EX-3 4 agreement_17g1f.htm JOINT INSURED BOND COVERAGE FOR FUNDS

AGREEMENT

 

Made as of this 10th day of July, 2008, by and among VANGUARD ADMIRAL FUNDS, VANGUARD BOND INDEX FUNDS, VANGUARD CALIFORNIA TAX-FREE FUNDS, VANGUARD CHESTER FUNDS, VANGUARD CMT FUNDS, VANGUARD CONVERTIBLE SECURITIES FUND, VANGUARD EXPLORER FUND, VANGUARD FENWAY FUNDS, VANGUARD FIXED INCOME SECURITIES FUNDS, VANGUARD FLORIDA TAX-FREE FUNDS, VANGUARD HORIZON FUNDS, VANGUARD INDEX FUNDS, VANGUARD INSTITUTIONAL INDEX FUNDS, VANGUARD INTERNATIONAL EQUITY INDEX FUNDS, VANGUARD MALVERN FUNDS, VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS, VANGUARD MONEY MARKET RESERVES, VANGUARD MONTGOMERY FUNDS, VANGUARD MORGAN GROWTH FUND, VANGUARD MUNICIPAL BOND FUNDS, VANGUARD NEW JERSEY TAX-FREE FUNDS, VANGUARD NEW YORK TAX-FREE FUNDS, VANGUARD OHIO TAX-FREE FUNDS, VANGUARD PENNSYLVANIA TAX-FREE FUNDS, VANGUARD QUANTITATIVE FUNDS, VANGUARD SPECIALIZED FUNDS, VANGUARD STAR FUNDS, VANGUARD TAX-MANAGED FUNDS, VANGUARD TREASURY FUND, VANGUARD TRUSTEES’ EQUITY FUND, VANGUARD VALLEY FORGE FUNDS, VANGUARD VARIABLE INSURANCE FUNDS, VANGUARD WELLESLEY INCOME FUND, VANGUARD WELLINGTON FUND, VANGUARD WHITEHALL FUNDS, VANGUARD WINDSOR FUNDS, AND VANGUARD WORLD FUND (hereinafter collectively referred to as the “Funds”) and THE VANGUARD GROUP, INC., VANGUARD ADVISERS, INC., AND VANGUARD MARKETING CORPORATION (hereinafter collectively referred to as “Vanguard”).

 

THIS AGREEMENT is entered into under the following circumstances:

WHEREAS, 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 who, either singly or jointly with others, may have access to the Funds’ assets, be bonded against larceny and embezzlement, and the SEC has promulgated such rules and regulations (“Rule 17g-1”); and

 

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WHEREAS, the Funds and Vanguard are named as joint insureds under the terms of a bond or policy of insurance with total coverage of $400,000,000 which insures against larceny and embezzlement by officers and employees (the “Joint Insured Bond”); and

WHEREAS, a majority of the Board of Trustees of the Funds (the “Board”), 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 the Joint Insured Bond, and the Board has approved the term and amount of the Joint Insured Bond, the portion of the premium payable by each party, and the manner in which recovery on the Joint Insured Bond, if any, shall be shared by and among the parties as set forth below in this Agreement; and

WHEREAS, the Funds and Vanguard now desire to enter into this Agreement as required by Rule 17g-1(f) of the Act to establish the manner in which recovery on the Joint Insured Bond, if any, shall be shared.

 

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

 

1.

     ALLOCATION OF PREMIUMS

 

 

The annual premium shall be allocated among the Vanguard Funds, based on relative net assets, in accordance with a Board-approved methodology, and expensed monthly over the term of the Joint Insured Bond.

 

2.

     ALLOCATION OF RECOVERIES

 

 

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

B.     If more than one party is damaged in a single loss or occurrence for which recovery is received under the Joint Insured Bond, each such party shall receive that portion of the recovery which represents the loss sustained by that party, unless the recovery is inadequate to fully indemnify each party sustaining a loss.

