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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
(NO. 2-31333)
UNDER THE SECURITIES ACT OF 1933
☒
Pre-Effective Amendment No.
☐
Post-Effective Amendment No. 90
☒
and
REGISTRATION STATEMENT
(NO. 811-01766)
UNDER THE INVESTMENT COMPANY ACT OF 1940
VANGUARD WELLESLEY INCOME FUND
(Exact Name of Registrant as Specified in Declaration of Trust)
P.O. Box 2600, Valley Forge, PA 19482
(Address of Principal Executive Office)
Registrant’s Telephone Number (610) 669-1000
Anne E. Robinson, Esquire
P.O. Box 876
Valley Forge, PA 19482
It is proposed that this filing will become effective (check appropriate box)
☐
immediately upon filing pursuant to paragraph (b)
☒
on January 31, 2023, pursuant to paragraph (b)
☐
60 days after filing pursuant to paragraph (a)(1)
☐
on (date) pursuant to paragraph (a)(1)
☐
75 days after filing pursuant to paragraph (a)(2)
☐
on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
☐
This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
Vanguard Wellesley® Income Fund
Prospectus
Investor Shares & Admiral™ Shares
Vanguard Wellesley Income Fund Investor Shares (VWINX)
Vanguard Wellesley Income Fund Admiral Shares (VWIAX)
This prospectus contains financial data for the Fund through the fiscal year ended September 30, 2022.
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Fund Summary
Investment Objective
The Fund seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation.
Fees and Expenses
The following table describes the fees and expenses you may pay if you buy, hold, and sell Investor Shares or Admiral Shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.
Shareholder Fees
(Fees paid directly from your investment)
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Sales Charge (Load) Imposed on Purchases |
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Sales Charge (Load) Imposed on Reinvested Dividends |
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Account Service Fee Per Year
(for certain fund account balances below $1,000,000) |
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Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
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Total Annual Fund Operating Expenses |
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Examples
The following examples are intended to help you compare the cost of investing in the Fund's Investor Shares or Admiral Shares with the cost of investing in other mutual funds. They illustrate the hypothetical expenses that you would incur over various periods if you were to invest $10,000 in the Fund's shares. These examples assume that the shares provide a return of 5% each year and that total annual fund operating expenses remain as stated in the preceding table. You would incur these hypothetical expenses whether or not you were to redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense examples, reduce the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 58% of the average value of its portfolio.
Principal Investment Strategies
The Fund invests approximately 60% to 65% of its assets in investment-grade fixed income securities that the advisor believes will generate a reasonable level of current income, including corporate, U.S. Treasury, and government agency bonds, as well as mortgage-backed securities. The remaining 35% to 40% of Fund assets are invested in common stocks of companies that have a history of above-average dividends or expectations of increasing dividends.
Principal Risks
The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money, and the level of risk may vary based on market conditions. However, because fixed income securities such as bonds usually are less volatile than stocks and because the Fund invests more than half of its assets in fixed income securities, the Fund’s overall level of risk is expected to be low to moderate.
• With approximately 60% to 65% of its assets allocated to bonds, the Fund is proportionately subject to the following bond risks: interest rate risk, which is the
chance that bond prices overall will decline because of rising interest rates; income risk, which is the chance that the Fund's income will decline because of falling interest rates; credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline; liquidity risk, which is the chance that the Fund may not be able to sell a security in a timely manner at a desired price; and call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. The Fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund's income. Such redemptions and subsequent reinvestments would also increase the Fund's portfolio turnover rate. For mortgage-backed securities, this risk is known as prepayment risk.
• With approximately 35% to 40% of its assets allocated to stocks, the Fund is proportionately subject to the following stock risks: stock market risk, which is the chance that stock prices overall will decline; and investment style risk, which is the chance that returns from mid- and large-capitalization dividend-paying value stocks will trail returns from the overall stock market. Mid- and large-cap stocks each tend to go through cycles of doing better—or worse—than other segments of the stock market or the stock market in general. These periods have, in the past, lasted for as long as several years. Historically, mid-cap stocks have been more volatile in price than large-cap stocks. The stock prices of mid-size companies tend to experience greater volatility because, among other things, these companies tend to be more sensitive to changing economic conditions.
• Manager risk, which is the chance that poor security selection will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Annual Total Returns
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund's Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the share classes presented compare with those of a composite bond/stock index and other relevant market indexes, which have investment characteristics similar to those of the Fund. The Wellesley Income Composite Index is weighted 65% in the Bloomberg U.S. Credit A or Better Bond Index and 35% in the FTSE High Dividend Yield Index. Keep in mind that the Fund's past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447.
Annual Total Returns — Vanguard Wellesley Income Fund Investor Shares
During the periods shown in the bar chart, the highest and lowest returns for a calendar quarter were:
Average Annual Total Returns for Periods Ended December 31, 2022
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Vanguard Wellesley Income Fund Investor Shares |
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Return After Taxes on Distributions |
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Return After Taxes on Distributions and Sale of Fund Shares |
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Vanguard Wellesley Income Fund Admiral Shares |
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Wellesley Income Composite Index
(reflects no deduction for fees, expenses, or taxes) |
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Bloomberg U.S. Aggregate Bond Index
(reflects no deduction for fees, expenses, or taxes) |
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Dow Jones U.S. Total Stock Market Float Adjusted Index
(reflects no deduction for fees, expenses, or taxes) |
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Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are shown only for the Investor Shares and may differ for each share class. After-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned Return After Taxes on Distributions and Sale of Fund Shares may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.
Investment Advisor
Wellington Management Company LLP (Wellington Management)
Portfolio Managers
Matthew C. Hand, CFA, Senior Managing Director and Equity Portfolio Manager of Wellington Management. He has managed a portion of the Fund since July 2022 (co-managed since 2021).
Loren L. Moran, CFA, Senior Managing Director and Fixed Income Portfolio Manager of Wellington Management. She has managed the bond portion of the Fund since 2017.
Purchase and Sale of Fund Shares
You may purchase or redeem shares online through our website (vanguard.com), by mail (The Vanguard Group, P.O. Box 982901, El Paso, TX 79998-2901), or by telephone (800-662-2739). The minimum investment amount required to open and maintain a Fund account for Investor Shares or Admiral Shares is $3,000 or $50,000, respectively. The minimum investment amount required to add to an existing Fund account is generally $1. Financial intermediaries, institutional clients, and Vanguard-advised clients should contact Vanguard for information on special eligibility rules that may apply to them regarding Admiral Shares. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility. If you are investing through an employer-sponsored retirement or savings plan, your plan administrator or your benefits office can provide you with detailed information on how you can invest through your plan.
Tax Information
The Fund’s distributions may be taxable as ordinary income or capital gain. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply.
Payments to Financial Intermediaries
The Fund and its investment advisor do not pay financial intermediaries for sales of Fund shares.
More on the Fund
This prospectus describes the principal risks you would face as a Fund shareholder. It is important to keep in mind one of the main principles of investing: generally, the higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: the lower the risk, the lower the potential reward. As you consider an investment in any mutual fund, you should take into account your personal tolerance for fluctuations in the securities markets. Look for this
symbol throughout the prospectus. It is used to mark detailed information about the more significant risks that you would confront as a Fund shareholder. To highlight terms and concepts important to mutual fund investors, we have provided Plain Talk® explanations along the way. Reading the prospectus will help you decide whether the Fund is the right investment for you. We suggest that you keep this prospectus for future reference.
Share Class Overview
The Fund offers two separate classes of shares: Investor Shares and Admiral Shares.
Both share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment returns will differ.
Plain Talk About Fund Expenses |
All mutual funds have operating expenses. These expenses, which are
deducted from a fund’s gross income, are expressed as a percentage of the
net assets of the fund. Assuming that operating expenses remain as stated
in the Fees and Expenses section, Vanguard Wellesley Income Fund’s
expense ratios would be as follows: for Investor Shares, 0.23%, or $2.30 per
$1,000 of average net assets; for Admiral Shares, 0.16%, or $1.60 per
$1,000 of average net assets. The average expense ratio for mixed-asset
target allocation conservative funds in 2021 was 0.68%, or $6.80 per $1,000
of average net assets (derived from data provided by Lipper, a Thomson
Reuters Company, which reports on the mutual fund industry). |
Plain Talk About Costs of Investing |
Costs are an important consideration in choosing a mutual fund. That is
because you, as a shareholder, pay a proportionate share of the costs of
operating a fund and any transaction costs incurred when the fund buys or
sells securities. These costs can erode a substantial portion of the gross
income or the capital appreciation a fund achieves. Even seemingly small
differences in expenses can, over time, have a dramatic effect on a
fund’s performance. |
The following sections explain the principal investment strategies and policies that the Fund uses in pursuit of its investment objective. The Fund's board of trustees, which oversees the Fund's management, may change investment strategies or policies in the interest of shareholders without a shareholder vote, unless those strategies or policies are designated as fundamental. Note that the Fund’s investment objective is not fundamental and may be changed without a shareholder vote.
Plain Talk About Balanced Funds |
Balanced funds are generally investments that seek to provide some
combination of income and capital appreciation by investing in a mix of
stocks and bonds. Because prices of stocks and bonds can respond
differently to economic events and influences, a balanced fund should
experience less volatility than a fund investing exclusively in stocks, but may
experience more volatility than a fund investing exclusively in bonds. |
Market Exposure
Bonds
The Fund invests approximately 60% to 65% of its assets in bonds.
The Fund is subject to interest rate risk, which is the chance that bond prices overall will decline because of rising interest rates. Interest rate risk for the Fund is expected to be moderate because the average duration of the Fund’s bond portfolio is intermediate-term and also because the Fund’s equity portfolio consists primarily of income-generating stocks, which tend to be moderately sensitive to interest rate changes.
Although fixed income securities (commonly referred to as bonds) are often thought to be less risky than stocks, there have been periods when bond prices have fallen significantly because of rising interest rates. For instance, prices of long-term bonds fell by almost 48% between December 1976 and September 1981.
To illustrate the relationship between bond prices and interest rates, the following table shows the effect of a 1% and a 2% change (both up and down) in interest rates on the values of three noncallable bonds (i.e., bonds that cannot be redeemed by the issuer) of different maturities, each with a face value of $1,000.
How Interest Rate Changes Affect the Value of a $1,000 Bond1
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Intermediate-Term (10 years) |
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1 Assuming a 4% coupon rate.
