Vanguard Closes Energy Fund; Fund To Cease Accepting New Accounts Immediately

Vanguard Closes Energy Fund; Fund To Cease Accepting New Accounts Immediately

VALLEY FORGE, Pa. — The Vanguard Group has implemented a temporary “cooling-off” closure period for the $5.3 billion Vanguard(R) Energy Fund, effective immediately. Vanguard’s top-performing fund this year, Vanguard Energy Fund will cease accepting new accounts; existing shareholders may continue to purchase shares. This is the seventh of the firm’s 25 actively managed stock mutual funds to close in the past 30 months.

“Given the intense interest in the energy sector as a whole and the level of cash flow into Vanguard Energy Fund, the board of trustees decided that this was a prudent step to protect existing shareholders,” said Vanguard Chairman Jack Brennan. “Vanguard funds are designed for long-term investors, and we are concerned that some investors may be gravitating toward the Energy Fund based on its recent short term performance record.”

Vanguard Energy Fund has produced a 55.2% total return over the 12 months ended November 30, 2004, compared to the 12.9% return of the S&P 500 Index. The Fund’s assets increased from $2.4 billion at year-end 2003 to $5.3 billion in November 2004.

“The closing of the fund should not be construed as a statement on or a forecast for the energy sector,” said Mr. Brennan.

Sector funds, by definition, are less diversified than general equity funds and therefore have a higher level of risk and the potential for considerable short-term volatility. For example, in 1996, the average natural resources fund returned 33%, followed by a -24% cumulative decline over the following two years (Source: Lipper, Inc.). As a result, Vanguard generally recommends that sector funds represent a modest portion of a well-balanced and diversified investment program.

Vanguard Energy Fund remains open to existing shareholders in both the Investor Shares (VGENX) and the Admiral(TM) Shares (VGELX), as well as to participants of certain plans that offered the fund as of December 9, 2004. Vanguard reserves the right to close the fund completely at any time.

Wellington Management Company, LLP, of Boston has provided investment advisory services to Vanguard Energy Fund since its inception in 1984. Karl Bandtel, senior vice president at Wellington Management, has served as lead investment manger to the fund since 2002.

Four other Vanguard funds are currently closed: Vanguard(R) International Explorer(TM) Fund (August 2004), Vanguard(R) Convertible Securities Fund (May 2004), Vanguard(R) PRIMECAP Fund (March 2004) and Vanguard Capital Opportunity Fund (March 2004). Vanguard Global Equity Fund and Vanguard(R) Precious Metals and Mining Fund, which had been closed, re-opened earlier in 2004.

The Vanguard Group, headquartered in Valley Forge, Pennsylvania, is the nation’s second-largest mutual fund firm and a leading provider of company-sponsored retirement plan services. Vanguard manages nearly $795 billion in U.S. mutual fund assets, including more than $245 billion in employer-sponsored retirement plans. Vanguard offers 129 funds to U.S. investors and more than 40 additional funds in foreign markets.

VR-656

Average Annual Returns (period ending September 30, 2004):

Vanguard Energy Fund S&P 500 Index S&P Energy Sector Index

1 Year 48.6% 13.9% 44.8%

5 Year 17.2% -1.3% 8.7%

10 Year 14.6% 11.1% 14.2%

The performance data shown represent past performance, which is not a

guarantee of future results. Investment returns and principal value

will fluctuate, so investors’ shares, when sold, may be worth more or

less than their original cost. For performance data current to the

most recent month-end, which may be higher or lower than that cited,

visit our website at www.vanguard.com. The performance of an index is

not an exact representation of any particular investment, as you

cannot invest directly in an index.

For more information about Vanguard funds, visit www.vanguard.com, or

call 800-662-7447, to obtain a prospectus. Investment objectives,

risks, charges, expenses, and other important information about a fund

are contained in the prospectus; consider and read it carefully before

investing. Vanguard Marketing Corporation, Distributor

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