 

2

 

C.     If the recovery is inadequate to fully indemnify each party sustaining a loss, the recovery shall be allocated among the parties as follows:

(i)     Each party sustaining a loss shall be allocated an amount equal to the lesser of its actual loss or at least equal to the amount which it would have received had it provided and maintained a single insured bond with the minimum coverage as set forth in Exhibit A as attached.

(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) above, in ratio of the premium paid by each such party to the premium paid by all parties.

 

3.

     BOND COVERAGE REQUIRED

 

 

Each party has determined the minimum amount of fidelity bond coverage deemed appropriate to be maintained. This amount is set forth in Exhibit A and each Fund represents and warrants to each of the other parties that the minimum amount of coverage required by Rule 17g-1(d)(1) is not more than reflected in Exhibit A. Each Fund further agrees that its minimum coverage shall not be less than the minimum coverage required by Rule 17g-1(d)(1).

 

4.     This Agreement shall apply to the present fidelity bond coverage and any renewal or replacement thereof and shall continue until terminated by any party that provides 60 days’ written notice to the other parties.

 

5.     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.

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed on their behalf by their duly authorized officers as of the date first written above.

VANGUARD ADMIRAL FUNDS

VANGUARD BOND INDEX FUNDS

VANGUARD CALIFORNIA TAX-FREE FUNDS

VANGUARD CONVERTIBLE SECURITIES FUND

VANGUARD CHESTER FUNDS

VANGUARD CMT FUNDS

VANGUARD EXPLORER FUND

VANGUARD FENWAY FUNDS

VANGUARD FIXED INCOME SECURITIES FUNDS

VANGUARD FLORIDA TAX-FREE FUNDS

VANGUARD HORIZON FUNDS

VANGUARD INDEX FUNDS

VANGUARD INSTITUTIONAL INDEX FUNDS

VANGUARD INTERNATIONAL EQUITY INDEX FUNDS

VANGUARD MALVERN FUNDS

VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS

VANGUARD MONEY MARKET RESERVES

VANGUARD MONTGOMERY FUNDS

VANGUARD MORGAN GROWTH FUND

VANGUARD MUNICIPAL BOND FUNDS

VANGUARD NEW JERSEY TAX-FREE FUNDS

VANGUARD NEW YORK TAX-FREE FUNDS

VANGUARD OHIO TAX-FREE FUNDS

VANGUARD PENNSYLVANIA TAX-FREE FUNDS

VANGUARD QUANTITATIVE FUNDS

VANGUARD SPECIALIZED FUNDS

VANGUARD STAR FUNDS

VANGUARD TAX-MANAGED FUNDS

VANGUARD TREASURY FUND

VANGUARD TRUSTEES’ EQUITY FUNDS

VANGUARD VARIABLE INSURANCE FUNDS

VANGUARD VALLEY FORGE FUNDS

VANGUARD WELLESLEY INCOME FUND

VANGUARD WELLINGTON FUND

VANGUARD WHITEHALL FUNDS

VANGUARD WINDSOR FUNDS

VANGUARD WORLD FUND

 

By:

/s/ Heidi Stam

 

Heidi Stam, Secretary

 

 

 

 

Attest:

/s/ Arthur S. Gabinet

 

Arthur S. Gabinet, Assistant Secretary

 

 

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THE VANGUARD GROUP, INC.

 

 

By:

/s/ Heidi Stam

 

Heidi Stam, Managing Director, General Counsel, and Secretary

 

Attest:

/s/ Michael L. Kimmel

 

Michael L. Kimmel, Assistant Secretary

 

 

VANGUARD ADVISERS, INC.

 

By:

/s/ Michael L. Kimmel

 

Michael L. Kimmel, Secretary

 

 

Attest:

/s/ Deborah McCracken

 

Deborah McCracken, Assistant Secretary

 

 

VANGUARD MARKETING CORPORATION

 

 

By:

/s/ Michael L. Kimmel

 

Michael L. Kimmel, Secretary

 

 

Attest:

/s/ Deborah McCracken

 

Deborah McCracken, Assistant Secretary

 

 

 

5

 

EXHIBIT A

 

Rule 17g-1

Minimum Bond Requirements

 

As of 6/30/2009

 

 

 

 

