: The Laudus Fund imposes a 2% redemption fee on shares
redeemed or exchanged within 30 days of purchase, and the Fund will
impose a 1% redemption fee on shares redeemed within one year of
purchase by selling or by exchanging to another Vanguard fund, or if a
shareholder's shares are redeemed because the shareholder's Vanguard
Fund account balance falls below the minimum initial investment for
any reason, including market fluctuation. Please disclose how the
one-year holding period for Fund shares issued to the Laudus Fund
shareholders in the Reorganization will be calculated, i.e., when will
the one-year period begin for these shares?
Response: We have added disclosure to explain that Laudus Fund
shareholders on the date of the Reorganization will not be subject to
the 1% Vanguard Fund redemption fee on Fund shares issues in the
Reorganization. Please see pages 14 and 33 of the prospectus.
Capitalization Table
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8. Comment: Please complete the information for the capitalization table
in a pre-effective amendment.
Response: The information for the capitalization table has been
included in Pre-Effective Amendment No. 1 to the Registration
Statement being filed today. Please see page 13 of the prospectus.
STATEMENT OF ADDITIONAL INFORMATION
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Investment Limitations - Industry Concentration
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9. Comment: Please supplementally explain how Vanguard monitors industry
concentration limits in a multimanager context.
Response: The Fund continuously monitors investment limitations and
will notify an adviser if the Fund is approaching limitations on the
level of any adviser's investment in any one industry to ensure that
the Fund does not exceed the 25% industry limit.
Description of Compensation
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10. Comment: The Vanguard portfolio manager's compensation is determined,
in part, by gross, pre-tax performance of the Fund relative to
expectations for how the Fund should have performed, given the Fund's
investment objective, policies, strategies and limitations, and the
market environment during the measurement period. Please disclose the
benchmark to be used to measure performance for purposes of this
compensation and the measurement period.
Response: We have added the requested disclosure. Please see page 41
of the statement of additional information.
Christian Sandoe, Esquire
Securities and Exchange Commission
September 20, 2007
Page 4
Tandy Requirements
The Trust acknowledges that, with respect to the filing made by the Trust with
the Commission and reviewed by the staff:
o the Trust is responsible for the adequacy and accuracy of the
disclosure in the filing;
o staff comments or changes to disclosure in response to staff comments
in the filing reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing; and
o 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 Untied States.
We hope the staff finds this letter and the revisions in Pre-Effective Amendment
No. 1 responsive to the staff's comments on the initial filing of the
Registration Statement. The Trust intends to request acceleration of the
effective date of its Registration Statement to September 24, 2007.
Please contact me at (610) 503 5693 with any questions or comments regarding the
above responses.
Sincerely,
Natalie S. Bej
Senior Counsel