EX-3 5 agreement1999.htm EXHIBIT 3 TO 40-17G REPORT

 

AGREEMENT

 

Made this as of this 1st day of August, 1999, by and among VANGUARD WELLINGTON FUND,

VANGUARD WINDSOR FUNDS, VANGUARD WORLD FUND, VANGUARD EXPLORER FUND,

VANGUARD MORGAN GROWTH FUND, VANGUARD WELLESLEY INCOME FUND, VANGUARD

FIXED INCOME SECURITIES FUNDS, VANGUARD MONEY MARKET RESERVES, VANGUARD

MUNICIPAL BOND FUNDS, VANGUARD PREFERRED STOCK FUND, VANGUARD STAR FLTNDS,

VANGUARD PRIMECAP FUND, VANGUARD INDEX FUNDS, VANGUARD TRUSTEES' EQUITY

FUND, VANGUARD SPECIALIZED FUNDS, VANGUARD CALIFORNIA TAX-FREE FUNDS,

VANGUARD NEW YORK TAX-FREE FUNDS, VANGUARD PENNSYLVANIA TAX-FREE FUNDS,

VANGUARD OHIO TAX-FREE FUNDS, VANGUARD FLORIDA TAX-FREE FUNDS, VANGUARD

CONVERTIBLE SECURITIES FUND, VANGUARD QUANTITATIVE FUNDS, VANGUARD BOND INDEX

FUNDS, VANGUARD EQUITY INCOME FUND, VANGUARD NEW JERSEY TAX-FREE FUNDS,

VANGUARD ADMIRAL FUNDS, VANGUARD ASSET ALLOCATION FUND, VANGUARD VARIABLE

INSURANCE FUNDS, VANGUARD BALANCED INDEX FUNDS, VANGUARD INSTITUTIONAL INDEX

FUNDS, VANGUARD INTERNATIONAL EQUITY INDEX FUNDS, VANGUARD TAX-MANAGED

FUNDS, VANGUARD WHITEHALL FUNDS, VANGUARD TREASURY FUND, VANGUARD HORIZON

FUNDS AND VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS, (hereinafter collectively referred

to as "Funds") and THE VANGUARD GROUP, INC. AND VANGUARD MARKETING CORPORATION

(hereinafter collectively referred to as "Vanguard").

 

THIS AGREEMENT is entered into under the following circumstances:

 

A. Section 17(g) of the Investment Company Act of 1940 ("the Act") provides that the Securities and Exchange Commission ("SEC") is authorized to require that the officers and employees of registered management investment companies be bonded against larceny and embezzlement, and the SEC has promulgated rules and regulations dealing with this subject ("Rule 17g- 1");

B. Funds and Vanguard are named as joint insureds under the terms of certain bond or policy of insurance with total coverage of $350,000,000 which insures against larceny and embezzlement by officers and employees (the "Bond");

C. A majority of those members of the Board of Trustees of each of the Funds, who are not "interested persons" as defined by Section 2(a)(19) of the Act, have given due consideration to all factors relevant to the form, amount and apportionment of recoveries and premium on such joint insured Bond, and the Board of Trustees of each Fund has approved the term and amount of the Bond, the portion of the premium payable by that party, and the manner in which recovery on said Bond, if any, shall be shared by and among the parties hereto as hereinafter set forth; and

D. Funds and Vanguard now desire to enter into the agreement required by Rule 17g-

1(f) to establish the manner in which recovery on said Bond, if any, shall be shared.

NOW, THEREFORE, IT IS HEREBY AGREED by and among the parties as follows:

 

1. ALLOCATION OF RECOVERIES

 

A. In the event of a separate loss or losses under the Bond, the party suffering such loss or losses shall be entitled to be indemnified up to the full amount of the Bond.

 

B. If more than one of the parties hereto is damaged in a single loss or occurrence for which recovery is received under the Bond, each such party shall receive that portion

of the recovery which represents the loss sustained by that party, unless the recovery is inadequate

fully to indemnify each such party sustaining a loss.