Fund/Portfolio Name

Net Assets

Bond Requirement

 

 

 

Vanguard Admiral Funds

 

 

Admiral Treasury Money Market Fund

$20,910,738,192

$2,500,000

Vanguard Bond Index Funds

 

 

Inflation-Protected Securities Fund

22,342,381,853

2,500,000

Intermediate-Term Bond Index Fund

8,613,220,488

2,500,000

Long-Term Bond Index Fund

2,679,230,776

1,900,000

Short-Term Bond Index Fund

11,606,293,068

2,500,000

Total Bond Market Index Fund

57,430,159,456

2,500,000

Total Bond Market II Index Fund

21,415,573,864

2,500,000

Vanguard CMT Funds

 

 

Market Liquidity Fund

21,367,282,154

2,500,000

Municipal Cash Management Fund

2,353,702,117

1,700,000

Vanguard California Tax-Free Funds

 

 

CA Intermediate-Term Tax-Exempt Fund

4,525,660,542

2,500,000

CA Long-Term Tax-Exempt Fund

2,713,815,982

1,900,000

CA Tax-Exempt Money Market Fund

6,051,105,448

2,500,000

Vanguard Chester Funds

 

 

PRIMECAP Fund

23,796,485,869

2,500,000

Target Retirement Income Fund

2,128,636,530

1,700,000

Target Retirement 2005 Fund

1,623,051,557

1,500,000

Target Retirement 2010 Fund

2,586,996,249

1,900,000

Target Retirement 2015 Fund

8,015,577,586

2,500,000

Target Retirement 2020 Fund

4,536,536,595

2,500,000

Target Retirement 2025 Fund

8,193,895,417

2,500,000

Target Retirement 2030 Fund

3,106,036,738

2,100,000

Target Retirement 2035 Fund

5,485,356,097

2,500,000

Target Retirement 2040 Fund

1,793,353,673

1,500,000

Target Retirement 2045 Fund

2,871,429,384

1,900,000

Target Retirement 2050 Fund

709,779,929

900,000

Vanguard Convertible Securities Fund

1,538,229,153

1,500,000

Vanguard Explorer Fund

7,254,611,365

2,500,000

Vanguard Fenway Funds

 

 

Equity Income Fund

3,419,496,569

2,100,000

Growth Equity Fund

535,030,507

900,000

PRIMECAP Core Fund

3,422,744,345

2,100,000

 

 

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Vanguard Fixed Income Securities Funds

 

 

GNMA Fund

33,969,851,708

2,500,000

High-Yield Corporate Fund

9,762,439,439

2,500,000

Intermediate-Term Investment-Grade Fund

11,533,142,521

2,500,000

Intermediate-Term Treasury Fund

6,264,702,802

2,500,000

Long-Term Investment-Grade Fund

6,778,437,930

2,500,000

Long-Term Treasury Fund

2,863,039,768

1,900,000

Short-Term Federal Fund

4,287,274,552

2,500,000

Short-Term Investment-Grade Fund

24,890,527,512

2,500,000

Short-Term Treasury Fund

6,545,478,214

2,500,000

Vanguard Florida Tax-Free Funds

 

 

Florida Long-Term Tax-Exempt Fund

956,453,994

1,000,000

Vanguard Horizon Funds

 

 

Capital Opportunity Fund

6,673,131,590

2,500,000

Global Equity Fund

3,376,886,685

2,100,000

Strategic Equity Fund

3,208,084,057

2,100,000

Strategic Small-Cap Equity Fund

141,365,971

525,000

Vanguard Index Funds

 

 

500 Index Fund

77,889,421,001

2,500,000

Extended Market Index Fund

10,175,376,730

2,500,000

Growth Index Fund

12,792,820,804

2,500,000

Large-Cap Index Fund

3,222,918,241

2,100,000

Mid-Cap Growth Index Fund

888,385,004

1,000,000

Mid-Cap Index Fund

14,594,989,858

2,500,000

Mid-Cap Value Index Fund

806,068,396

1,000,000

Small-Cap Growth Index Fund

3,911,219,871

2,300,000

Small-Cap Index Fund

12,262,808,461

2,500,000

Small-Cap Value Index Fund

3,914,598,683

2,300,000

Total Stock Market Index Fund

92,494,324,076

2,500,000

Value Index Fund

9,206,529,610

2,500,000

Vanguard Institutional Index Funds

 