These figures are for illustration only; you should not regard them as an indication of future performance of the bond market as a whole or the Fund in particular. Also, because bonds make up only a portion of the Fund’s assets, changes in interest rates may not have as dramatic an effect on the Fund as they would on a fund made up entirely of bonds.
Plain Talk About Bonds and Interest Rates |
As a rule, when interest rates rise, bond prices fall. The opposite is also true:
Bond prices go up when interest rates fall. Why do bond prices and interest
rates move in opposite directions? Let’s assume that you hold a bond
offering a 4% yield. A year later, interest rates are on the rise and bonds of
comparable quality and maturity are offered with a 5% yield. With
higher-yielding bonds available, you would have trouble selling your 4% bond
for the price you paid—you would probably have to lower your asking price.
On the other hand, if interest rates were falling and 3% bonds were being
offered, you should be able to sell your 4% bond for more than you paid. |
How mortgage-backed securities are different: In general, declining interest
rates will not lift the prices of mortgage-backed securities—such as those
guaranteed by the Government National Mortgage Association—as much as
the prices of comparable bonds. Why? Because when interest rates fall, the
bond market tends to discount the prices of mortgage-backed securities for
prepayment risk—the possibility that homeowners will refinance their
mortgages at lower rates and cause the bonds to be paid off prior to
maturity. In part to compensate for this prepayment possibility,
mortgage-backed securities tend to offer higher yields than other bonds of
comparable credit quality and maturity. In contrast, when interest rates rise,
prepayments tend to slow down, subjecting mortgage-backed securities to
extension risk—the possibility that homeowners will repay their mortgages
at slower rates. This will lengthen the duration or average life of
mortgage-backed securities held by a fund and delay the fund’s ability to
reinvest proceeds at higher interest rates, making the fund more sensitive to
changes in interest rates. |
Changes in interest rates can affect bond income as well as bond prices.
The Fund is subject to income risk, which is the chance that the Fund’s income will decline because of falling interest rates. A fund holding bonds will experience a decline in income when interest rates fall because the fund then must invest new cash flow and cash from maturing bonds in lower-yielding bonds. Income risk for the Fund is expected to be moderate because the average duration of the Fund's bond portfolio is intermediate-term.
Plain Talk About Bond Maturities |
A bond is issued with a specific maturity date—the date when the issuer
must pay back the bond’s principal (face value). Bond maturities range from
less than 1 year to more than 30 years. Typically, the longer a bond’s maturity,
the more price risk you, as a bond investor, will face as interest rates
rise—but also the higher the potential yield you could receive. Longer-term
bonds are generally more suitable for investors willing to take a greater risk
of price fluctuations to get higher and more stable interest income.
Shorter-term bond investors should be willing to accept lower yields and
greater income variability in return for less fluctuation in the value of their
investment. The stated maturity of a bond may differ from the effective
maturity of a bond, which takes into consideration that an action such as a
call or refunding may cause bonds to be repaid before their stated
maturity dates. |
Because bond and stock prices often move in different directions, the Fund’s stock holdings help to reduce—but not eliminate—some of the bond price fluctuations caused by changes in interest rates. Likewise, stock market volatility may not have as dramatic an effect on the Fund as it would on a fund made up entirely of stocks.
Stocks
The remaining 35% to 40% of the Fund's assets are invested in stocks.
The Fund is subject to stock market risk, which is the chance that stock prices overall will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Stocks of publicly traded companies are often classified according to market capitalization, which is the market value of a company’s outstanding shares. These classifications typically include small-cap, mid-cap, and large-cap. It is important to understand that there are no “official” definitions of small-, mid-, and large-cap, even among Vanguard fund advisors, and that market capitalization ranges can change over time. The asset-weighted median market capitalization of the Fund's stock holdings as of September 30, 2022, was $101 billion.
Market disruptions can adversely affect local and global markets as well as normal market conditions and operations. Any such disruptions could have an adverse impact on the value of the Fund's investments and Fund performance.
Security Selection
Wellington Management, advisor to the Fund, invests approximately 60% to 65% of the Fund's assets in investment-grade bonds and approximately 35% to 40% of the Fund’s assets in dividend-paying common stocks. Although the mix of stocks and bonds varies from time to time, depending on the advisor’s view of economic and market conditions, generally bonds can be expected to represent at least 60% of the Fund’s holdings.
The Fund is managed according to traditional methods of active investment management. Securities are bought and sold based on the advisor’s judgments about companies and their financial prospects and about bond issuers and the general level of interest rates. The Fund's advisor may, at times, select securities that cause the Fund to focus in a particular market sector, which would subject the Fund to proportionately higher exposure to the risks of that sector.
The Fund is subject to manager risk, which is the chance that poor security selection will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.
Bonds
Wellington Management selects investment-grade bonds that it believes will generate a reasonable and sustainable level of current income. These may include short-, intermediate-, and long-term corporate, U.S. Treasury, government agency, and asset-backed bonds, as well as mortgage-backed securities. The bonds are bought and sold according to the advisor’s judgment about bond issuers and the general direction of interest rates, within the context of the economy in general. Although the Fund does not have specific maturity guidelines, the average duration of the Fund’s bond portfolio as of September 30, 2022, was 6.7 years.
Plain Talk About Types of Bonds |
Bonds are issued (sold) by many sources: Corporations issue corporate
bonds; the federal government issues U.S. Treasury bonds; agencies of the
federal government issue agency bonds; financial institutions issue
asset-backed bonds; and mortgage holders issue “mortgage-backed”
pass-through certificates. Each issuer is responsible for paying back the
bond’s initial value as well as for making periodic interest payments. Many
bonds issued by government agencies and entities are neither guaranteed
nor insured by the U.S. government. |
A breakdown of the Fund’s bond holdings (which amounted to approximately 61.1% of the Fund’s net assets) as of September 30, 2022, follows:
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Percentage of Fund’s
Bond Holdings |
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Government Mortgage-Backed |
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Commercial Mortgage-Backed |
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Keep in mind that, because the bond makeup of the Fund can change daily, this listing is only a “snapshot” at one point in time.
The Fund is subject to credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline.
The advisor purchases bonds that are of investment-grade quality—that is, bonds rated at least Baa3 by Moody‘s Investors Service, Inc., or BBB– by Standard & Poor‘s—or, if unrated, are determined to be of comparable quality by the advisor.
The U.S. government guarantees the timely payment of interest and principal for its U.S. Treasury bonds; some (but not all) agency bonds have the same guarantee. The government does not, however, guarantee its bonds’ prices. In other words, although U.S. Treasury and agency bonds may enjoy among the highest credit ratings, their prices—like the prices of other bonds in the Fund—will fluctuate with changes in interest rates.
Plain Talk About Credit Quality |
A bond’s credit quality rating is an assessment of the issuer’s ability to pay
interest on the bond and, ultimately, to repay the principal. The lower the
credit quality, the greater the perceived chance that the bond issuer will
default, or fail to meet its payment obligations. All things being equal, the
lower a bond’s credit quality, the higher its yield should be to compensate
investors for assuming additional risk. |
Although falling interest rates tend to strengthen bond prices, they can cause another problem for bond fund investors—bond calls.
The Fund is subject to call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. The Fund would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund‘s income. Such redemptions and subsequent reinvestments would also increase the Fund’s portfolio turnover rate. For mortgage-backed securities, this risk is known as prepayment risk. Call/prepayment risk is expected to be low to moderate for the Fund because it invests only a limited portion of its assets in callable bonds and mortgage-backed securities.
Bond issuers take advantage of falling interest rates by calling corporate bonds. With mortgage-backed securities, it is the mortgage holder—such as the U.S. homeowner—who benefits from lower rates.
The Fund is subject to liquidity risk, which is the chance that the Fund may not be able to sell a security in a timely manner at a desired price.
Corporate bonds are traded among dealers and brokers that connect buyers with sellers. Liquidity in the corporate bond market may be challenged depending on overall economic conditions and credit tightening. There may be little trading in the secondary market for particular bonds and other debt securities, which may make them more difficult to value or sell.
Stocks
The Fund’s stocks are chosen primarily for their dividend-paying capabilities, but they must also have the potential for moderate long-term capital appreciation. The advisor looks for stocks of companies that either offer significant dividends now or expect to increase their dividends in the future. This income orientation leads the Fund to invest in stocks with higher-than-market-average dividend yields. As a result, the Fund's equity holdings are expected to have more of a value orientation than a growth orientation.
Plain Talk About Growth Funds and Value Funds |
Growth investing and value investing are two styles employed by stock-fund
managers. Growth funds generally invest in stocks of companies believed to
have above-average potential for growth in revenue, earnings, cash flow, or
other similar criteria. These stocks typically have low dividend yields, if any,
and above-average prices in relation to measures such as earnings and book
value. Value funds typically invest in stocks whose prices are below average
in relation to those measures; these stocks often have above-average
dividend yields. Value stocks also may remain undervalued by the market for
long periods of time. Growth and value stocks have historically produced
similar long-term returns, though each category has periods when it
outperforms the other. |
The Fund is subject to investment style risk, which is the chance that returns from mid- and large-capitalization dividend-paying value stocks will trail returns from the overall stock market. Mid- and large-cap stocks each tend to go through cycles of doing better—or worse—than other segments of the stock market or the stock market in general. These periods have, in the past, lasted for as long as several years. Historically, mid-cap stocks have been more volatile in price than large-cap stocks. The stock prices of mid-size companies tend to experience greater volatility because, among other things, these companies tend to be more sensitive to changing economic conditions.
Other Investment Policies and Risks
In addition to investing in bonds and stocks, the Fund may make other kinds of investments to achieve its investment objective.
Although the Fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 25% of its assets in foreign securities, which may include depositary receipts. Foreign securities may be traded on U.S. or foreign markets. To the extent that it owns foreign securities, the Fund is subject to country risk and currency risk. Country risk is the chance that world events—such as political upheaval, financial troubles, or natural disasters—will adversely affect the value and/or liquidity of securities issued by companies in foreign countries. In addition, the prices of foreign stocks and the prices of U.S. stocks have, at times, moved in opposite directions. Currency risk is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.
The Fund may invest in securities that are convertible into common stocks, as well as invest modestly in collateralized mortgage obligations (CMOs).
The Fund may also invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, a bond, or a currency), a physical asset (such as gold, oil, or wheat), a market index, or a reference rate. Investments in derivatives may subject the Fund to risks different from, and possibly greater than, those of investments directly in the underlying securities or assets. The Fund's derivative investments may include fixed income futures contracts, options, straddles, credit swaps, interest rate swaps, total return swaps, and other types of derivatives. The Fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.