 

C. If the recovery is inadequate fully to indemnify each such party sustaining

loss, the recovery shall be allocated among such parties as follows:

 

(i) Each party sustaining a loss shall be allocated an amount equal to the

lesser of its actual loss or the minimum amount of bond deemed appropriate to be maintained by such party as hereinafter set forth in paragraph 2 hereof and Exhibit A hereof.

 

(ii) The remaining portion of the recovery shall be allocated to each party sustaining a loss not fully indemnified by the allocation under subparagraph (i) in ratio of the premium paid by each such party to the premium paid by all such parties.

 

2. BONDING COVERAGE REQUIRED

 

Each of the parties hereto has determined that the minimum amount of fidelity bond coverage deemed appropriate to be maintained by it is as set forth opposite its name in Exhibit A hereto and each of the Funds represents and warrants to each of the other parties hereto that the minimum amount of coverage required of it under Rule 17g-l(d)(l) as of July 3 1, 1999, is not more than reflected opposite its name in Exhibit A hereto. Each of the Funds further agrees that it will determine, immediately following the end of its fiscal quarters, the minimum amount of coverage required of it by Rule 17g- l(1) and will promptly take such steps as may be necessary to insure that its minimum coverage as therein set forth shall at no time be less than the minimum coverage required of it under Rule 1 7g- 1 (d)( 1).

3. This Agreement shall apply to the present fidelity bond coverage and any renewal or replacement thereof and shall continue until terminated by any party hereto upon the giving of not less than sixty days' written notice to the other parties hereto.

4.    Any dispute arising under this Agreement shall be submitted to arbitration under the Rules of the American Arbitration Association and the decision rendered therein shall be final and

binding upon the parties hereto.

 

IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed as

of the date aforesaid.

 

VANGUARD WELLINGTON FUND

VANGUARD WINDSOR FUNDS

VANGUARD WORLD FUND

VANGUARD EXPLORER FUND

VANGUARD MORGAN GROWTH FUND

VANGUARD WELLESLEY INCOME FUND

VANGUARD FIXED INCOME SECURITIES FUNDS

VANGUARD MONEY MARKET RESERVES

VANGUARD MUNICIPAL BOND FUNDS

VANGUARD PREFERRED STOCK FUND

VANGUARD STAR FUNDS

VANGUARD INDEX FUNDS

VANGUARD TRUSTEES' EQUITY FUND

VANGUARD SPECIALIZED FUNDS

VANGUARD PRIMECAP FUND

VANGUARD CALIFORNIA TAX-FREE FUNDS

VANGUARD NEW YORK TAX-FREE FUNDS

VANGUARD PENNSYLVANIA TAX-FREE FUNDS

VANGUARD CONVERTIBLE SECURITIES FUND

VANGUARD QUANTITATIVE FUNDS

VANGUARD BOND INDEX FUNDS

VANGUARD EQUITY INCOME FUND

VANGUARD BALANCED INDEX FLNDS

VANGUARD FLORIDA TAX-FREE FUNDS

VANGUARD ADMIRAL FUNDS

VANGUARD NEW JERSEY TAX-FREE FUNDS

VANGUARD ASSET ALLOCATION FUND

VANGUARD OHIO TAX-FREE FUNDS

VANGUARD VARIABLE INSURANCE FUNDS

VANGUARD INSTITUTIONAL INDEX FUNDS

VANGUARD INTERNATIONAL EQUITY INDEX FUNDS

VANGUARD TAX-MANAGED FUNDS

VANGUARD HORIZON FUNDS

VANGUARD WHITEHALL FUNDS

VANGUARD TREASURY FUND

 

VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS

THE VANGUARD GROUP, INC.

