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VANGUARD SPECIALIZED PORTFOLIOS
PROSPECTUS SUPPLEMENT
APRIL 18, 1994
IMPORTANT NOTE FOR INVESTORS CONSIDERING PURCHASING SHARES OF THE
TECHNOLOGY OR THE SERVICE ECONOMY PORTFOLIO
The Fund's Board of Directors has proposed, for shareholder approval, the
following: 1) the acquisition of all of the outstanding shares of the Technology
Portfolio, in a tax-free reorganization, by Vanguard Explorer Fund ("Explorer")
and 2) the acquisition of all of the outstanding shares of the Service Economy
Portfolio, in a tax-free merger, by Vanguard/Morgan Growth Fund ("Morgan
Growth"). If the reorganizations are approved by the shareholders of each
Portfolio at a Special Meeting to be held on or about June 1, 1994, the
Portfolios will be merged into Vanguard Explorer Fund and Vanguard/Morgan Growth
Fund, respectively, on or about June 2, 1994. Beginning April 18, 1994, shares
of the Technology Portfolio and the Service Economy Portfolio may be redeemed or
exchanged to any Vanguard Fund without incurring the 1% redemption fee.
A distribution for each Portfolio of income dividends and realized capital
gains, if any, would be distributed prior to the proposed merger. For more
information about Explorer and Morgan Growth, please call Vanguard's Investor
Information Department (800-662-7447).
Due to the reorganization, beginning April 18, 1994, the Technology and Service
Economy Portfolios will no longer accept new accounts or purchases.
IMPORTANT NOTE FOR INVESTORS CONSIDERING PURCHASING SHARES
OF THE ENERGY, GOLD & PRECIOUS METALS, OR
HEALTH CARE PORTFOLIOS
Beginning on June 3, 1994, Vanguard Specialized Portfolios will change its
redemption fee policy. Under the new policy, shares of the Energy, Gold &
Precious Metals, and Health Care Portfolios purchased on or after June 3, 1994
and redeemed or exchanged after being held for less than one year will be
assessed a 1% fee. The fee will also be assessed on exchange redemptions between
the Fund's Portfolios for shares purchased on or after June 3, 1994 and held for
less than one year. As in the past, the Utilities Income Portfolio will not be
subject to a redemption fee.
To determine the one-year holding period, the Portfolios will use the "first-in,
first-out" (FIFO) method. That is, the date of the redemption or exchange will
be compared to the earliest purchase date of shares held in the account. If this
holding period is less than one year, a 1% fee will be assessed. Shares
purchased through reinvestment of dividends and capital gains will not be
subject to the redemption fee.
Given the new fee policy, the special money market accounts available to
shareholders of Vanguard Specialized Portfolios will be discontinued as of June
3, 1994.
PVSP
