EX-3 4 funds17g1fagreement.htm EXHIBIT 3 TO 40-17G REPORT

AGREEMENT

Made as of this 8th day of December, 2006, by and among VANGUARD WELLINGTON FUND, VANGUARD WINDSOR FUNDS, VANGUARD WORLD FUNDS, VANGUARD EXPLORER FUND, VANGUARD MORGAN GROWTH FUND, VANGUARD WELLESLEY INCOME FUND, VANGUARD FIXED INCOME SECURITIES FUNDS, VANGUARD MONEY MARKET FUND, VANGUARD MUNICIPAL BOND FUNDS, VANGUARD STAR FUND, VANGUARD CHESTER FUNDS, VANGUARD INDEX FUNDS, VANGUARD TRUSTEES EQUITY FUNDS, VANGUARD SPECIALIZED FUNDS, VANGUARD CALIFORNIA TAX-FREE FUNDS, VANGUARD NEW YORK TAX-FREE FUNDS, VANGUARD PENNSYLVANIA TAX-FREE FUND, VANGUARD OHIO TAX-FREE FUNDS, VANGUARD FLORIDA TAX-FREE FUNDS, VANGUARD CONVERTIBLE SECURITIES FUND, VANGUARD QUANTITATIVE FUNDS, VANGUARD BOND INDEX FUNDS, VANGUARD FENWAY FUNDS, VANGUARD NEW JERSEY TAX-FREE FUNDS, VANGUARD ADMIRAL FUNDS, VANGUARD MALVERN FUNDS, VANGUARD VARIABLE INSURANCE FUNDS, VANGUARD BALANCED INDEX FUND, VANGUARD INSTITUTIONAL INDEX FUND, VANGUARD INTERNATIONAL EQUITY INDEX FUNDS, VANGUARD TAX-MANAGED FUNDS, VANGUARD WHITEHALL FUNDS, VANGUARD TREASURY FUND, VANGUARD HORIZON FUNDS, AND VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS, VANGUARD CMT FUNDS (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

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.

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.

 

IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed as of the date aforesaid.

 

VANGUARD ADMIRAL FUNDS

 

VANGUARD BALANCED INDEX FUND

 

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 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 FUND

 

VANGUARD WELLESLEY INCOME FUND

 

VANGUARD WELLINGTON FUND

 

VANGUARD WHITEHALL FUNDS

 

VANGUARD WINDSOR FUNDS

 

VANGUARD WORLD FUNDS

                

 

By:

/s/ Heidi Stam

 

 

Heidi Stam, Secretary

 

 

Attest:

/s/ Arthur S. Gabinet

 

 

Arthur S. Gabinet, Assistant Secretar

 

THE VANGUARD GROUP, INC.

 

On behalf of itself and its affiliates and subsidiaries

 

 

By:

/s/ Heidi Stam

 

 

Heidi Stam, Managing Director and Secretary

 

 

Attest:

/s/ Amy Cooper

 

 

Amy Cooper, Assistant Secretar

 

 

 

 

 

 

 

 

 

 

EXHIBIT A

 

Rule 17g-1

Minimum Bond Requirements

 

As of 11/30/2006

(000 omitted)

 

 

 

 

Fund/Portfolio Name

Net Assets

Bond Requirement

 

 

 

Vanguard Admiral Funds

 

 

Admiral Treasury Money Market Fund

$ 16,350,331

$ 2,500

Vanguard Balanced Index Fund

9,164,517

2,500

Vanguard Bond Index Funds

 

 

Intermediate-Term Bond Index Fund

6,300,551

2,500

Long-Term Bond Index Fund

2,181,240

1,700

Short-Term Bond Index Fund

5,293,889

2,500

Total Bond Market Index Fund

39,866,884

2,500

Vanguard California Tax-Free Funds

 

 

CA Intermediate-Term Tax-Exempt Fund

3,456,578

2,100

CA Long-Term Tax-Exempt Fund

2,650,240

1,900

CA Tax-Exempt Money Market Fund

7,219,984

2,500

Vanguard Convertible Securities Fund

726,998

900

Vanguard Chester Funds

 

 