VANGUARD MARKETING CORPORATION

 

By:

John J. Brennan,

Chairman, President and

Chief Executive Officer

 

Attest:

Raymond J. Klapinsky, Secretary

 

Exhibit A  

FIDELITY BOND REQUIREMENTS

AS OF JULY 31, 1999

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

Vanguard Windsor Funds

 

 

- Windsor Fund

$18,258

$2,500

- Windsor II Fund

33,573

2,500

 

 

 

Vanguard Trustees' Equity Fund

 

 

- International Value Fund

951

1,000

 

 

 

Vanguard World Fund

 

 

- U.S. Growth Fund

15,870

2,500

- International Growth Fund

7,973

2,500

 

 

 

Vanguard Specialized Funds

 

 

- Energy Fund

1,111

1,250

- Health Care Fund

10,592

2,500

- Gold & Precious Metals Funds

328

750

- Utilities Income Fund

986

1,000

- REIT Index Fund

980

1,000

 

 

 

Vanguard Index Funds

 

 

- 500 Index Fund

90,905

2,500

- Extended Market Index Fund (Ind.)

3,274

2,100

- Extended Market Index Fund (Inst.)

539

900

- Total Stock Market Index Fund (Ind.)

13,100

2,500

- Total Stock Market Index Fund (Inst.)

3,371

2,300

- Value Index Fund (Ind.)

3,205

2,100

- Value Index Fund (Inst.)

401

750

- Growth Index Fund (Ind.)

11,314

2,500

- Growth Index Fund (Inst.)

332

750

- MidCap Index Fund (Ind.)

414

750

- MidCap Index Fund (Inst.)

83

450

- Small Cap Value Index Fund .(Ind.)

196

600

- Small Cap Value Index Fund (Inst.)

0

0

- Small Cap Growth Index Fund (Ind.)

124

525

- Small Cap Growth Index Fund (Inst.)

0

0

- Small Cap Index Fund (Ind.)

3,071

2,100

- Small Cap Index Fund (Inst.)

270

750

 

 

 

Vanguard International Equity Index Funds

 

 

- European Stock Index Fund

4,983

2,500

- Pacific Stock Index Fund

1,778

1,500

- Emerging Markets Stock Index Fund

872

1,000

 

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

Vanguard Bond Index Funds

 

 

- Total Bond Market Index Fund (Ind.)

8,897

2,500

- Total Bond Market Index Fund. (Inst.)

2,914

1,900

- Short-Term Bond Index Fund

1,011

1,250

- Intermediate-Term Bond Index Fund

1,362

1,250

- Long Term Bond Index Fund

287

750

 

 

 

Vanguard Fixed Income Securities Funds

 

 

- Short-Term Corporate Fund (Ind.)

5,855

2,500

- Short-Term Corporate Fund (Inst.)

486

750

- Short-Term Federal Fund

1,668

1,500

- Short-Term U.S. Treasury Bond Fund

1,219

1,250

- Intermediate-Term U.S. Treasury Bond Fund

1,787

1,500

- Intermediate-Term Corporate Fund

1,375

1,250

- Long-Term U.S. Treasury Bond Fund

1,307

1,250

- GNMA Fund

12,364

2,500

- Long-Term Corporate Fund

3,905

2,300

- High Yield Corporate Fund

5,810

2,500

 

 

 

Vanguard Admiral Funds

 

 

- U.S. Treasury Money Market Fund

5,595

2,500

- Short-Term U.S. Treasury Fund

1,269

1,250

- Intermediate-Term U.S. Treasury Fund

1,334

1,250

- Long-Term U.S. Treasury Fund

481

750

 

 

 

Vanguard Money Market Reserves

 

 

- Prime Money Market Fund (Ind.)

38,025

2,500

- Prime Money Market Fund (Inst.)

1,230

1,250

- Federal Money Market Fund

4,884

2500

 

 

 

Vanguard Treasury Fund

4,410

2,500

 

 

 

Vanguard Variable Insurance Funds

 

 

- Money Market

661

900

- High Grade Bond

335

750

- Balanced

621

900

- Equity Income

456

750

- Equity Index

1,392

1,250

- Growth

965

1,000

- International

268

750

- Mid Cap Index

49

350

- Short-Term Corporate

23

250

- Diversified Value

49

350

- REIT

19

225

- High Yield Bond

150

600

- Small Company Growth

169

600

 

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

Vanguard Municipal Bond Funds

 

 

