(PUB) Investing 2015

Morningstar Analyst Rating

03-26-15

Morningstar Pillars

Process

Performance

People

Parent

Price

Positive

Morningstar Analyst Rating

Morningstar evaluates mutual funds based on five key pillars, which

its analysts believe lead to funds that are more likely to outperform

over the long term on a risk-adjusted basis.

Analyst Rating Spectrum

Œ „ ´ˇ ¨

Pillar Spectrum

Positive

Negative

Neutral

NAV

225.70

211.71

187.16

143.27

128.73

122.40

120.22

101.44

138.63

145.60

139.45

126.79

Total Return %

9.64

28.52

43.19

15.11

11.45

6.16

20.96

-18.45

4.43

10.87

15.41

9.51

+/-MSCI Ac Wrld ND

7.33

24.36

20.39

-1.02

18.80

-6.51

-13.67

23.74

-7.23

-10.08

4.57

-5.72

+/-S&P 1500 Hlth Care TR

2.52

3.73

1.00

-3.24

-0.43

0.96

0.20

5.31

-3.59

3.90

7.92

6.17

Income Return %

0.39

1.18

1.69

2.14

1.84

1.69

1.74

1.40

1.91

1.54

1.23

0.93

Capital Return %

9.25

27.34

41.50

12.97

9.61

4.47

19.22

-19.85

2.52

9.33

14.18

8.58

Total Rtn % Rank Cat

Income $

0.82

2.12

2.36

2.76

2.24

2.01

1.76

1.92

2.75

2.10

1.54

1.11

Capital Gains $

5.60

25.44

14.00

2.19

5.18

3.20

0.73

9.52

10.59

6.66

5.08

4.00

Expense Ratio %

0.34

0.35

0.36

0.29

0.26

0.25

0.21

0.28

Income Ratio %

1.44

1.33

1.94

1.72

1.67

1.73

1.64

1.78

1.33

1.29

1.02

0.91

Turnover Rate %

Net Assets $mil

12,655

11,252

9,636

8,143

8,223

8,426

11,755

10,753

14,965

16,329

16,787

19,606

Performance

03-31-15

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Total

2010

2011

2012

2013

2014

2.94 -9.04

8.78 4.23

6.16

6.64 8.01

-9.28 6.66 11.45

7.93 1.38

5.27 -0.07 15.11

14.43 5.00

7.56 10.80 43.19

8.84 5.17

3.90 8.06 28.52

Trailing

Total +/- MSCI

+/- S&P %Rank Growth of

Return%Ac Wrld ND 1500 HC TR

Cat

$10,000

3 Mo

6 Mo

1 Yr

3 Yr Avg

5 Yr Avg

10 Yr Avg

15 Yr Avg

9.64 7.33

2.52

56 10,964

18.48 15.75

2.97

56 11,848

29.47 24.05

2.62

70 12,947

29.10 18.35

2.04

46 21,517

21.70 12.71

1.22

38 26,696

13.75 7.31

2.00

44 36,267

12.43 9.09

3.44

22 57,974

Tax Analysis

Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat

3 Yr (estimated)

5 Yr (estimated)

10 Yr (estimated)

26.11

2.32

19.65

1.68

12.21

1.35

Potential Capital Gain Exposure: 47% of assets

Rating and Risk

Time Load-Adj

Morningstar

Period Return % Rtn vs Cat

Risk vs Cat

Risk-Adj Rating

1 Yr

29.47

3 Yr

29.10

Avg

Low

5 Yr

21.70

Avg

Low

10 Yr

13.75

Avg

Low

Incept

17.63

Other Measures

Standard Index

Best Fit Index

MSCI Ac Wrld ND

DJ Health

Alpha

19.1

3.4

Beta

0.66

0.91

R-Squared

Standard Deviation

9.69

Mean

29.10

Sharpe Ratio

2.70

Morningstar’s Take

by Laura Pavlenko Lutton 03-26-15

Vanguard Health Care is one of the industry’s best

sector funds.

This fund’s Morningstar Analyst Rating of Gold

hinges on its experienced management team, strong

track record, and low fees. Jean Hynes has capably led

the team behind this fund since Ed Owens retired at

the end of 2012. Hynes had worked with Owens since

1992 and had comanaged this fund since 2008.

Assisting her with stock selection and portfolio

construction is the health-care team from subadvisor

Wellington, including three named comanagers on

sibling Hartford Healthcare HGHAX and three analysts.

Wellington owes much of its long-term success with

this strategy and others to its career sector analysts.

It has not skipped a beat since Hynes took the reins.

It has added small stakes in some growth-leaning

smaller-cap stocks, such as medical-devices firm VWR

Corp VWR, but remains focused on larger-cap

companies. Top holdings, a handful of which represent

more than 4% of assets, include big pharmaceutical

companies that have been in the portfolio for a decade

or more. The fund is more value-leaning than peers,

maintaining a portfolio with lower price/book and

price/sales ratios than the category average. It

ventures abroad more often than the category norm.