PRIMECAP Fund

31,811,194

2,500

Target Retirement Income Fund

875,907

1,000

Target Retirement 2005 Fund

1,034,499

1,250

Target Retirement 2010 Fund

174,669

600

Target Retirement 2015 Fund

4,162,079

2,500

Target Retirement 2020 Fund

248,372

600

Target Retirement 2025 Fund

4,423,128

2,500

Target Retirement 2030 Fund

159,630

600

Target Retirement 2035 Fund

2,911,783

1,900

Target Retirement 2040 Fund

65,929

400

Target Retirement 2045 Fund

1,364,903

1,250

Target Retirement 2050 Fund

25,563

300

Vanguard CMT Funds

 

 

Market Liquidity Fund

17,707,808

2,500

Municipal Cash Management Fund

1,112,301

1,250

Vanguard Explorer Fund

12,014,474

2,500

Vanguard Fenway Funds

 

 

Equity Income Fund

5,161,813

2,500

Growth Equity Fund

774,599

1,000

PRIMECAP Core Fund

2,535,621

1,900

 

 

Vanguard Fixed Income Securities Funds

 

 

GNMA Fund

23,165,088

2,500

High-Yield Corporate Fund

9,318,773

2,500

Inflation-Protected Securities Fund

9,865,126

2,500

Intermediate-Term Investment-Grade Fund

5,189,429

2,500

Intermediate-Term Treasury Fund

4,012,133

2,500

Long-Term Investment-Grade Fund

5,859,237

2,500

Long-Term Treasury Fund

2,246,462

1,700

Short-Term Federal Fund

2,587,810

1,900

Short-Term Investment-Grade Fund

17,676,798

2,500

Short-Term Treasury Fund

3,475,195

2,100

Vanguard Florida Tax-Free Funds

 

 

Florida Long-Term Tax-Exempt Fund

1,203,123

1,250

Vanguard Horizon Funds

 

 

Capital Opportunity Fund

9,536,067

2,500

Global Equity Fund

4,747,065

2,500

Strategic Equity Fund

7,207,288

2,500

Strategic Small-Cap Equity Fund

200,145

600

Vanguard Index Funds

 

 

500 Index Fund

117,739,866

2,500

Extended Market Index Fund

12,830,175

2,500

Growth Index Fund

12,515,390

2,500

Large-Cap Index Fund

973,853

1,000

Mid-Cap Index Fund

18,007,703

2,500

Mid-Cap Growth Index Fund

43,362

350

Mid-Cap Value Index Fund

83,094

450

Small-Cap Index Fund

13,796,141

2,500

Small-Cap Growth Index Fund

2,949,227

1,900

Small-Cap Value Index Fund

5,045,449

2,500

Total Stock Market Index Fund

83,822,524

2,500

Value Index Fund

10,391,235

2,500

Vanguard Institutional Index Funds

 

 

Institutional Index Fund

64,291,716

2,500

Institutional Total Bond Market Index Fund

4,727,958

2,500

Institutional Total Stock Market Index Fund

5,418,418

2,500

Vanguard International Equity Index Funds

 

 

Emerging Markets Stock Index Fund

11,884,773

2,500

European Stock Index Fund

24,658,496

2,500

Pacific Stock Index Fund

11,770,230

2,500

Vanguard Malvern Funds

 

 

Asset Allocation Fund

12,550,614

2,500

Capital Value Fund

484,309

750

U.S. Value Fund

1,489,925

1,250

Vanguard Massachusetts Tax-Exempt Funds

 

 

Massachusetts Tax-Exempt Fund

573,362

900

 

 

Vanguard Money Market Reserves

 

 

Federal Money Market Fund

6,654,617

2,500

Prime Money Market Fund

77,176,342

2,500

Vanguard Morgan Growth Fund

7,405,787

2,500

Vanguard Municipal Bond Funds

 

 

High-Yield Tax-Exempt Fund

5,674,252

2,500

Insured Long-Term Tax-Exempt Fund

3,222,062

2,100

Intermediate-Term Tax-Exempt Fund

14,550,616

2,500

Limited-Term Tax-Exempt Fund

6,669,690

2,500

Long-Term Tax-Exempt Fund

2,356,251

1,700

Short-Term Tax-Exempt Fund

4,082,596

2,500

Tax-Exempt Money Market Fund

19,372,676

2,500

Vanguard New Jersey Tax-Free Funds

 

 

NJ Long-Term Tax-Exempt Fund

1,717,521

1,500

NJ Tax-Exempt Money Market Fund

2,786,630

1,900

Vanguard New York Tax-Free Funds

 

