EX-3 5 agreement1997.htm EXHIBIT 3 TO 40-17G REPORT

AGREEMENT

Made this as of this 1st day of June, 1996, by and among VANGUARD/WELLINGTON FUND, INC., VANGUARD/WINDSOR FUNDS, INC., VANGUARD WORLD FUND, INC., GEMINI II, INC., VANGUARD EXPLORER FUND , INC., VANGUARD/MORGAN GROWTH FUND, INC., VANGUARD/WELLESLEY INCOME FUND, INC., VANGUARD FIXED INCOME SECURITIES FUND, INC., VANGUARD MONEY MARKET RESERVES, INC., VANGUARD MUNICIPAL BOND FUND, INC., VANGUARD PREFERRED STOCK FUND, VANGUARD STAR FUND, VANGUARD PRIMECAP FUND, INC., VANGUARD INDEX TRUST, VANGUARD/TRUSTEES' EQUITY FUND, VANGUARD SPECIALIZED PORTFOLIOS, INC., VANGUARD CALIFORNIA TAX-FREE FUND, VANGUARD NEW YORK INSURED TAX-FREE FUND, VANGUARD PENNSYLVANIA TAX-FREE FUND, VANGUARD OHIO TAX-FREE FUND, VANGUARD FLORIDA INSURED TAX-FREE FUND, VANGUARD CONVERTIBLE SECURITIES FUND, INC., VANGUARD QUANTITATIVE PORTFOLIOS, INC., VANGUARD BOND INDEX FUND, INC., VANGUARD EQUITY INCOME FUND, INC., VANGUARD NEW JERSEY TAX-FREE FUND, VANGUARD ADMIRAL FUNDS, INC., VANGUARD ASSET ALLOCATION FUND, INC., VANGUARD VARIABLE INSURANCE FUND, INC., VANGUARD BALANCED INDEX FUND, INC., VANGUARD INSTITUTIONAL INDEX FUND, VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC., VANGUARD TAX-MANAGED FUND, INC., VANGUARD WHITEHALL FUNDS, INC., AND VANGUARD HORIZON FUND, INC., (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 $200,000,000 which insures against larceny and embezzlement by officers and employees (the "Bond");

C.          A majority of those members of the Board of Directors (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 Directors (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 a 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 May 31, 1996, 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 17g-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, INC.

VANGUARD/WINDSOR FUNDS, INC.

VANGUARD WORLD FUND, INC.

GEMINI II, INC.

VANGUARD EXPLORER FUND, INC.

VANGUARD/MORGAN GROWTH FUND, INC.

VANGUARD/WELLESLEY INCOME FUND, INC.

VANGUARD FIXED INCOME SECURITIES FUND, INC.

VANGUARD MONEY MARKET RESERVES, INC.

VANGUARD MUNICIPAL BOND FUND, INC.

VANGUARD PREFERRED STOCK FUND

VANGUARD STAR FUND

VANGUARD INDEX TRUST

VANGUARD/TRUSTEES' EQUITY FUND

VANGUARD SPECIALIZED PORTFOLIOS, INC.

VANGUARD PRIMECAP FUND, INC.

VANGUARD CALIFORNIA TAX-FREE FUND

VANGUARD NEW YORK INSURED TAX-FREE FUND

VANGUARD PENNSYLVANIA TAX-FREE FLTND

VANGUARD CONVERTIBLE SECURITIES FUND, INC.

VANGUARD QUANTITATIVE PORTFOLIOS, INC.

VANGUARD BOND INDEX FUND, INC.

VANGUARD EQUITY BOND FUND, INC.

VANGUARD BALANCED INDEX FUND

VANGUARD FLORIDA INSURED TAX-FREE FUND

VANGUARD ADMIRAL FUNDS, INC.

VANGUARD NEW JERSEY TAX-FREE FUND

VANGUARD ASSET ALLOCATION FUND, INC:

VANGUARD OHIO TAX-FREE FUND

 

VANGUARD VARIABLE INSURANCE FUND, INC.

VANGUARD INSTITUTIONAL INDEX FUND

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.

VANGUARD TAX-MANAGED FCTND, INC.

VANGUARD HORIZON FUND, INC.

VANGUARD WHITEHALL FUNDS, INC.

THE VANGUARD GROUP, INC.

VANGUARD MARKETING CORPORATION

 

 

BY

/s/ John C. Bogle

 

John C. Bogle, Chairman, and

 

Chief Executive Officer

 

 

Attest:

/s/ Raymond J Klapinsky

 

Raymond J. Klapinsky, Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A

 

FIDELITY BOND REOUIREMENTS

AS OF MAY 31, 1996

 

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

 

 

 

Vanguard/Windsor Funds

 

 

- Windsor Fund

$15,047

$2,500

- Windsor II

12,954

2,500

 

 

 

Vanguard/Trustee's Equity Fund

 

 

- United States

145

525

- International

944

1,000

 

 

 

Vanguard World Fund

 

 

- U.S. Growth

4,297

2,500

- International Growth

4,774

2,500

 

 

 

