NOTES TO FINANCIAL STATEMENTS
Vanguard Specialized Funds comprise the Health Care, Energy, REIT Index, Utilities Income, and Gold and
Precious Metals Funds, each of which is registered under the Investment Company Act of 1940 as a diversified
open-end investment company, or mutual fund. The Health Care, Energy, Utilities Income, and Gold and
Precious Metals Funds may invest in securities of foreign issuers, which may subject them to investment risks not
normally associated with investing in securities of United States corporations.
A. The following significant accounting policies conform to generally accepted accounting principles for mutual
funds. The funds consistently follow such policies in preparing their financial statements.
1. SECURITY VALUATION: Equity securities are valued at the latest quoted sales prices as of the close of
trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on the valuation date; such
securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices.
Prices are taken from the primary market in which each security trades. Precious metals are valued at the mean of
the latest quoted bid and asked prices. Temporary cash investments acquired over 60 days to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which considers such factors as security
prices, yields, maturities, and ratings), both as furnished by independent pricing services. Other temporary cash
investments are valued at amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued by methods deemed by the board of trustees to represent fair
2. FOREIGN CURRENCY: Securities and other assets and liabilities denominated in foreign currencies are
translated into U.S. dollars at the exchange rates on the valuation date as employed by Morgan Stanley Capital
International in the calculation of its indexes.
Realized gains (losses) an