The Fund may enter into foreign currency exchange forward contracts, which are a type of derivative. A foreign currency exchange forward contract is an agreement to buy or sell a currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Advisors of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the Fund’s securities from falling in value as a result of risks other than unfavorable currency exchange movements.
Plain Talk About Derivatives |
Derivatives can take many forms. Some forms of derivatives—such as
exchange-traded futures and options on securities, commodities, or
indexes—have been trading on regulated exchanges for decades. These
types of derivatives are standardized contracts that can easily be bought and
sold and whose market values are determined and published daily. On the
other hand, non-exchange-traded derivatives—such as certain swap
agreements and foreign currency exchange forward contracts—tend to be
more specialized or complex and may be more difficult to accurately value. |
Cash Management
The Fund's daily cash balance may be invested in Vanguard Market Liquidity Fund and/or Vanguard Municipal Cash Management Fund (each, a CMT Fund), which are low-cost money market funds. When investing in a CMT Fund, the Fund bears its proportionate share of the expenses of the CMT Fund in which it invests. Vanguard receives no additional revenue from Fund assets invested in a CMT Fund.
Redemption Requests
Methods used to meet redemption requests. Under normal circumstances, the Fund typically expects to meet redemptions with positive cash flows. When this is not an option, the Fund seeks to maintain its risk exposure by selling a cross section of the Fund’s holdings to meet redemptions, while also factoring in transaction costs. Additionally, the Fund may work with larger clients to implement their redemptions in a manner that is least disruptive to the portfolio; see “Potentially disruptive redemptions” under Redeeming Shares in the Investing With Vanguard section.
Under certain circumstances, including under stressed market conditions, there are additional tools that the Fund may use in order to meet redemptions, including advancing the settlement of market trades with counterparties to match investor redemption payments or delaying settlement of an investor’s transaction to match trade settlement within regulatory requirements. The Fund may also suspend payment of redemption proceeds for up to seven days; see “Emergency circumstances” under Redeeming Shares in the Investing With Vanguard section. Additionally under these unusual circumstances, the Fund may borrow money (subject to certain regulatory conditions and if available under board-approved procedures) through an interfund lending facility; through a bank line-of-credit, including a joint committed credit facility; or through an uncommitted line-of-credit from Vanguard in order to meet redemption requests.
Potential redemption activity impacts. At times, the Fund may experience adverse effects when certain large shareholders, or multiple shareholders comprising significant ownership of the Fund, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so. This may result in the Fund distributing capital gains or other taxable income to non-redeeming shareholders. Large redemptions may also increase the Fund's transaction costs. Redemption activity can occur for many reasons, including shareholder reactions to market movements or other events unrelated to Vanguard’s actions, or when Vanguard makes product changes that, for example, may result in a shareholder redeeming shares of the Fund to purchase shares of another similar fund or investment vehicle. When experiencing large redemptions, the Fund reserves the right to pay all or part of the redemption in-kind and/or delay payment of the redemption proceeds for up to seven calendar days; see “Potentially disruptive redemptions” under Redeeming Shares in the Investing With Vanguard section.
Temporary Investment Measures
The Fund may temporarily depart from its normal investment policies and strategies when the advisor believes that doing so is in the Fund's best interest, so long as the strategy or policy employed is consistent with the Fund's investment objective. For instance, the Fund may invest beyond its normal limits in derivatives or exchange-traded funds that are consistent with the Fund's investment objective when those instruments are more favorably priced or provide needed liquidity, as might be the case if the Fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.
In addition, the Fund may take temporary defensive positions that are inconsistent with its normal investment policies and strategies—for instance, by allocating substantial assets to cash equivalent investments or other less volatile instruments—in response to adverse or unusual market, economic, political, or other conditions. In doing so, the Fund may succeed in avoiding losses but may otherwise fail to achieve its investment objective.
Frequent Trading or Market-Timing
Background. Some investors try to profit from strategies involving frequent trading of mutual fund shares, such as market-timing. For funds holding foreign securities, investors may try to take advantage of an anticipated difference between the price of the fund’s shares and price movements in overseas markets, a practice also known as time-zone arbitrage. Investors also may try to engage in frequent trading of funds holding investments such as small-cap stocks and high-yield bonds. As money is shifted into and out of a fund by a shareholder engaging in frequent trading, the fund incurs costs for buying and selling securities, resulting in increased brokerage and administrative costs. These costs are borne by all fund shareholders, including the long-term investors who do not generate the costs. In addition, frequent trading may interfere with an advisor’s ability to efficiently manage the fund.
Policies to address frequent trading. The Vanguard funds (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) do not knowingly accommodate frequent trading. The board of trustees of each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) has adopted policies and procedures reasonably designed to detect and discourage frequent trading and, in some cases, to compensate the fund for the costs associated with it. These policies and procedures do not apply to ETF Shares because frequent trading in ETF Shares generally does not disrupt portfolio management or otherwise harm fund
shareholders. Although there is no assurance that Vanguard will be able to detect or prevent frequent trading or market-timing in all circumstances, the following policies have been adopted to address these issues:
• Each Vanguard fund reserves the right to reject any purchase request—including exchanges from other Vanguard funds—without notice and regardless of size. For example, a purchase request could be rejected because the investor has a history of frequent trading or if Vanguard determines that such purchase may negatively affect a fund’s operation or performance.
• Each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) generally prohibits, except as otherwise noted in the Investing With Vanguard section, an investor’s purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account.
• Certain Vanguard funds charge shareholders purchase and/or redemption fees on transactions.
See the Investing With Vanguard section of this prospectus for further details on Vanguard’s transaction policies.
Each Vanguard fund (other than retail and government money market funds), in determining its net asset value, will use fair-value pricing when appropriate, as described in the Share Price section. Fair-value pricing may reduce or eliminate the profitability of certain frequent-trading strategies.
Do not invest with Vanguard if you are a market-timer.
A precautionary note to investment companies: The Fund's shares are issued by a registered investment company, and therefore the acquisition of such shares by other investment companies and private funds is subject to the restrictions of Section 12(d)(1) of the Investment Company Act of 1940 (the 1940 Act). SEC Rule 12d1-4 under the 1940 Act permits registered investment companies to invest in other registered investment companies beyond the limits in Section 12(d)(1), subject to certain conditions, including that funds with different investment advisors must enter into a fund of funds investment agreement.
Turnover Rate
Although the Fund generally seeks to invest for the long term, it may sell securities regardless of how long they have been held. The Financial Highlights section of this prospectus shows historical turnover rates for the Fund. A turnover rate of 100%, for example, would mean that the Fund had sold and
replaced securities valued at 100% of its net assets within a one-year period. In general, the greater the turnover rate, the greater the impact transaction costs will have on a fund’s return. Also, funds with high turnover rates may be more likely to generate capital gains, including short-term capital gains, that must be distributed to shareholders and will be taxable to shareholders investing through a taxable account.
The Fund and Vanguard
The Fund is a member of The Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All of the funds that are members of Vanguard (other than funds of funds) share in the expenses associated with administrative services and business operations, such as personnel, office space, and equipment.
Vanguard Marketing Corporation provides marketing services to the funds. Although fund shareholders do not pay sales commissions or 12b-1 distribution fees, each fund (other than a fund of funds) or each share class of a fund (in the case of a fund with multiple share classes) pays its allocated share of the Vanguard funds’ marketing costs.
Plain Talk About Vanguard’s Unique Corporate Structure |
Vanguard is owned jointly by the funds it oversees and thus indirectly by the
shareholders in those funds. Most other mutual funds are operated by
management companies that are owned by third parties—either public or
private stockholders—and not by the funds they serve. |
Investment Advisor
Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210, a Delaware limited liability partnership, is an investment counseling firm that provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 80 years. Wellington Management is owned by the partners of Wellington Management Group LLP, a Massachusetts limited liability partnership. As of September 30, 2022, Wellington Management and its investment advisory affiliates had investment management authority with respect to approximately $1.1 trillion in client assets. The firm manages the Fund subject to the supervision and oversight of the trustees and officers of the Fund.
The Fund pays the advisor a base fee plus or minus a performance adjustment. The base fee, which is paid quarterly, is a percentage of average daily net assets under management during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of the Fund relative to that of the Wellesley Income Composite Index over the preceding 36-month period. The Index is a composite benchmark weighted 65% in the Bloomberg U.S. Credit A or Better Bond Index and 35% in the FTSE High Dividend Yield Index. When the performance adjustment is positive, the Fund’s expenses increase; when it is negative, expenses decrease.
For the fiscal year ended September 30, 2022, the advisory fee represented an effective annual rate of 0.05% of the Fund’s average net assets before a performance-based increase of 0.01%.
Under the terms of an SEC exemption, the Fund's board of trustees may, without prior approval from shareholders, change the terms of an advisory agreement with a third-party investment advisor or hire a new third-party investment advisor—either as a replacement for an existing advisor or as an additional advisor. Any significant change in the Fund’s advisory arrangements will be communicated to shareholders in writing. As the Fund's sponsor and overall manager, Vanguard may provide investment advisory services to the Fund at any time. Vanguard may also recommend to the board of trustees that an advisor be hired, terminated, or replaced or that the terms of an existing advisory agreement be revised. The Fund has filed an application seeking a similar SEC exemption with respect to investment advisors that are wholly owned subsidiaries of Vanguard. If the exemption is granted, the Fund may rely on the new SEC relief.
For a discussion of why the board of trustees approved the Fund's investment advisory agreement, see the most recent annual report to shareholders covering the fiscal year ended September 30.
The managers primarily responsible for the day-to-day management of the Fund are:
Matthew C. Hand, CFA, Senior Managing Director and Equity Portfolio Manager of Wellington Management. He has worked in investment management since joining Wellington Management in 2004, has managed investment portfolios since 2019, and has managed a portion of the Fund since July 2022 (co-managed since 2021). Education: B.A., University of Pennsylvania.
Loren L. Moran, CFA, Senior Managing Director and Fixed Income Portfolio Manager of Wellington Management. She has worked in investment management since 2001, has been with Wellington Management since 2014, and has managed the bond portion of the Fund since 2017. Education: B.S., Georgetown University.
The Fund's Statement of Additional Information provides information about each portfolio manager’s compensation, other accounts under management, and ownership of shares of the Fund.
Dividends, Capital Gains, and Taxes
Fund Distributions
The Fund distributes to shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net short-term or long-term capital gains realized from the sale of its holdings. From time to time, the Fund may also make distributions that are treated as a return of capital. Income dividends generally are distributed quarterly in March, June, September, and December; capital gains distributions, if any, generally occur annually in December. In addition, the Fund may occasionally make a supplemental distribution at some other time during the year.