Vanguard Specialized Portfolios

 

 

- Energy

607

900

- Healthcare

2,146

1,700

- Gold & Precious Metals

676

900

- Utilities Income

679

900

- REIT Index

33

300

 

 

 

Vanguard Index Trust

 

 

- 500

22,950

2,500

- Extended Market

1,986

1,500

- Total Stock Market

2,158

1,700

- Value

731

900

- Growth

485

750

- Small Capitalization Stock

1,449

1,250

 

 

 

Vanguard International Equity Index Fund

 

 

- European

1,233

1,250

- Pacific

993

1,000

- Emerging Markets

477

1,000

- Total International

32

300

 

 

 

Vanguard Bond Index Fund

 

 

- Total Bond Market

2,525

1,900

- Short-Term Bond

276

750

- Intermediate-Term Bond

415

750

- Long Term Bond

32

300

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000) (2)

 

 

 

Vanguard Fixed Income Securities Fund

 

 

- Short-Term Corporate

3,936

2,300

- Short-Term Federal

1,333

1,250

- Short-Tern U. S. Treasury Bond

929

1,000

- Intermediate-Term U.S. Treasury Bond

1,197

1,250

- Intermediate-Term Corporate

481

750

- Long-Term U.S. Treasury Bond

860

1,000

- GNMA

6,940

2,500

- Long-Term Corporate

3,247

2,100

- High Yield Corporate

3,059

2,100

 

 

 

Vanguard Admiral Funds

 

 

- U.S. Treasury Money Market

2,417

1,700

- Short-Term U.S. Treasury

427

750

- Intermediate-Term U.S. Treasury

592

900

- Long-Term U.S. Treasury

169

600

 

 

 

Vanguard Money Market Reserves

 

 

- Prime

19,789

2,500

- Federal

2,806

1,900

- U.S. Treasury

2,757

1,900

- Prime Institutional

844

1,000

 

 

 

Vanguard Variable Insurance Fund

 

 

- Money Market

247

600

- High Grade Bond

137

525

- Balanced

324

750

- Equity Income

134

525

- Equity Index

378

750

- Growth

245

600

- International

151

600

- High Yield Bond

8(3)

175

- Small Company Growth

31(3)

300

 

 

 

Vanguard Municipal Bond Fund

 

 

- Money Market

4,339

2,500

- Short-Term

1,398

1,250

- Limited-Term

1,730

1,500

- Intermediate-Term

5,803

2,500

- Long-Term

1,082

1,250

- High Yield

1,942

1,500

- Insured Long Term

1942

1,500

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

Vanguard California Tax-Free Fund

 

 

- Money Market

1,277

1,250

- Insured Intermediate-Term

263

750

- Insured Long-Term

975

1,000

 

 

 

Vanguard New Jersey Tax-Free Fund

 

 

- Money Market

884

1,000

- Insured Long-Term

793

1,000

 

 

 

Vanguard Pennsylvania Tax-Free Fund

 

 

- Money Market

1,302

1,250

- Insured Long-Term

1,560

1,500

 

 

 

Vanguard Ohio Tax-Free Fund

 

 

- Money Market

197

600

- Insured Long Term

202

600

 

 

 

Vanguard Florida Insured Tax-Free Fund

452

750

Vanguard Explorer Fund

2,219

1,700

Vanguard Equity Income Fund

1,234

1,250

Vanguard/Morgan Growth Fund

1,833

1,500

Vanguard PRIMECAP Fund

3,856

1,500

Vanguard Quantitative Portfolios

1,119

1,250

Gemini II

414

750

Vanguard Asset Allocation Fund

2,119

1,700

Vanguard Balanced Index Fund

658

900

Vanguard Convertible Securities Fund

164

600

Vanguard Preferred Stock Fund

286

750

Vanguard/Wellesley Income Fund

6,911

2,500

Vanguard/Wellington Fund

13,954

2,500

Vanguard New York Insured Tax-Free Fund

876

1,000

Vanguard Institutional Index Fund

8,941

2,500

Vanguard STAR Fund (4)

 

 

- STAR

5,316

2,500

- Life Income

137

525

- Life Conservative Growth

322

750

- Life Moderate Growth

461

750

- Life Growth

393

750

Vanguard Tax-Managed Fund

 

 

- Growth and Income

159

600

- Capital Appreciation

390

750

- Balanced

52

400

 

 

 

Rule 17(g)

 

 

Minimum

 

Net Assets

Coverage

Fund

(000,000)(1)

(000)(2)

 

 

 

 

 

 

 

 

 

Vanguard Horizon Fund

 

 

- Aggressive Growth

113

525

- Capital Opportunity

111

525

- Global Asset Allocation

68

450

- Global Equity

63

450

 

 

 

Vanguard Whitehall Funds

 

 

- Selected Value

62

400

 

 

 

 

$209,836(5)

$113,625

 

 

 

 

(1)As of May 31,1996

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

(3)As of June 4, 1996.

(4)Not a member of The Vanguard Group.

(5)Assets of Vanguard STAR Fund ($6,629) are counted twice.