 

NY Long-Term Tax-Exempt Fund

2,470,466

1,700

NY Tax-Exempt Money Market Fund

4,379,469

2,500

Vanguard Ohio Tax-Free Funds

 

 

OH Long-Term Tax-Exempt Fund

594,870

900

OH Tax- Exempt Money Market Fund

1,036,288

1,250

Vanguard Pennsylvania Tax-Free Funds

 

 

PA Long-Term Tax-Exempt Fund

2,390,166

1,700

PA Tax- Exempt Money Market Fund

3,390,025

2,100

Vanguard Quantitative Funds

 

 

Growth and Income Fund

7,731,237

2,500

Structured Broad Market Fund

106,429

525

Structured Large-Cap Equity Fund

709,359

900

Structured Large-Cap Growth Fund

51,705

400

Vanguard Specialized Funds

 

 

Energy Fund

10,417,054

2,500

Health Care Fund

26,833,937

2,500

Precious Metals and Mining Fund

3,456,528

2,100

REIT Index Fund

11,592,085

2,500

Dividend Growth Fund

1,183,831

1,250

Dividend Appreciation Index Fund

191,897

600

Vanguard STAR Funds

 

 

Developed Markets Index Fund

2,746,265

1,900

Institutional Developed Markets Index Fund

3,751,520

2,300

LifeStrategy Conservative Growth Fund

5,512,153

2,500

LifeStrategy Growth Fund

8,663,576

2,500

LifeStrategy Income Fund

1,687,999

1,500

LifeStrategy Moderate Growth Fund

9,711,130

2,500

STAR Fund

13,788,951

2,500

Total International Stock Index Fund

19,143,058

2,500

 

 

Vanguard Tax-Managed Funds

 

 

Tax-Managed Balanced Fund

662,965

900

Tax-Managed Capital Appreciation Fund

3,948,813

2,300

Tax-Managed Growth and Income Fund

3,056,499

2,100

Tax-Managed International Fund

1,827,704

1,500

Tax-Managed Small-Cap Fund

1,876,279

1,500

Vanguard Treasury Fund

 

 

Vanguard Treasury Money Market Fund

5,301,696

2,500

Vanguard Trustees' Equity Fund

 

 

Diversified Equity Fund

130,919

525

International Value Fund

7,342,417

2,500

Vanguard Variable Insurance Fund

 

 

Balanced Portfolio

1,355,184

1,250

Capital Growth Portfolio

254,995

750

Diversified Value Portfolio

868,050

1,000

Equity Income Portfolio

580,872

900

Equity Index Portfolio

2,085,882

1,700

Growth Portfolio

361,246

750

High Yield Bond Portfolio

256,616

750

International Portfolio

1,442,401

1,250

Mid-Cap Index Portfolio

787,753

1,000

Money Market Portfolio

1,302,959

1,250

REIT Index Portfolio

654,943

900

Short-Term Investment-Grade Portfolio

401,450

750

Small Company Growth Portfolio

810,016

1,000

Total Bond Market Index Portfolio

930,862

1,000

Total Stock Market Index Portfolio

457,378

750

Vanguard Wellesley Income Fund

12,596,618

2,500

Vanguard Wellington Fund

45,169,054

2,500

Vanguard Whitehall Funds

 

 

High Dividend Yield Index Fund

35,509

350

International Explorer Fund

2,790,429

1,900

Mid-Cap Growth Fund

827,684

1,000

Selected Value Fund

4,548,765

2,500

Vanguard Windsor Funds

 

 

Windsor Fund

23,751,099

2,500

Windsor II Fund

47,436,001

2,500

 

 

Vanguard World Fund

 

 

Consumer Discretionary Index Fund

72,961

400

Consumer Staples Index Fund

265,285

750

Energy Index Fund

482,404

900

FTSE Social Index Fund

557,167

900

Financials Index Fund

201,921

600

Health Care Index Fund

499,130

750

Industrials Index Fund

137,943

525

Information Technology Index Fund

256,271

750

International Growth Fund

15,303,001

2,500

Materials Index Fund

137,918

525

Telecommunication Services Index Fund

159,043

600

U.S. Growth Fund

5,938,624

2,500

Utilities Index Fund

225,416

600

 

 

 

TOTALS

$1,193,412,223

$253,500