You can receive distributions of income or capital gains in cash, or you can have them automatically reinvested in more shares of the Fund. However, if you are investing through an employer-sponsored retirement or savings plan, your distributions will be automatically reinvested in additional Fund shares.
Plain Talk About Distributions |
As a shareholder, you are entitled to your portion of a fund’s income from
interest and dividends as well as capital gains from the fund’s sale of
investments. Income consists of both the dividends that the fund earns from
any stock holdings and the interest it receives from any money market and
bond investments. Capital gains are realized whenever the fund sells
securities for higher prices than it paid for them. These capital gains are
either short-term or long-term, depending on whether the fund held the
securities for one year or less or for more than one year. |
Basic Tax Points
Investors in taxable accounts should be aware of the following basic federal income tax points:
• Distributions are taxable to you whether or not you reinvest these amounts in additional Fund shares.
• Distributions declared in December—if paid to you by the end of January—are taxable as if received in December.
• Any dividend distribution or short-term capital gains distribution that you receive is taxable to you as ordinary income. If you are an individual and meet certain holding-period requirements with respect to your Fund shares, you may be eligible for reduced tax rates on “qualified dividend income,” if any, or a special tax deduction on “qualified REIT dividends,” if any, distributed by the Fund.
• Any distribution of net long-term capital gains is taxable to you as long-term capital gains, no matter how long you have owned shares in the Fund.
• Capital gains distributions may vary considerably from year to year as a result of the Fund's normal investment activities and cash flows.
• Your cost basis in the Fund will be decreased by the amount of any return of capital that you receive. This, in turn, will affect the amount of any capital gain or loss that you realize when selling or exchanging your Fund shares.
• Return of capital distributions generally are not taxable to you until your cost basis has been reduced to zero. If your cost basis is at zero, return of capital distributions will be treated as capital gains.
• A sale or exchange of Fund shares is a taxable event. This means that you may have a capital gain to report as income, or a capital loss to report as a deduction, when you complete your tax return.
• Any conversion between classes of shares of the same fund is a nontaxable event. By contrast, an exchange between classes of shares of different funds is a taxable event.
• Vanguard (or your intermediary) will send you a statement each year showing the tax status of all of your distributions.
Individuals, trusts, and estates whose income exceeds certain threshold amounts are subject to a 3.8% Medicare contribution tax on “net investment income.” Net investment income takes into account distributions paid by the Fund and capital gains from any sale or exchange of Fund shares.
Dividend distributions and capital gains distributions that you receive, as well as your gains or losses from any sale or exchange of Fund shares, may be subject to state and local income taxes.
This prospectus provides general tax information only. If you are investing through a tax-advantaged account, such as an IRA or an employer-sponsored retirement or savings plan, special tax rules apply. Please consult your tax advisor for detailed information about any tax consequences for you.
Plain Talk About Buying a Dividend |
Unless you are a tax-exempt investor or investing through a tax-advantaged
account (such as an IRA or an employer-sponsored retirement or savings
plan), you should consider avoiding a purchase of fund shares shortly before
the fund makes a distribution, because doing so can cost you money in
taxes. This is known as “buying a dividend.” For example: On December 15,
you invest $5,000, buying 250 shares for $20 each. If the fund pays a
distribution of $1 per share on December 16, its share price will drop to $19
(not counting market change). You still have only $5,000 (250 shares x $19 =
$4,750 in share value, plus 250 shares x $1 = $250 in distributions), but you
owe tax on the $250 distribution you received—even if you reinvest it in
more shares. To avoid buying a dividend, check a fund’s distribution schedule
before you invest. |
General Information
Backup withholding. By law, Vanguard must withhold 24% of any taxable distributions or redemptions from your account if you do not:
• Provide your correct taxpayer identification number.
• Certify that the taxpayer identification number is correct.
• Confirm that you are not subject to backup withholding.
Similarly, Vanguard (or your intermediary) must withhold taxes from your account if the IRS instructs us to do so.
Foreign investors. Vanguard funds offered for sale in the United States (Vanguard U.S. funds), including the Fund offered in this prospectus, are not widely available outside the United States. Non-U.S. investors should be aware that U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments in Vanguard U.S. funds. Foreign investors should visit the non-U.S. investors page on our website at vanguard.com for information on Vanguard’s non-U.S. products.
Invalid addresses. If a dividend distribution or capital gains distribution check mailed to your address of record is returned as undeliverable, Vanguard will automatically reinvest the distribution and all future distributions until you provide us with a valid mailing address. Reinvestments will receive the net asset value calculated on the date of the reinvestment.
Share Price
Share price, also known as net asset value (NAV), is calculated as of the close of regular trading on the New York Stock Exchange (NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for business (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s discretion), generally 4 p.m., Eastern time. Each share class has its own NAV, which is computed by dividing the total assets, minus liabilities, allocated to the share class by the number of Fund shares outstanding for that class. On U.S. holidays or other days when the NYSE is closed, the NAV is not calculated, and the Fund does not sell or redeem shares. However, on those days the value of the Fund’s assets may be affected to the extent that the Fund holds securities that change in value on those days (such as foreign securities that trade on foreign markets that are open).
Stocks held by a Vanguard fund are valued at their market value when reliable market quotations are readily available from the principal exchange or market on which they are traded. Such securities are generally valued at their official closing price, the last reported sales price, or if there were no sales that day, the mean between the closing bid and asking prices. Debt securities held by a fund are valued based on information furnished by an independent pricing service or market quotations. When a fund determines that pricing-service information or market quotations either are not readily available or do not accurately reflect the value of a security, the security is priced at its fair value (the amount that the owner might reasonably expect to receive upon the current sale of the security).
The values of any foreign securities held by a fund are converted into U.S. dollars using an exchange rate obtained from an independent third party as of the close of regular trading on the NYSE. The values of any mutual fund shares, including institutional money market fund shares, held by a fund are based on the NAVs of the shares. The values of any ETF shares or closed-end fund shares held by a fund are based on the market value of the shares.
A fund also will use fair-value pricing if the value of a security it holds has been materially affected by events occurring before the fund's pricing time but after the close of the principal exchange or market on which the security is traded. This most commonly occurs with foreign securities, which may trade on foreign exchanges that close many hours before the fund's pricing time. Intervening events might be company-specific (e.g., earnings report, merger announcement) or country-specific or regional/global (e.g., natural disaster, economic or political news, interest rate change, act of terrorism). Intervening events include price movements in U.S. markets that exceed a specified threshold or that are otherwise deemed to affect the value of foreign securities.
Fair-value pricing may be used for domestic securities—for example, if (1) trading in a security is halted and does not resume before the fund’s pricing time or a security does not trade in the course of a day and (2) the fund holds enough of the security that its price could affect the NAV. A fund may use fair-value pricing with respect to its fixed income securities on bond market holidays when the fund is open for business (such as Columbus Day and Veterans Day).
Fair-value prices are determined by Vanguard according to procedures adopted by the board of trustees. When fair-value pricing is employed, the prices of securities used by a fund to calculate the NAV may differ from quoted or published prices for the same securities.
The Fund has authorized certain financial intermediaries and their designees, and may, from time to time, authorize certain fund of funds for which Vanguard serves as the investment advisor (Vanguard Funds of Funds), to accept orders to buy or sell fund shares on its behalf. The Fund will be deemed to receive an order when accepted by the financial intermediary, its designee, or one of the Vanguard Funds of Funds, and the order will receive the NAV next computed by the Fund after such acceptance.
Vanguard fund share prices are published daily on our website at vanguard.com/prices.
Financial Highlights
Financial highlights information is intended to help you understand a fund’s performance for the past five years (or, if shorter, its period of operations). Certain information reflects financial results for a single fund share. Total return represents the rate that an investor would have earned or lost each period on an investment in a fund or share class (assuming reinvestment of all distributions). This information has been obtained from the financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, whose report, along with fund financial statements, is included in a fund’s most recent annual report to shareholders. You may obtain a free copy of a fund’s latest annual or semiannual report, which is available upon request.
Vanguard Wellesley Income Fund Investor Shares
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Net Realized and Unrealized Gain (Loss) on Investments |
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Total from Investment Operations |
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Dividends from Net Investment Income |
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Net Asset Value, End of Period |
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Net Assets, End of Period (Millions) |
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Ratio of Total Expenses to Average Net Assets3 |
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Ratio of Net Investment Income to Average Net Assets |
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Calculated based on average shares outstanding. |
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Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses
provide information about any applicable account service fees. |
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Includes performance-based investment advisory fee increases (decreases) of 0.01%, 0.01%, 0.01%, 0.01%, and
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The ratio of expenses to average net assets for the period net of reduction from custody fee offset and broker
commission abatement arrangements was 0.23%. |
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Includes 10%, 4%, 7%, 2%, and 4%, respectively, attributable to mortgage-dollar-roll activity. |
Vanguard Wellesley Income Fund Admiral Shares
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Net Realized and Unrealized Gain (Loss) on Investments |
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Net Asset Value, End of Period |
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Net Assets, End of Period (Millions) |
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Ratio of Total Expenses to Average Net Assets3 |
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Calculated based on average shares outstanding. |
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Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses
provide information about any applicable account service fees. |
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Includes performance-based investment advisory fee increases (decreases) of 0.01%, 0.01%, 0.01%, 0.01%, and
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The ratio of expenses to average net assets for the period net of reduction from custody fee offset and broker
commission abatement arrangements was 0.16%. |
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Includes 10%, 4%, 7%, 2%, and 4%, respectively, attributable to mortgage-dollar-roll activity. |
Investing With Vanguard
This section of the prospectus explains the basics of doing business with Vanguard. Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as a bank, a broker, or an investment advisor. If you hold Vanguard fund shares directly with Vanguard, you should carefully read each topic within this section that pertains to your relationship with Vanguard. If you hold Vanguard fund shares indirectly through an intermediary (including shares held in a brokerage account through Vanguard Brokerage Services®), please see Investing With Vanguard Through Other Firms, and also refer to your account agreement with the intermediary for information about transacting in that account. If you hold Vanguard fund shares through an employer-sponsored retirement or savings plan, please see Employer-Sponsored Plans. Vanguard reserves the right to change the following policies without notice. Please call or check online for current information. See Contacting Vanguard.
