EX-3 4 agreement_08012007.htm JOINT INSURED BOND COVERAGE

AGREEMENT

Made as of this 11th day of July, 2007, 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

 

#51658

 

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.

 

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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 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 Secretary

 

 

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THE VANGUARD GROUP, INC.

 

 

By:

/s/ Heidi Stam

 

Heidi Stam, Managing Director, General

 

Counsel, and Secretary

 

 

Attest:

/s/ Amy B. Cooper

 

Amy B. Cooper, Assistant Secretary

 

 

VANGUARD ADVISERS, INC.

 

 

By:

/s/ Michael Kimmel

 

Michael Kimmel, Secretary

 

 

Attest:

/s/ Deborah McCracken

 

Deborah McCracken, Assistant Secretary

 

 

VANGUARD MARKETING CORPORATION

 

 

By:

/s/ Michael Kimmel

 

Michael Kimmel, Secretary

 

 

 

Attest:

/s/ Deborah McCracken

 

Deborah McCracken, Assistant Secretary

 

 

 

5

 

EXHIBIT A

 

Rule 17g-1

Minimum Bond Requirements

 

As of 5/31/2007

(000 omitted)

 

 

 

 

Fund/Portfolio Name

Net Assets

Bond Requirement

 

 

 

Vanguard Admiral Funds

 

 

Admiral Treasury Money Market Fund

$  18,140,768

$  2,500

Vanguard Balanced Index Fund

9,848,016

2,500

Vanguard Bond Index Funds

 

 

Intermediate-Term Bond Index Fund

6,357,602

2,500

Long-Term Bond Index Fund

2,320,683

1,500

Short-Term Bond Index Fund

5,599,183

2,500

Total Bond Market Index Fund

46,472,567

2,500

Vanguard California Tax-Free Funds

 

 

CA Intermediate-Term Tax-Exempt Fund

4,001,050

2,300

CA Long-Term Tax-Exempt Fund

2,900,278

1,700

CA Tax-Exempt Money Market Fund

7,764,618

2,500

Vanguard Convertible Securities Fund

802,040

1,000

Vanguard Chester Funds

 

 

PRIMECAP Fund

33,251,325

2,500

Target Retirement Income Fund

1,136,895

1,250

Target Retirement 2005 Fund

1,314,420

1,250

Target Retirement 2010 Fund

842,412

1,000

Target Retirement 2015 Fund

5,863,414

2,500

Target Retirement 2020 Fund

1,205,090

1,250

Target Retirement 2025 Fund

6,009,837

2,500

Target Retirement 2030 Fund

766,425

1,000

Target Retirement 2035 Fund

4,048,909

2,300

Target Retirement 2040 Fund

352,176

750

Target Retirement 2045 Fund

1,968,096

1,500

Target Retirement 2050 Fund

117,782

525

Vanguard CMT Funds

 

 

Market Liquidity Fund

28,131,535

2,500

Municipal Cash Management Fund

1,618,304

1,500

Vanguard Explorer Fund

12,842,392

2,500

Vanguard Fenway Funds

 

 

Equity Income Fund

5,840,410

2,500

Growth Equity Fund

782,719

1,000

PRIMECAP Core Fund

3,033,989

1,900

 

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Vanguard Fixed Income Securities Funds

 

 

GNMA Fund

23,137,956

2,500

High-Yield Corporate Fund

9,814,655

2,500

Inflation-Protected Securities Fund

10,102,794

2,500

Intermediate-Term Investment-Grade Fund

5,535,609

2,500

Intermediate-Term Treasury Fund

4,139,892

2,300

Long-Term Investment-Grade Fund

5,817,855

2,500

Long-Term Treasury Fund

2,246,174

1,500

Short-Term Federal Fund

2,599,261

1,700

Short-Term Investment-Grade Fund

18,490,255

2,500

Short-Term Treasury Fund

3,555,554

2,100

Vanguard Florida Tax-Free Funds

 

 

Florida Long-Term Tax-Exempt Fund

1,140,103

1,250

Vanguard Horizon Funds

 

 

Capital Opportunity Fund

9,506,270

2,500

Global Equity Fund

6,744,565

2,500

Strategic Equity Fund

8,351,371

2,500

Strategic Small-Cap Equity Fund

267,418

750

Vanguard Index Funds

 

 

500 Index Fund

128,766,544

2,500

Extended Market Index Fund

14,953,537

2,500

Growth Index Fund

14,948,178

2,500

Large-Cap Index Fund

1,473,443

1,250

Mid-Cap Growth Index Fund

273,161

750

Mid-Cap Index Fund

21,396,208

2,500

Mid-Cap Value Index Fund

384,015

750

Small-Cap Growth Index Fund

3,840,802

2,100

Small-Cap Index Fund

15,916,288

2,500

Small-Cap Value Index Fund

6,037,701

2,500

Total Stock Market Index Fund

99,766,565

2,500

Value Index Fund

13,197,032

2,500

Vanguard Institutional Index Funds

 

 

Institutional Index Fund

73,276,483

2,500

Institutional Total Bond Market Index Fund

6,708,526

2,500

Institutional Total Stock Market Index Fund

8,787,927

2,500

Vanguard International Equity Index Funds

 

 

Emerging Markets Stock Index Fund

16,632,606

2,500

European Stock Index Fund

33,201,648

2,500

FTSE All-World Ex-US Index Fund

82,075

450

Pacific Stock Index Fund

14,947,098

2,500

Vanguard Malvern Funds

 

 

Asset Allocation Fund

14,119,527

2,500

Capital Value Fund

691,514

900

 

 

A-2

 