 

Institutional Index Fund

55,363,193,565

2,500,000

Institutional Total Bond Market Index Fund

3,507,688,744

2,300,000

Institutional Total Stock Market Index Fund

9,063,858,657

2,500,000

Vanguard International Equity Index Funds

 

 

Emerging Markets Stock Index Fund

18,712,828,303

2,500,000

European Stock Index Fund

9,116,677,811

2,500,000

FTSE All-World Ex-US Index Fund

4,783,318,980

2,500,000

FTSE All-World Ex-US Small-Cap Index Fund

162,347,883

600,000

Pacific Stock Index Fund

5,195,365,186

2,500,000

Total World Stock Index Fund

408,358,419

750,000

Vanguard Malvern Funds

 

 

Asset Allocation Fund

8,420,663,050

2,500,000

Capital Value Fund

489,917,204

750,000

U.S. Value Fund

471,608,372

750,000

 

 

A-2

 

 

Vanguard Massachusetts Tax-Exempt Funds

 

 

Massachusetts Tax-Exempt Fund

833,832,215

1,000,000

Vanguard Money Market Reserves

 

 

Federal Money Market Fund

10,744,175,453

2,500,000

Prime Money Market Fund

117,639,008,364

2,500,000

Vanguard Montgomery Funds

 

 

Market Neutral Fund

81,349,440

450,000

Vanguard Morgan Growth Fund

6,643,532,539

2,500,000

Vanguard Municipal Bond Funds

 

 

High-Yield Tax-Exempt Fund

5,924,171,057

2,500,000

Intermediate-Term Tax-Exempt Fund

22,911,993,429

2,500,000

Limited-Term Tax-Exempt Fund

10,153,007,462

2,500,000

Long-Term Tax-Exempt Fund

6,755,431,929

2,500,000

Short-Term Tax-Exempt Fund

8,241,131,296

2,500,000

Tax-Exempt Money Market Fund

21,474,067,540

2,500,000

Vanguard New Jersey Tax-Free Funds

 

 

NJ Long-Term Tax-Exempt Fund

1,908,332,004

1,500,000

NJ Tax-Exempt Money Market Fund

2,850,838,353

1,900,000

Vanguard New York Tax-Free Funds

 

 

NY Long-Term Tax-Exempt Fund

2,793,137,840

1,900,000

NY Tax-Exempt Money Market Fund

4,369,063,539

2,500,000

Vanguard Ohio Tax-Free Funds

 

 

OH Long-Term Tax-Exempt Fund

860,201,701

1,000,000

OH Tax- Exempt Money Market Fund

1,017,331,087

1,250,000

Vanguard Pennsylvania Tax-Free Funds

 

 

PA Long-Term Tax-Exempt Fund

2,623,936,473

1,900,000

PA Tax- Exempt Money Market Fund

3,675,648,897

2,300,000

Vanguard Quantitative Funds

 

 

Growth and Income Fund

4,178,226,885

2,500,000

Structured Broad Market Fund

241,896,510

600,000

Structured Large-Cap Equity Fund

513,340,332

900,000

Structured Large-Cap Growth Fund

47,372,539

350,000

Structured Large-Cap Value Fund

43,042,378

350,000

Vanguard Specialized Funds

 

 

Dividend Appreciation Index Fund

1,482,729,492

1,250,000

Dividend Growth Fund

2,005,068,041

1,700,000

Energy Fund

9,430,370,411

2,500,000

Health Care Fund

17,858,777,595

2,500,000

Precious Metals and Mining Fund

2,629,712,180

1,900,000

REIT Index Fund

6,622,030,767

2,500,000

Vanguard STAR Funds

 

 