For Vanguard fund shares held directly with Vanguard, each fund you hold in an account is a separate “fund account.” For example, if you hold three funds in a nonretirement account titled in your own name, two funds in a nonretirement account titled jointly with your spouse, and one fund in an individual retirement account, you have six fund accounts—and this is true even if you hold the same fund in multiple accounts. Note that each reference to “you” in this prospectus applies to any one or more registered account owners or persons authorized to transact on your account.
Purchasing Shares
Vanguard reserves the right, without notice, to increase or decrease the minimum amount required to open, convert shares to, or maintain a fund account or to add to an existing fund account.
Investment minimums may differ for certain categories of investors.
Account Minimums for Investor Shares
To open and maintain an account. $3,000.
To add to an existing account. Generally $1.
Account Minimums for Admiral Shares
To open and maintain an account. $50,000. If you request Admiral Shares when you open a new account but the investment amount does not meet the account minimum for Admiral Shares, your investment will be placed in Investor Shares of the Fund. Financial intermediaries, institutional clients, and Vanguard-advised clients should contact Vanguard for information on special
eligibility rules that may apply to them regarding Admiral Shares. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility.
To add to an existing account. Generally $1.
How to Initiate a Purchase Request
Be sure to check Exchanging Shares, Frequent-Trading Limitations, and Other Rules You Should Know before placing your purchase request.
Online. You may open certain types of accounts, request a purchase of shares, and request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.
By telephone. You may call Vanguard to begin the account registration process or request that the account-opening forms be sent to you. You may also call Vanguard to request a purchase of shares in your account or to request an exchange. See Contacting Vanguard.
By mail. You may send Vanguard your account registration form and check to open a new fund account. To add to an existing fund account, you may send your check with an Invest-by-Mail form (from a transaction confirmation or your account statement) or with a deposit slip (available online).
How to Pay for a Purchase
By electronic bank transfer. You may purchase shares of a Vanguard fund through an electronic transfer of money from a bank account. To establish the electronic bank transfer service on an account, you must designate the bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can purchase shares by electronic bank transfer on a regular schedule (Automatic Investment Plan), if eligible, or upon request. Your purchase request can be initiated online (if you are registered for online access), by telephone, or by mail.
By wire. Wiring instructions vary for different types of purchases. Please call Vanguard for instructions and policies on purchasing shares by wire. See Contacting Vanguard.
By check. You may make initial or additional purchases to your fund account by sending a check with a deposit slip or by utilizing our mobile application if your account is eligible and you are registered for online access. Also see How to Initiate a Purchase Request. Make your check payable to Vanguard and include the appropriate fund number (e.g., Vanguard—xx). For a list of Fund numbers (for share classes in this prospectus), see Additional Information.
By exchange. You may purchase shares of a Vanguard fund using the proceeds from the simultaneous redemption of shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail with an exchange form. See Exchanging Shares.
Trade Date
The trade date for any purchase request received in good order will depend on the day and time Vanguard receives your request, the manner in which you are paying, and the type of fund you are purchasing. Your purchase will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See Share Price.
For purchases by check into all funds other than money market funds and for purchases by exchange, wire, or electronic bank transfer into all funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the same day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the next business day.
For purchases by check into money market funds: If the purchase request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date for the purchase will be the next business day. If the purchase request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date for the purchase will be the second business day following the day Vanguard receives the purchase request. Because money market instruments must be purchased with federal funds and it takes a money market mutual fund one business day to convert check proceeds into federal funds, the trade date for the purchase will be one business day later than for other funds.
If applicable, orders by Vanguard Funds of Funds will be treated as received by the Fund at the same time that corresponding orders are received in proper form by the Vanguard Funds of Funds.
If your purchase request is not accurate and complete, it may be rejected. See Other Rules You Should Know—Good Order.
For further information about purchase transactions, consult our website at vanguard.com or see Contacting Vanguard.
Other Purchase Rules You Should Know
Admiral Shares. Admiral Shares generally are not available for SIMPLE IRAs and Vanguard Individual 401(k) Plans.
Check purchases. All purchase checks must be written in U.S. dollars, be drawn on a U.S. bank, and be accompanied by good order instructions. Vanguard does not accept cash, traveler’s checks, starter checks, or money orders. In addition, Vanguard may refuse checks that are not made payable to Vanguard.
New accounts. We are required by law to obtain from you certain personal information that we will use to verify your identity. If you do not provide the information, we may not be able to open your account. If we are unable to verify your identity, Vanguard reserves the right, without notice, to close your account or take such other steps as we deem reasonable. Certain types of accounts may require additional documentation.
Refused or rejected purchase requests. Vanguard reserves the right to stop selling fund shares or to reject any purchase request at any time and without notice, including, but not limited to, purchases requested by exchange from another Vanguard fund. This also includes the right to reject any purchase request because the investor has a history of frequent trading or because the purchase may negatively affect a fund’s operation or performance.
Large purchases. Call Vanguard before attempting to invest a large dollar amount.
No cancellations. Vanguard will not accept your request to cancel any purchase request once processing has begun. Please be careful when placing a purchase request.
Converting Shares
When a conversion occurs, you receive shares of one class in place of shares of another class of the same fund. At the time of conversion, the dollar value of the “new” shares you receive equals the dollar value of the “old” shares that were converted. In other words, the conversion has no effect on the value of your investment in the fund at the time of the conversion. However, the number of shares you own after the conversion may be greater than or less than the number of shares you owned before the conversion, depending on the NAVs of the two share classes.
Vanguard will not accept your request to cancel any self-directed conversion request once processing has begun. Please be careful when placing a conversion request.
A conversion between share classes of the same fund is a nontaxable event.
Trade Date
The trade date for any conversion request received in good order will depend on the day and time Vanguard receives your request. Your conversion will be executed using the NAVs of the different share classes on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See Share Price.
For a conversion request received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. For a conversion request received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day. See Other Rules You Should Know.
Conversions From Investor Shares to Admiral Shares
Self-directed conversions. If your account balance in the Fund is at least $50,000, you may ask Vanguard to convert your Investor Shares to Admiral Shares at any time. You may request a conversion through our website (if you are registered for online access), by telephone, or by mail. Financial intermediaries, institutional clients, and Vanguard-advised clients should contact Vanguard for information on special eligibility rules that may apply to them regarding Admiral Shares. See Contacting Vanguard. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility.
Automatic conversions. Vanguard conducts periodic reviews of account balances and may, if your account balance in the Fund exceeds $50,000, automatically convert your Investor Shares to Admiral Shares. You will be notified before an automatic conversion occurs and will have an opportunity to instruct Vanguard not to effect the conversion. Financial intermediaries, institutional clients, and Vanguard-advised clients should contact Vanguard for information on special eligibility rules that may apply to them regarding Admiral Shares. If you are investing through an intermediary, please contact that firm directly for more information regarding your eligibility.
Mandatory Conversions to Investor Shares
If an account no longer meets the balance requirements for Admiral Shares, Vanguard may automatically convert the shares in the account to Investor Shares. A decline in the account balance because of market movement may result in such a conversion. Vanguard will notify the investor in writing before any mandatory conversion occurs.
Redeeming Shares
How to Initiate a Redemption Request
Be sure to check Exchanging Shares, Frequent-Trading Limitations, and Other Rules You Should Know before placing your redemption request.
Online. You may request a redemption of shares or request an exchange through our website or our mobile application if your account is eligible and you are registered for online access.
By telephone. You may call Vanguard to request a redemption of shares or an exchange. See Contacting Vanguard.
By mail. You may send a form (available online) to Vanguard to redeem from a fund account or to make an exchange.
How to Receive Redemption Proceeds
By electronic bank transfer. You may have the proceeds of a fund redemption sent directly to a designated bank account. To establish the electronic bank transfer service on an account, you must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form. After the service is set up on your account, you can redeem shares by electronic bank transfer on a regular schedule (Automatic Withdrawal Plan), if eligible, or upon request. Your redemption request can be initiated online (if you are registered for online access), by telephone, or by mail.
By wire. To receive your proceeds by wire, you may instruct Vanguard to wire your redemption proceeds ($100 minimum) to a previously designated bank account. To establish the wire redemption service, you generally must designate a bank account online, complete a form, or fill out the appropriate section of your account registration form.
Please note that Vanguard charges a $10 wire fee for outgoing wire redemptions. The fee is assessed in addition to, rather than being withheld from, redemption proceeds and is paid directly to the fund in which you invest. For example, if you redeem $100 via a wire, you will receive the full $100, and the
$10 fee will be assessed to your fund account through an additional redemption of fund shares. If you redeem your entire fund account, your redemption proceeds will be reduced by the amount of the fee. The wire fee does not apply to accounts held by Flagship and Flagship Select clients; accounts held through intermediaries, including Vanguard Brokerage Services; or accounts held by institutional clients.
By exchange. You may have the proceeds of a Vanguard fund redemption invested directly in shares of another Vanguard fund. You may initiate an exchange online (if you are registered for online access), by telephone, or by mail. See Exchanging Shares.
By check. If you have not chosen another redemption method, Vanguard will mail you a redemption check, generally payable to all registered account owners, normally within two business days of your trade date, and generally to the address of record.
Trade Date
The trade date for any redemption request received in good order will depend on the day and time Vanguard receives your request and the manner in which you are redeeming. Your redemption will be executed using the NAV as calculated on the trade date. NAVs are calculated only on days that the NYSE is open for trading (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, NAVs will be calculated as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s discretion), generally 4 p.m., Eastern time. The time selected for NAV calculation in this rare event shall also serve as the conclusion of the trading day. See Share Price.
For redemptions by check, exchange, or wire: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
• Note on timing of wire redemptions from money market funds: For telephone requests received by Vanguard on a business day before 10:45 a.m., Eastern time (2 p.m., Eastern time, for Vanguard Cash Reserves Federal Money Market Fund; 12:30 p.m., Eastern time, for Vanguard Federal Money Market Fund), the redemption proceeds generally will leave Vanguard by the close of business the same day. For telephone requests received by Vanguard on a business day after those cut-off times, or on a nonbusiness day, and for all requests other than by telephone, the redemption proceeds
generally will leave Vanguard by the close of business on the next business day.
• Note on timing of wire redemptions from all other funds: For requests received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the redemption proceeds generally will leave Vanguard by the close of business on the next business day. For requests received by Vanguard on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the redemption proceeds generally will leave Vanguard by the close of business on the second business day after Vanguard receives the request.
For redemptions by electronic bank transfer: If the redemption request is received by Vanguard on a business day before the close of regular trading on the NYSE (generally 4 p.m., Eastern time), the trade date will be the same day. If the redemption request is received on a business day after the close of regular trading on the NYSE, or on a nonbusiness day, the trade date will be the next business day.
