<PAGE> 1
VANGUARD SPECIALIZED PORTFOLIOS, INC.
GOLD & PRECIOUS METALS PORTFOLIO
Prospectus Supplement
March 20, 1997
The Board of Directors of Vanguard Specialized Portfolios, Inc. (the "Fund") has
approved a revised investment advisory agreement with M&G Investment Management
Ltd. ("M&G"), the Fund's investment adviser for the Gold & Precious Metals
Portfolio (the "Portfolio"). The revised agreement involves a reduction in the
annual rate of advisory fees to be paid to M&G.
Under the terms of the new agreement, the Portfolio will pay M&G a basic
advisory fee at the end of each fiscal quarter based on the Portfolio's
aggregate average month-end net assets during the quarter. The quarterly rate is
applied according to the following annual fee schedule:
<TABLE>
<CAPTION>
Net Assets Annual Basic Fee Rate
----------------------------------------------------
<S> <C>
First $100 million 0.30%
Next $150 million 0.20
Next $250 million 0.15
Over $500 million 0.10
</TABLE>
The revised investment advisory agreement replaces the Fund's original agreement
with the adviser dated February 1, 1987, and went into effect on December 1,
1996.
Graham E. French assumes the portfolio management responsibilities
formerly held by David J. Hutchins for the Gold & Precious Metals Portfolio. Mr.
French has served as a member of the Portfolio's management team since 1991, two
years after joining M&G.
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