Developed Markets Index Fund

2,401,104,123

1,700,000

Institutional Developed Markets Index Fund

4,287,870,981

2,500,000

LifeStrategy Conservative Growth Fund

5,040,766,379

2,500,000

LifeStrategy Growth Fund

6,184,595,432

2,500,000

LifeStrategy Income Fund

1,694,594,231

1,500,000

LifeStrategy Moderate Growth Fund

7,325,200,537

2,500,000

 

 

A-3

 

 

STAR Fund

10,785,526,043

2,500,000

Total International Stock Index Fund

20,154,971,242

2,500,000

Vanguard Tax-Managed Funds

 

 

Tax-Managed Balanced Fund

613,805,377

900,000

Tax-Managed Capital Appreciation Fund

2,784,285,543

1,900,000

Tax-Managed Growth and Income Fund

1,860,388,800

1,500,000

Tax-Managed International Fund

4,453,692,206

2,300,000

Tax-Managed Small-Cap Fund

1,352,482,572

1,250,000

Vanguard Treasury Fund

 

 

Treasury Money Market Fund

6,434,793,135

2,500,000

Vanguard Trustees' Equity Fund

 

 

Diversified Equity Fund

1,079,808,611

1,250,000

International Value Fund

5,532,550,612

2,500,000

Vanguard Valley Forge Funds

 

 

Balanced Index Fund

7,837,855,963

2,500,000

Managed Payout Growth Focus Fund

39,106,014

350,000

Managed Payout Growth and Distribution Fund

132,472,328

525,000

Managed Payout Distribution Focus Fund

119,027,100

525,000

Vanguard Variable Insurance Fund

 

 

Balanced Portfolio

1,097,962,107

1,250,000

Capital Growth Portfolio

276,506,736

750,000

Diversified Value Portfolio

589,182,033

900,000

Equity Income Portfolio

346,006,436

750,000

Equity Index Portfolio

1,594,933,331

1,500,000

Growth Portfolio

219,098,053

600,000

High Yield Bond Portfolio

278,529,654

750,000

International Portfolio

1,279,557,379

1,250,000

Mid-Cap Index Portfolio

501,275,758

900,000

Money Market Portfolio

1,889,040,842

1,500,000

REIT Index Portfolio

234,591,581

600,000

Short-Term Investment-Grade Portfolio

577,151,876

900,000

Small Company Growth Portfolio

461,244,640

750,000

Total Bond Market Index Portfolio

1,579,323,809

1,500,000

Total Stock Market Index Portfolio

545,610,711

900,000

Vanguard Wellesley Income Fund

12,087,343,982

2,500,000

Vanguard Wellington Fund

40,052,080,678

2,500,000

Vanguard Whitehall Funds

 

 

High Dividend Yield Index Fund

439,152,846

750,000

International Explorer Fund

1,388,712,633

1,250,000

Mid-Cap Growth Fund

1,074,242,214

1,250,000

Selected Value Fund

2,442,318,932

1,700,000

Vanguard Windsor Funds

 

 

Windsor Fund

10,416,686,924

2,500,000

Windsor II Fund

29,195,107,431

2,500,000

 

 

A-4

 

 

Vanguard World Fund

 

 

Consumer Discretionary Index Fund

105,694,976

525,000

Consumer Staples Index Fund

550,979,639

900,000

Energy Index Fund

899,986,495

1,000,000

Extended Duration Treasury Index Fund

154,856,337

600,000

FTSE Social Index Fund

358,685,327

750,000

Financials Index Fund

556,941,344

900,000

Health Care Index Fund

629,839,590

900,000

Industrials Index Fund

160,712,548

600,000

Information Technology Index Fund

538,966,080

900,000

International Growth Fund

12,334,702,576

2,500,000

Materials Index Fund

357,171,078

750,000

Mega Cap 300 Growth Index Fund

483,805,219

750,000

Mega Cap 300 Index Fund

265,292,350

750,000

Mega Cap 300 Value Index Fund

201,612,409

600,000

Telecommunication Services Index Fund

155,685,762

600,000

U.S. Growth Fund

3,493,420,425

2,100,000

Utilities Index Fund

417,747,478

750,000

 

 

 

TOTALS

$1,239,031,930,351

$277,150,000

 

 

A-5