If your redemption request is not accurate and complete, it may be rejected. If we are unable to send your redemption proceeds by wire or electronic bank transfer because the receiving institution rejects the transfer, Vanguard will make additional efforts to complete your transaction. If Vanguard is still unable to complete the transaction, we may send the proceeds of the redemption to you by check, generally payable to all registered account owners, or use your proceeds to purchase new shares of the fund from which you sold shares for the purpose of the wire or electronic bank transfer transaction. See Other Rules You Should Know—Good Order.
If your redemption request is received in good order, we typically expect that redemption proceeds will be paid by the Fund within one business day of the trade date; however, in certain circumstances, investors may experience a longer settlement period at the time of the transaction. For further information, see “Potentially disruptive redemptions” and “Emergency circumstances.”
For further information about redemption transactions, consult our website at vanguard.com or see Contacting Vanguard.
Other Redemption Rules You Should Know
Documentation for certain accounts. Special documentation may be required to redeem from certain types of accounts, such as trust, corporate, nonprofit, or retirement accounts. Please call us before attempting to redeem from these types of accounts.
Potentially disruptive redemptions. Vanguard reserves the right to pay all or part of a redemption in kind—that is, in the form of securities—if we reasonably believe that a cash redemption would negatively affect the fund’s operation or performance or that the shareholder may be engaged in market-timing or frequent trading. Under these circumstances, Vanguard also reserves the right to delay payment of the redemption proceeds for up to seven calendar days. By calling us before you attempt to redeem a large dollar amount, you may avoid in-kind or delayed payment of your redemption. Please see Frequent-Trading Limitations for information about Vanguard's policies to limit frequent trading.
Recently purchased shares. Although you can redeem shares at any time, proceeds may not be made available to you until the fund collects payment for your purchase. This may take up to seven calendar days for shares purchased by check or by electronic bank transfer. If you have written a check on a fund in an account with checkwriting privileges, that check may be rejected if your fund account does not have a sufficient available balance.
Share certificates. Share certificates are no longer issued for Vanguard funds. Shares currently held in certificates cannot be redeemed, exchanged, converted, or transferred (reregistered) until you return the certificates (unsigned) to Vanguard by registered mail.
Address change. If you change your address online or by telephone, there may be up to a 14-day restriction (starting on the business day after your address is changed) on your ability to request check redemptions online and by telephone. You can request a redemption in writing (using a form available online) at any time. Confirmations of address changes are sent to both the old and new addresses.
Payment to a different person or address. At your request, we can make your redemption check payable, or wire your redemption proceeds, to a different person or send it to a different address. However, this generally requires the written consent of all registered account owners and may require additional documentation, such as a signature guarantee or a notarized signature. You may obtain a signature guarantee from some commercial or savings banks, credit unions, trust companies, or member firms of a U.S. stock exchange.
No cancellations. Vanguard will not accept your request to cancel any redemption request once processing has begun. Please be careful when placing a redemption request.
Emergency circumstances. Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days. In addition, Vanguard funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.
Exchanging Shares
An exchange occurs when you use the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund. You can make exchange requests online (if you are registered for online access), by telephone, or by mail. See Purchasing Shares and Redeeming Shares.
If the NYSE is open for regular trading (generally until 4 p.m., Eastern time, on a business day) at the time an exchange request is received in good order, the trade date generally will be the same day. See Other Rules You Should Know—Good Order for additional information on all transaction requests.
Vanguard will not accept your request to cancel any exchange request once processing has begun. Please be careful when placing an exchange request.
Call Vanguard before attempting to exchange a large dollar amount. By calling us before you attempt to exchange a large dollar amount, you may avoid delayed or rejected transactions.
Please note that Vanguard reserves the right, without notice, to revise or terminate the exchange privilege, limit the amount of any exchange, or reject an exchange, at any time, for any reason. See Frequent-Trading Limitations for additional restrictions on exchanges.
Frequent-Trading Limitations
Because excessive transactions can disrupt management of a fund and increase the fund’s costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other than money market funds and short-term bond funds, but including Vanguard Short-Term Inflation-Protected Securities Index Fund) limits an investor’s purchases or exchanges into a fund account for 30 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent-trading limits.
For Vanguard Retirement Investment Program pooled plans, the limitations apply to exchanges made online or by telephone.
These frequent-trading limitations do not apply to the following:
• Purchases of shares with reinvested dividend or capital gains distributions.
• Transactions through Vanguard’s Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, Vanguard Small Business Online®, and certain transactions through intermediaries relating to systematic trades and required minimum distributions.
• Discretionary transactions through Vanguard Personal Advisor Services®, Vanguard Institutional Advisory Services®, Vanguard Digital Advisor™, and discretionary (advisor-directed) transactions through certain intermediaries.
• Redemptions of shares to pay fund or account fees.
• Redemptions of shares to remove excess shareholder contributions to certain types of retirement accounts (including, but not limited to, IRAs and Vanguard Individual 401(k) Plans).
• Transfers and reregistrations of shares within the same fund.
• Purchases of shares by asset transfer or direct rollover.
• Conversions of shares from one share class to another in the same fund.
• Checkwriting redemptions.
• Section 529 college savings plans.
• Certain approved institutional portfolios and asset allocation programs, as well as trades made by funds or trusts managed by Vanguard or its affiliates that invest in other Vanguard funds. (Please note that shareholders of Vanguard’s funds of funds are subject to the limitations.)
For participants in employer-sponsored defined contribution plans,* the frequent-trading limitations do not apply to:
• Purchases of shares with participant payroll or employer contributions or loan repayments.
• Purchases of shares with reinvested dividend or capital gains distributions.
• Distributions, loans, and in-service withdrawals from a plan.
• Redemptions of shares as part of a plan termination or at the direction of the plan.
• Transactions executed through the Vanguard Managed Account Program.
• Redemptions of shares to pay fund or account fees.
• Share or asset transfers or rollovers.
• Reregistrations of shares.
• Conversions of shares from one share class to another in the same fund.
• Exchange requests submitted by written request to Vanguard. (Exchange requests submitted by fax, if otherwise permitted, are subject to the limitations.)
* The following Vanguard fund accounts are subject to the frequent-trading limitations: SEP-IRAs, SIMPLE IRAs, certain Individual 403(b)(7) Custodial Accounts, and Vanguard Individual 401(k) Plans.
Accounts Held by Institutions (Other Than Defined Contribution Plans)
Vanguard will systematically monitor for frequent trading in institutional clients’ accounts. If we detect suspicious trading activity, we will investigate and take appropriate action, which may include applying to a client’s accounts the 30-day policy previously described, prohibiting a client’s purchases of fund shares, and/or revoking the client’s exchange privilege.
Accounts Held by Intermediaries
When intermediaries establish accounts in Vanguard funds for the benefit of their clients, we cannot always monitor the trading activity of the individual clients. However, we review trading activity at the intermediary (omnibus) level, and if we detect suspicious activity, we will investigate and take appropriate action. If necessary, Vanguard may prohibit additional purchases of fund shares by an intermediary, including for the benefit of certain of the intermediary’s clients. Intermediaries also may monitor their clients’ trading activities with respect to Vanguard funds.
For those Vanguard funds that charge purchase and/or redemption fees, intermediaries will be asked to assess these fees on client accounts and remit these fees to the funds. The application of purchase and redemption fees and frequent-trading limitations may vary among intermediaries. There are no assurances that Vanguard will successfully identify all intermediaries or that intermediaries will properly assess purchase and redemption fees or administer frequent-trading limitations. If you invest with Vanguard through an intermediary, please read that firm’s materials carefully to learn of any other rules or fees that may apply.
Other Rules You Should Know
Prospectus and Shareholder Report Mailings
When two or more shareholders have the same last name and address, just one summary prospectus (or prospectus) and/or shareholder report may be sent in an attempt to eliminate the unnecessary expense of duplicate mailings. You may request individual prospectuses and reports by contacting our Client Services Department in writing, by telephone, or online. See Contacting Vanguard.
Vanguard.com
Registration. If you are a registered user of vanguard.com, you can review your account holdings; buy, sell, or exchange shares of most Vanguard funds; and perform most other transactions through our website. You must register for this service online.
Electronic delivery. Vanguard can deliver your account statements, transaction confirmations, prospectuses, certain tax forms, and shareholder reports electronically. If you are a registered user of vanguard.com, you can consent to the electronic delivery of these documents by logging on and changing your mailing preferences under “Account Maintenance.” You can revoke your electronic consent at any time through our website, and we will begin to send paper copies of these documents within 30 days of receiving your revocation.
Telephone Transactions
Automatic. When we set up your account, we will automatically enable you to do business with us by telephone, unless you instruct us otherwise in writing.
Proof of a caller’s authority. We reserve the right to refuse a telephone request if the caller is unable to provide the requested information or if we reasonably believe that the caller is not an individual authorized to act on the account. Before we allow a caller to act on an account, we may request the following information:
• Authorization to act on the account (as the account owner or by legal documentation or other means).
• Account registration and address.
• Fund name and account number, if applicable.
• Other information relating to the caller, the account owner, or the account.
Good Order
We reserve the right to reject any transaction instructions that are not in “good order.” Good order generally means that your instructions:
• Are provided by the person(s) authorized in accordance with Vanguard’s policies and procedures to access the account and request transactions.
• Include the fund name and account number.
• Include the amount of the transaction (stated in dollars, shares, or percentage).
Written instructions also must generally be provided on a Vanguard form and include:
• Signature(s) and date from the authorized person(s).
• Signature guarantees or notarized signatures, if required for the type of transaction. (Call Vanguard for specific requirements.)
• Any supporting documentation that may be required.
Good order requirements may vary among types of accounts and transactions. For more information, consult our website at vanguard.com or see Contacting Vanguard.
Vanguard reserves the right, without notice, to revise the requirements for good order.
Future Trade-Date Requests
Vanguard does not accept requests to hold a purchase, conversion, redemption, or exchange transaction for a future date. All such requests will receive trade dates as previously described in Purchasing Shares, Converting Shares, Redeeming Shares, and Exchanging Shares. Vanguard reserves the right to return future-dated purchase checks.
Accounts With More Than One Owner
If an account has more than one owner or authorized person, Vanguard generally will accept instructions from any one owner or authorized person.
Responsibility for Fraud
You should take precautions to protect yourself from fraud. Keep your account-related information private, and review any account confirmations, statements, or other information that we provide to you as soon as you receive them. Let us know immediately if you discover unauthorized activity or see something on your account that you do not understand or that looks unusual.