Taken together, these characteristics yield a

portfolio that’s more defensive than its usual peer.

Returns have been strong since Hynes was named to

the portfolio, amid lower volatility. To be sure, the

return was stronger in 2014.

One could argue that this fund is too large to keep

its edge over the long term. At $49 billion, it is the

largest actively managed sector fund. It cannot make

meaningful investments in smaller-cap stocks, though

such holdings are more common at sibling Hartford

Healthcare and that fund hasn’t kept up with this one

over time. What’s more, Vanguard has a solid history

of closing its capacity-constrained strategies. The key

differentiator for this fund, though, is its low fee,

which gives it a lasting advantage.

Address:

Vanguard Specialized Funds

Valley Forge, PA 19482

800-662-7447

Web Address:

www.vanguard.com

Inception:

05-23-84

Advisor:

Wellington Management Company LLP

Subadvisor:

None

NTF Plans:

Vanguard NTF

Minimum Purchase:

$3000

Add: $100 IRA: $3000

Min Auto Inv Plan:

Add:

Sales Fees:

No-load

Management Fee:

0.33%

Actual Fees:

Mgt:0.33% Dist:

Expense Projections:

3Yr:$113

5Yr:$197 10Yr:$443

Income Distribution:

None

Data through March 31, 2015

Vanguard Health Care Inv

Ticker

Status Yield Total Assets

Mstar Category

VGHCX Open

1.1% $48,539 mil

Health

93% 94% 90% 93% 93% 92% 96% 96%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 03-15

Historical Profile

Return

Risk

Rating

Average

Low

Neutral

Investment Style

Equity

Stock %

Manager Change

Partial Manager Change

Growth of $10,000

Investment Values of

Fund

Investment Values of

MSCI Ac Wrld ND

Performance Quartile

(within Category)

History

10.0

17.0

24.0

31.0

Portfolio Analysis

12-31-14

Share change since 09-14 Total Stocks:89 Sector

PE Tot Ret% % Assets

Bristol-Myers Squibb Com

Hlth care 53.8 9.27 5.17

Actavis PLC

Hlth care

15.62 5.07

UnitedHealth Group Inc

Hlth care 20.8 17.39 4.65

Merck & Co Inc

Hlth care 14.1 2.01 4.55

AstraZeneca PLC

Hlth care 71.4 0.21 3.79

Eli Lilly and Co

Hlth care 32.7 6.03 3.40

McKesson Corp

Hlth care 30.9 9.09 2.95

Regeneron Pharmaceutical

Hlth care 147.1 10.05 2.69

Vertex Pharmaceuticals I

Hlth care

-0.70 2.61

Roche Holding AG Dividen

Hlth care 24.6 4.46 2.22

Medtronic Inc

Hlth care 25.0 8.44 2.11

Amgen Inc

Hlth care 23.9 0.85 1.99

Mylan Inc

Hlth care 25.4 5.29 1.90

Cerner Corp

Technology 48.8 13.30 1.86

Boston Scientific Inc

Hlth care

33.96 1.77

Novartis AG

Hlth care 22.8 8.17 1.76

UCB SA

Hlth care 116.3 -2.08 1.74

Humana Inc

Hlth care 24.2 24.14 1.69

Incyte Corp Ltd

Hlth care

25.37 1.67

Astellas Pharma Inc

Hlth care 45.7 23.42 1.66

Current Investment Style

Market Cap %

Giant

41.2

Large

42.8

Mid

13.4

Small

2.6

Micro

0.0

Avg $mil:

38,189

Value Blnd Growth

Large Mid Small

Value Measures

Rel Category

Price/Earnings

Price/Book

Price/Sales

Price/Cash Flow

Dividend Yield %

23.31

3.33

1.68

17.08

1.42

1.21

1.07

0.76

1.33

1.15

Growth Measures

% Rel Category

Long-Term Erngs

Book Value

Sales

Cash Flow

Historical Erngs

10.37

6.53

7.13

-1.41

-2.51

0.83

0.75

NMF

Profitability

% Rel Category

Return on Equity

Return on Assets

Net Margin

11.30

4.08

6.63

1.02

1.81

0.72

Industry

Weightings

% of

Stocks

Rel

Cat

Biotech

16.8

0.5

Drugs

38.1

1.3

Mgd Care

14.1

2.1

Hospitals

2.4

0.8

Other HC Srv

0.0

Diagnostics

3.9

1.0

Equipment

16.5

1.3

Good/Srv

4.5

0.9

Other

3.8

1.7

Composition - Net

(% of Stock)

Cash

2.4

Stocks 95.5

Bonds 0.0

Other

2.1

Foreign 26.4

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