 

U.S. Value Fund

1,558,615

1,500

Vanguard Massachusetts Tax-Exempt Funds

 

 

Massachusetts Tax-Exempt Fund

648,333

900

Vanguard Money Market Reserves

 

 

Federal Money Market Fund

7,064,899

2,500

Prime Money Market Fund

88,319,974

2,500

Vanguard Morgan Growth Fund

8,596,104

2,500

Vanguard Municipal Bond Funds

 

 

High-Yield Tax-Exempt Fund

6,133,621

2,500

Insured Long-Term Tax-Exempt Fund

3,272,028

1,900

Intermediate-Term Tax-Exempt Fund

15,489,910

2,500

Limited-Term Tax-Exempt Fund

6,599,858

2,500

Long-Term Tax-Exempt Fund

2,494,713

1,500

Short-Term Tax-Exempt Fund

4,005,878

2,300

Tax-Exempt Money Market Fund

20,664,401

2,500

Vanguard New Jersey Tax-Free Funds

 

 

NJ Long-Term Tax-Exempt Fund

1,792,037

1,500

NJ Tax-Exempt Money Market Fund

3,247,849

1,900

Vanguard New York Tax-Free Funds

 

 

NY Long-Term Tax-Exempt Fund

2,621,211

1,700

NY Tax-Exempt Money Market Fund

5,083,954

2,500

Vanguard Ohio Tax-Free Funds

 

 

OH Long-Term Tax-Exempt Fund

658,652

900

OH Tax- Exempt Money Market Fund

1,052,197

1,250

Vanguard Pennsylvania Tax-Free Funds

 

 

PA Long-Term Tax-Exempt Fund

2,438,023

1,500

PA Tax- Exempt Money Market Fund

3,824,460

2,100

Vanguard Quantitative Funds

 

 

Growth and Income Fund

8,272,940

2,500

Structured Broad Market Fund

118,555

525

Structured Large-Cap Equity Fund

809,458

1,000

Structured Large-Cap Growth Fund

57,414

400

Structured Large-Cap Value Fund

80,782

450

Vanguard Specialized Funds

 

 

Dividend Appreciation Index Fund

391,944

750

Dividend Growth Fund

1,296,290

1,250

Energy Fund

11,909,600

2,500

Health Care Fund

28,660,573

2,500

Precious Metals and Mining Fund

4,047,166

2,300

REIT Index Fund

12,127,368

2,500

Vanguard STAR Funds

 

 

Developed Markets Index Fund

3,576,919

2,100

Institutional Developed Markets Index Fund

4,478,229

2,300

LifeStrategy Conservative Growth Fund

6,916,043

2,500

 

 

A-3

 

 

LifeStrategy Growth Fund

9,955,729

2,500

LifeStrategy Income Fund

1,811,864

1,500

LifeStrategy Moderate Growth Fund

10,921,911

2,500

STAR Fund

14,864,589

2,500

Total International Stock Index Fund

24,975,577

2,500

Vanguard Tax-Managed Funds

 

 

Tax-Managed Balanced Fund

709,704

900

Tax-Managed Capital Appreciation Fund

4,451,796

2,300

Tax-Managed Growth and Income Fund

3,404,939

1,900

Tax-Managed International Fund

2,271,213

1,500

Tax-Managed Small-Cap Fund

2,135,234

1,500

Vanguard Treasury Fund

 

 

Vanguard Treasury Money Market Fund

5,396,621

2,500

Vanguard Trustees' Equity Fund

 

 

Diversified Equity Fund

271,445

750

International Value Fund

9,295,174

2,500

Vanguard Variable Insurance Fund

 

 

Balanced Portfolio

1,535,845

1,500

Capital Growth Portfolio

303,072

750

Diversified Value Portfolio

1,097,150

1,250

Equity Income Portfolio

664,507

900

Equity Index Portfolio

2,418,025

1,500

Growth Portfolio

348,866

750

High Yield Bond Portfolio

273,199

750

International Portfolio

1,855,156

1,500

Mid-Cap Index Portfolio

903,771

1,000

Money Market Portfolio

1,489,077

1,250

REIT Index Portfolio

617,257

900

Short-Term Investment-Grade Portfolio

417,160

750

Small Company Growth Portfolio

874,079

1,000

Total Bond Market Index Portfolio

1,134,843

1,250

Total Stock Market Index Portfolio

566,111

900

Vanguard Wellesley Income Fund

13,436,108

2,500

Vanguard Wellington Fund

49,689,152

2,500

Vanguard Whitehall Funds

 

 

High Dividend Yield Index Fund

119,365

525

International Explorer Fund

3,327,636

1,900

Mid-Cap Growth Fund

1,004,131

1,250

Selected Value Fund

5,522,616

2,500

Vanguard Windsor Funds

 

 

Windsor Fund

25,695,223

2,500

Windsor II Fund

55,049,870

2,500

 

A-4

 

 

 

 

Vanguard World Fund

 

 

Consumer Discretionary Index Fund

111,123

525

Consumer Staples Index Fund

338,620

750

Energy Index Fund

669,669

900

FTSE Social Index Fund

671,568

900

Financials Index Fund

328,096

750

Health Care Index Fund

576,808

900

Industrials Index Fund

215,773

600

Information Technology Index Fund

351,979

750

International Growth Fund

18,336,804

2,500

Materials Index Fund

319,731

750

Telecommunication Services Index Fund

292,544

750

U.S. Growth Fund

5,849,860

2,500

Utilities Index Fund

505,446

900

 

 

 

TOTALS   

$1,369,869,579

$261,000

 

 

A-5