Vanguard will not be responsible for losses that result from transactions by a person who we reasonably believe is authorized to act on your account.
Uncashed Checks
Please cash your distribution or redemption checks promptly. Vanguard will not pay interest on uncashed checks. Vanguard may be required to transfer assets related to uncashed checks to a state under the state’s abandoned property law.
Dormant Accounts
If your account has no activity in it for a period of time, Vanguard may be required to transfer it to a state under the state’s abandoned property law, subject to potential federal or state withholding taxes.
Unusual Circumstances
If you experience difficulty contacting Vanguard online or by telephone, you can send us your transaction request on a Vanguard form by regular or express mail.
Investing With Vanguard Through Other Firms
You may purchase or sell shares of most Vanguard funds through a financial intermediary, such as a bank, a broker, or an investment advisor. Please consult your financial intermediary to determine which, if any, shares are available through that firm and to learn about other rules that may apply. Your financial intermediary can provide you with account information and any required tax forms. You may be required to pay a commission on purchases of mutual fund shares made through a financial intermediary.
Please see Frequent-Trading Limitations—Accounts Held by Intermediaries for information about the assessment of any purchase or redemption fees and the monitoring of frequent trading for accounts held by intermediaries.
Account Service Fee
Vanguard may charge a $20 account service fee on fund accounts that have a balance below $1,000,000 for any reason, including market fluctuation. The account service fee may be applied to both retirement and nonretirement fund accounts and may be assessed on fund accounts in all Vanguard funds, regardless of the account minimum. The fee, which will be collected by redeeming fund shares in the amount of $20, will be deducted from fund accounts subject to the fee once per calendar year.
Certain account types have alternative fee structures, including SIMPLE IRAs, Vanguard Retirement Investment Program pooled plans, and Vanguard Individual 401(k) Plans.
Low-Balance Accounts
The Fund reserves the right to liquidate a fund account whose balance falls below the account minimum for any reason, including market fluctuation. This liquidation policy applies to nonretirement fund accounts and accounts that are held through intermediaries. Any such liquidation will be preceded by written notice to the investor.
Right to Change Policies
In addition to the rights expressly stated elsewhere in this prospectus, Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time and (2) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fee charged to a shareholder or a group of shareholders. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard believes they are in the best interest of a fund.
Account Restrictions
Vanguard reserves the right to: (1) redeem all or a portion of a fund/account to meet a legal obligation, including tax withholding, tax lien, garnishment order, or other obligation imposed on your account by a court or government agency; (2) redeem shares, close an account, or suspend account privileges, features, or options in the case of threatening conduct or activity; (3) redeem shares, close an account, or suspend account privileges, features, or options if Vanguard believes or suspects that not doing so could result in a suspicious, fraudulent, or illegal transaction; (4) place restrictions on the ability to redeem any or all shares in an account if it is required to do so by a court or government agency; (5) place restrictions on the ability to redeem any or all shares in an account if Vanguard believes that doing so will prevent fraud, financial exploitation or abuse, or to protect vulnerable investors; (6) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners; and (7) freeze any account and/or suspend account services upon initial notification to Vanguard of the death of an account owner.
Share Classes
Vanguard reserves the right, without notice, to change the eligibility requirements of its share classes, including the types of clients who are eligible to purchase each share class.
Shareholder Rights
The Fund's Agreement and Declaration of Trust, as amended, requires a shareholder bringing a derivative action on behalf of Vanguard Wellesley Income Fund (the Trust) that is subject to a pre-suit demand to collectively hold at least 10% of the outstanding shares of the Trust or at least 10% of the outstanding shares of the series or class to which the demand relates and to undertake to reimburse the Trust for the expense of any counsel or advisors used when considering the merits of the demand in the event that the board of trustees determines not to bring such action. In each case, these requirements do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such application.
Fund and Account Updates
Confirmation Statements
We will send (or provide through our website, whichever you prefer) a confirmation of your trade date and the amount of your transaction when you buy, sell, exchange, or convert shares. However, we will not send confirmations reflecting only checkwriting redemptions or the reinvestment of dividend or capital gains distributions. For any month in which you had a checkwriting redemption, a Checkwriting Activity Statement will be sent to you itemizing the checkwriting redemptions for that month. Promptly review each confirmation statement that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on a confirmation statement, or Vanguard will consider the transaction properly processed.
Portfolio Summaries
We will send (or provide through our website, whichever you prefer) quarterly portfolio summaries to help you keep track of your accounts throughout the year. Each summary shows the market value of your account at the close of the statement period, as well as all distributions, purchases, redemptions, exchanges, transfers, and conversions for the current calendar quarter (or month). Promptly review each summary that we provide to you. It is important that you contact Vanguard immediately with any questions you may have about any transaction reflected on the summary, or Vanguard will consider the transaction properly processed.
Tax Information Statements
For most accounts, Vanguard (or your intermediary) is required to provide annual tax forms to assist you in preparing your income tax returns. These forms are generally available for each calendar year early in the following year. Registered users of vanguard.com can also view certain forms through our website. Vanguard (or your intermediary) may also provide you with additional tax-related documentation. For more information, consult our website at vanguard.com or see Contacting Vanguard.
Annual and Semiannual Reports
We will send (or provide through our website, whichever you prefer) reports about Vanguard Wellesley Income Fund twice a year, in May and November. These reports include overviews of the financial markets and provide the following specific Fund information:
• Performance assessments and comparisons with industry benchmarks.
• Financial statements with listings of Fund holdings.
Portfolio Holdings
Please consult the Fund's Statement of Additional Information or our website for a description of the policies and procedures that govern disclosure of the Fund’s portfolio holdings.
Employer-Sponsored Plans
Your plan administrator or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.
• If you have any questions about the Fund or Vanguard, including those about the Fund’s investment objective, strategies, or risks, contact Vanguard Participant Services toll-free at 800-523-1188 or visit our website at vanguard.com.
• If you have questions about your account, contact your plan administrator or the organization that provides recordkeeping services for your plan.
• Be sure to carefully read each topic that pertains to your transactions with Vanguard.
Vanguard reserves the right to change its policies without notice to shareholders.
Transactions
Processing times for your transaction requests may differ among recordkeepers or among transaction and funding types. Your plan’s recordkeeper (which may also be Vanguard) will determine the necessary processing time frames for your transaction requests prior to submission to the Fund. Consult your recordkeeper or plan administrator for more information.
If Vanguard is serving as your plan recordkeeper and if your transaction involves one or more investments with an early cut-off time for processing or another trading restriction, your entire transaction will be subject to the restriction when the trade date for your transaction is determined.
Contacting Vanguard
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For the most complete source of Vanguard news
For fund, account, and service information
For most account transactions
For literature requests
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Investor Information 800-662-7447
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Additional Information
The Fund's Bylaws require, unless the Trust otherwise consents in writing, that the U.S. Federal District Courts be the sole and exclusive forum for the resolution of complaints under the Securities Act of 1933. This provision may limit a shareholder’s ability to bring a claim in a different forum and may result in increased shareholder costs in pursuing such a claim.
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CGS identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor’s Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2023 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.
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”Bloomberg®” and the Bloomberg U.S. Aggregate Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”), and have been licensed for use for certain purposes by Vanguard.
Vanguard Wellesley Income Fund is not sponsored, endorsed, sold or promoted by Bloomberg. Bloomberg does not make any representation or warranty, express or implied, to the owners of or counterparties to Vanguard Wellesley Income Fund or any member of the public regarding the advisability of investing in securities generally or in Vanguard Wellesley Income Fund particularly. The only relationship of Bloomberg to Vanguard is the licensing of certain trademarks, trade names and service marks and of the Bloomberg U.S. Aggregate Bond Index, which is determined, composed and calculated by BISL without regard to Vanguard or Vanguard Wellesley Income Fund. Bloomberg has no obligation to take the needs of Vanguard or the owners of Vanguard Wellesley Income Fund into consideration in determining, composing or calculating the Bloomberg U.S. Aggregate Bond Index. Bloomberg is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of Vanguard Wellesley Income Fund to be issued. Bloomberg shall not have any obligation or liability, including, without limitation, to Vanguard Wellesley Income Fund customers, in connection with the administration, marketing or trading of Vanguard Wellesley Income Fund.
BLOOMBERG DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE BLOOMBERG U.S. AGGREGATE BOND INDEX OR ANY DATA RELATED THERETO AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. BLOOMBERG DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY VANGUARD, OWNERS OF VANGUARD WELLESLEY INCOME FUND OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BLOOMBERG U.S. AGGREGATE BOND INDEX OR ANY DATA RELATED THERETO. BLOOMBERG DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BLOOMBERG U.S. AGGREGATE BOND INDEX OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, TO THE MAXIMUM EXTENT ALLOWED BY LAW, BLOOMBERG, ITS LICENSORS, AND ITS AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS, AND VENDORS SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR ANY INJURY OR DAMAGES—WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR OTHERWISE—ARISING IN CONNECTION WITH VANGUARD WELLESLEY INCOME FUND OR BLOOMBERG U.S. AGGREGATE BOND INDEX OR ANY DATA OR VALUES RELATING THERETO—WHETHER ARISING FROM THEIR NEGLIGENCE OR OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF.
Glossary of Investment Terms
Active Management. An investment approach that seeks to exceed the average returns of a particular financial market or market segment. In selecting securities to buy and sell, active managers may rely on, among other things, research, market forecasts, quantitative models, and their own judgment and experience.
Bloomberg U.S. Aggregate Bond Index. An index that is the broadest measure of the taxable U.S. bond market, including most U.S. Treasury, agency, corporate, mortgage-backed, asset-backed, and international dollar-denominated issues, all with investment-grade ratings (rated Baa3 or above by Moody’s) and maturities of 1 year or more.
Bond. A debt security (IOU) issued by a corporation, a government, or a government agency in exchange for the money the bondholder lends it. In most instances, the issuer agrees to pay back the loan by a specific date and generally to make regular interest payments until that date.
Capital Gains Distributions. Payments to mutual fund shareholders of gains realized on securities that a fund has sold at a profit, minus any realized losses.
Cash Equivalent Investments. Cash deposits, short-term bank deposits, and money market instruments that include U.S. Treasury bills and notes, bank certificates of deposit (CDs), repurchase agreements, commercial paper, and banker’s acceptances.
Common Stock. A security representing ownership rights in a corporation.
Coupon Rate. The interest rate paid by the issuer of a debt security until its maturity. It is expressed as an annual percentage of the face value of the security.
