[SHIP]
[THE VANGUARD GROUP LOGO]
January 10, 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 WELLESLEY INCOME FUND
Dear Mr. Sandoe:
The following responds to your comments of January 5, 2006 on the
post-effective amendment of the registration statement of the above-referenced
registrant. You commented on Post-Effective Amendment No. 59 that was filed on
November 21, 2005.
COMMENT 1: PROSPECTUS - MARKET EXPOSURE
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Comment: Include an example describing the meaning of the term "duration."
Response: The glossary already includes a definition of "duration" and
includes an example.
COMMENT 2: SAI - INDUSTRY CONCENTRATION INVESTMENT LIMITATION
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Comment: How do we reconcile treating "gas," "electric," and "electric and
gas" as separate industries?
Response: This likely goes back to our historical reliance on SIC codes for
industry testing. There are separate SIC codes for gas, electric,
and "combination" (i.e., electric and gas) utility companies. We
have since moved to testing based on NAICS codes which do not
have the same level of aggregation. Accordingly, we plan to
delete the sentence that describes how utility companies will be
divided. The 25% investment limitation remains unchanged.
COMMENT 3: SAI - INVESTING WITH VANGUARD THROUGH OTHER FIRMS
- -------------------------------------------------------------------
Comment: The disclosure states that "The Fund will be deemed to have
received a purchase or redemption order when an Authorized Agent
accepts the order in accordance with the Fund's instructions."
Does this allow for time to pass between receiving and accepting
the order? If so, there is a potential for violations of Rule
22c-1.
Response: We think any confusion caused by the prior sentence is addressed
in the sentence that follows it in the SAI. That sentence
explains that "In most instances, a customer order
January 10, 2006
Christian Sandoe
Page 2 of 3
that is properly transmitted to an Authorized Agent will be
priced at the Fund's NAV next determined after the order is
received by the Authorized Agent." Authorized Agents will not
transmit customer orders to the Fund until they receive them in
good order, and so the Fund would be unable to be deemed to have
received an order until the Agent has accepted such order.
COMMENT 4: SAI - PORTFOLIO MANAGER COMPENSATION
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Comment: Does the disclosure regarding other accounts managed include all
of the investment vehicles contemplated by Form N-1A?
Response: Yes, although it is not disclosed in a tabular format, the stated
number of other accounts managed includes all of the types of
investment vehicles contemplated by Form N-1A.
COMMENT 5: SAI - INVESTMENT ADVISORY SERVICES
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Comment: The detail regarding the advisory fee (base fee and performance
fee structure) should be included in the SAI.
Response: We plan to put back some of the disclosure that was pulled in our
485(a) filing, but not all of it.
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)
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(1) In the Matter of Vanguard Convertible Securities Fund, et al., File No.
812-12380, Inv. 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).
January 10, 2006
Christian Sandoe
Page 3 of 3
TANDY REQUIREMENTS
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Comment: The SEC 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: As required by the SEC, 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) 669-1538 with any questions or comments
regarding the above responses. Thank you.
Sincerely,
Judith L. Gaines
Associate Counsel