- Tax-Exempt Money Market Fund

6,923

2,500

- Short-Term Tax-Exempt Fund

1,845

1,500

- Limited-Term Tax-Exempt Fund

2,591

1,900

- Intermediate-Term Tax-Exempt Fund

8,372

2,500

- Long-Term Tax-Exempt Fund

1,582

1,500

- High Yield Tax-Exempt Fund

2,268

1,700

- Insured Long Term Tax-Exempt Fund

3,039

2,100

 

 

 

Vanguard California Tax-Free Funds

 

 

- Money Market Tax-Exempt Fund

2,198

1,700

- Insured Intermediate-Term Tax-Exempt Fund

1,256

1,250

- Insured Long-Term Tax-Exempt Fund

1,591

1,500

 

 

 

Vanguard New Jersey Tax-Free Funds

 

 

- Money Market Tax-Exempt Fund

1,258

1,250

- Insured Long-Term Tax-Exempt Fund

1,177

1,250

 

 

 

Vanguard Pennsylvania Tax-Free Funds

 

 

- Money Market Tax-Exempt Fund

1,952

1,500

- Insured Long-Term Tax-Exempt Fund

1,955

1,500

 

 

 

Vanguard Ohio Tax-Free Funds

 

 

- Money Market Tax-Exempt Fund

386

750

- Insured Long Term Tax-Exempt Fund

365

750

 

 

 

Vanguard Florida Tax-Free Funds

896

1,000

Vanguard Explorer Fund

2,512

1,900

Vanguard Equity Income Fund

3,214

2,100

Vanguard Morgan Growth Fund

4,102

2,500

Vanguard PRIMECAP Fund

14,264

2,500

Vanguard Quantitative Funds (Growth and Income Fund)

6,857

2,500

Vanguard Asset Allocation Fund

8,293

2,500

Vanguard Balanced Index Funds

2,569

1,900

Vanguard Convertible Securities Fund

163

600

Vanguard Preferred Stock Fund

335

750

Vanguard Wellesley Income Fund

7,860

2,500

 

 

 

Vanguard Wellington Fund

26,665

2,500

 

 

 

Vanguard New York Tax-Free Funds

 

 

- Money Market Tax-Exempt Fund

719

900

- Insured Long Term Tax-Exempt Fund

1,551

1,500

 

 

 

Vanguard Institutional Index Funds (3)

 

 

- Institutional Index Fund

26,104

2,500

- Institutional Plus

5,5557

2,500

 

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

Vanguard STAR Funds (3)

 

 

- STAR

8,168

2,500

- LifeStrategy Income Fund

573

900

- LifeStrategy Conservative Growth Fund

1,635

1,500

- LifeStrategy Moderate Growth Fund

2,843

1,900

- LifeStrategy Growth Fund

2,539

1,900

- Total International Stock Index Fund

1,877

1,500

 

 

 

Vanguard Tax-Managed Funds

 

 

- Growth and Income Fund (Ind.)

1,831

1,500

- Growth and Income Fund (Inst.)

60

400

- Capital Appreciation Fund (Ind.)

1,788

1,500

- Capital Appreciation Fund (Inst.)

127

525

- Balanced Fund

272

750

- Small Cap Fund. (Ind.)

133

525

- Small Cap Fund (Inst.)

16

225

 

 

 

Vanguard Horizon Funds

 

 

- Aggressive Growth Fund

549

900

- Capital Opportunity Fund

719

900

- Global Asset Allocation Fund

94

450

- Global Equity Fund

153

600

 

 

 

Vanguard Whitehall Funds

 

 

- Selected Value Fund

230

600

 

 

 

Vanguard Massachusetts Tax-Exempt Funds

102

525

 

 

 

 

$515,614(4)

$617,600(4)

 

 

 

(1) As of July 3 1, 1999

(2) The maximum bond required for an investment company by the 1940 Act is $2,500,000.

(3) Not a member of The Vanguard Group.

(4) Assets of Vanguard STAR Funds ($17,635) are counted twice. The total minimum coverage would be $157,400 if the assets of Vanguard STAR Funds are not counted.