Dividend Distributions. Payments to mutual fund shareholders of income from interest or dividends generated by a fund's investments.
Dow Jones U.S. Total Stock Market Float Adjusted Index. An index that represents the entire U.S. stock market and tracks more than 5,000 stocks, excluding shares of securities not available for public trading.
Duration. A measure of the sensitivity of bond—and bond fund—prices to interest rate movements. For example, if a bond has a duration of two years, its price would fall by approximately 2% when interest rates rise by 1%. On the other hand, the bond’s price would rise by approximately 2% when interest rates fall by 1%.
Expense Ratio. A fund's total annual operating expenses expressed as a percentage of the fund's average net assets. The expense ratio includes management and administrative expenses, but it does not include the transaction costs of buying and selling portfolio securities.
Fixed Income Security. An investment, such as a bond, representing a debt that must be repaid by a specified date, and on which the borrower may pay a fixed, variable, or floating rate of interest.
Inception Date. The date on which the assets of a fund (or one of its share classes) are first invested in accordance with the fund's investment objective. For funds with a subscription period, the inception date is the day after that period ends. Investment performance is generally measured from the inception date.
Investment-Grade Bond. A debt security whose credit quality is considered by independent bond rating agencies, or through independent analysis conducted by a fund's advisor, to be sufficient to ensure timely payment of principal and interest under current economic circumstances. Debt securities rated in one of the four highest rating categories are considered investment-grade. Other debt securities may be considered by an advisor to be investment-grade.
Joint Committed Credit Facility. The Fund participates, along with other funds managed by Vanguard, in a committed credit facility provided by a syndicate of lenders pursuant to a credit agreement that may be renewed annually; each Vanguard fund is individually liable for its borrowings, if any, under the credit facility. The amount and terms of the committed credit facility are subject to approval by the Fund's board of trustees and renegotiation with the lender syndicate on an annual basis.
Mutual Fund. An investment company that pools the money of many people and invests it in a variety of securities in an effort to achieve a specific objective over time.
New York Stock Exchange (NYSE). A stock exchange based in New York City that is open for regular trading on business days, Monday through Friday, from 9:30 a.m. to 4 p.m., Eastern time.
Principal. The face value of a debt instrument or the amount of money put into an investment.
Return of Capital. A return of capital occurs when a fund's distributions exceed its earnings in a fiscal year. A return of capital is a return of all or part of your original investment or amounts paid in excess of your original investment in a fund. In general, a return of capital reduces your cost basis in a fund's shares and is not taxable to you until your cost basis has been reduced to zero.
Securities. Stocks, bonds, money market instruments, and other investments.
Total Return. A percentage change, over a specified time period, in a mutual fund’s net asset value, assuming the reinvestment of all distributions of dividends and capital gains.
Volatility. The fluctuations in value of a mutual fund or other security. The greater a fund's volatility, the wider the fluctuations in its returns.
Yield. Income (interest or dividends) earned by an investment, expressed as a percentage of the investment’s price.
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For More Information
If you would like more information about Vanguard Wellesley Income Fund, the following documents are available free upon request:
Annual/Semiannual Reports to Shareholders
Additional information about the Fund's investments is available in the Fund's annual and semiannual reports to shareholders. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI)
The SAI provides more detailed information about the Fund and is incorporated by reference into (and thus legally a part of) this prospectus.
To receive a free copy of the latest annual or semiannual report or the SAI, or to request additional information about the Fund or other Vanguard funds, please visit vanguard.com or contact us as follows:
If you are an individual investor:
Telephone: 800-662-7447; Text telephone for people with hearing impairment: 800-749-7273
If you are a participant in an employer-sponsored plan:
Telephone: 800-523-1188; Text telephone for people with hearing impairment: 800-749-7273
If you are a current Vanguard shareholder and would like information about your account, account transactions, and/or account statements, please call:
Client Services Department
Telephone: 800-662-2739; Text telephone for people with hearing impairment: 800-749-7273
Information Provided by the SEC
Reports and other information about the Fund are available in the EDGAR database on the SEC’s website at sec.gov, or you can receive copies of this information, for a fee, by electronic request at the following email address: publicinfo@sec.gov.
Fund's Investment Company Act file number: 811-01766
© 2023 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
P 027 012023
PART B
VANGUARD® WELLESLEY® INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
January 31, 2023
This Statement of Additional Information is not a prospectus but should be read in conjunction with the Fund’s current prospectus (dated January 31, 2023). To obtain, without charge, a prospectus or the most recent Annual Report to Shareholders, which contains the Fund’s financial statements as hereby incorporated by reference, please contact The Vanguard Group, Inc. (Vanguard).
Phone: Investor Information Department at 800-662-7447
Online: vanguard.com
Description of the Trust
Vanguard Wellesley Income Fund (the Trust) currently offers the following fund and share classes (identified by ticker symbol):
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1 Individually, a class; collectively, the classes.
The Trust has the ability to offer additional funds or classes of shares. There is no limit on the number of full and fractional shares that may be issued for a single fund or class of shares.
Organization
The Trust was organized as a Delaware corporation in 1968, was reorganized as a Maryland corporation in 1973, and then was reorganized as a Delaware statutory trust in 1998. Prior to its reorganization as a Delaware statutory trust, the Trust was known as Vanguard Wellesley Income Fund, Inc. The Trust is registered with the United States Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Vanguard Wellesley Income Fund (the Fund) is classified as diversified within the meaning of the 1940 Act.
Service Providers
Custodian. State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111, serves as the Fund‘s custodian. The custodian is responsible for maintaining the Fund's assets, keeping all necessary accounts and records of Fund assets, and appointing any foreign subcustodians or foreign securities depositories.
Independent Registered Public Accounting Firm. PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1800, 2001 Market Street, Philadelphia, PA 19103-7042, serves as the Fund's independent registered public accounting firm. The independent registered public accounting firm audits the Fund's annual financial statements and provides other related services.
Transfer and Dividend-Paying Agent. The Fund's transfer agent and dividend-paying agent is Vanguard, P.O. Box 2600, Valley Forge, PA 19482.
Characteristics of the Fund's Shares
Restrictions on Holding or Disposing of Shares. There are no restrictions on the right of shareholders to retain or dispose of the Fund’s shares, other than those described in the Fund’s current prospectus and elsewhere in this Statement of Additional Information. The Fund or class may be terminated by reorganization into another mutual fund or class or by liquidation and distribution of the assets of the Fund or class. Unless terminated by reorganization or liquidation, the Fund and share classes will continue indefinitely.
Shareholder Liability. The Trust is organized under Delaware law, which provides that shareholders of a statutory trust are entitled to the same limitations of personal liability as shareholders of a corporation organized under Delaware law. This means that a shareholder of the Fund generally will not be personally liable for payment of the Fund’s debts. Some state courts, however, may not apply Delaware law on this point. We believe that the possibility of such a situation arising is remote.
Dividend Rights. The shareholders of each class of the Fund are entitled to receive any dividends or other distributions declared by the Fund for each such class. No shares of the Fund have priority or preference over any other shares of the Fund with respect to distributions. Distributions will be made from the assets of the Fund and will be paid ratably to all shareholders of a particular class according to the number of shares of the class held by shareholders on the record date. The amount of dividends per share may vary between separate share classes of the Fund based upon differences in the net asset values of the different classes and differences in the way that expenses are allocated between share classes pursuant to a multiple class plan approved by the Fund's board of trustees.
Voting Rights. Shareholders are entitled to vote on a matter if (1) the matter concerns an amendment to the Declaration of Trust that would adversely affect to a material degree the rights and preferences of the shares of the Fund or any class; (2) the trustees determine that it is necessary or desirable to obtain a shareholder vote; (3) a merger or consolidation, share conversion, share exchange, or sale of assets is proposed and a shareholder vote is required by the 1940 Act to approve the transaction; or (4) a shareholder vote is required under the 1940 Act. The 1940 Act requires a shareholder vote under various circumstances, including to elect or remove trustees upon the written request of shareholders representing 10% or more of the Fund's net assets, to change any fundamental policy of the Fund (please see Fundamental Policies), and to enter into certain merger transactions. Unless otherwise required by applicable law, shareholders of the Fund receive one vote for each dollar of net asset value owned on the record date and a fractional vote for each fractional dollar of net asset value owned on the record date. However, only the shares of the Fund or the
class affected by a particular matter are entitled to vote on that matter. In addition, each class has exclusive voting rights on any matter submitted to shareholders that relates solely to that class, and each class has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of another. Voting rights are noncumulative and cannot be modified without a majority vote by the shareholders.
Liquidation Rights. In the event that the Fund is liquidated, shareholders will be entitled to receive a pro rata share of the Fund’s net assets. In the event that a class of shares is liquidated, shareholders of that class will be entitled to receive a pro rata share of the Fund’s net assets that are allocated to that class. Shareholders may receive cash, securities, or a combination of the two.
Preemptive Rights. There are no preemptive rights associated with the Fund's shares.
Conversion Rights. Fund shareholders may convert their shares to another class of shares of the same Fund upon the satisfaction of any then-applicable eligibility requirements as described in the Fund’s current prospectus.
Redemption Provisions. The Fund's redemption provisions are described in its current prospectus and elsewhere in this Statement of Additional Information.
Sinking Fund Provisions. The Fund has no sinking fund provisions.
Calls or Assessment. The Fund's shares, when issued, are fully paid and non-assessable.
Shareholder Rights. Any limitations on a shareholder’s right to bring an action do not apply to claims arising under the federal securities laws to the extent that any such federal securities laws, rules, or regulations do not permit such limitations.
Tax Status of the Fund
The Fund expects to qualify each year for treatment as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the IRC). This special tax status means that the Fund will not be liable for federal tax on income and capital gains distributed to shareholders. In order to preserve its tax status, the Fund must comply with certain requirements relating to the source of its income and the diversification of its assets. If the Fund fails to meet these requirements in any taxable year, the Fund will, in some cases, be able to cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, and/or disposing of certain assets. If the Fund is ineligible to or otherwise does not cure such failure for any year, it will be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, will be taxable to shareholders as ordinary income. In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before regaining its tax status as a regulated investment company.
Dividends received and distributed by the Fund on shares of stock of domestic corporations (excluding Real Estate Investment Trusts (REITs)) and certain foreign corporations generally may be eligible to be reported by the Fund, and treated by individual shareholders, as “qualified dividend income” taxed at long-term capital gain rates instead of at higher ordinary income tax rates. Individuals must satisfy holding period and other requirements in order to be eligible for such treatment. Also, distributions attributable to income earned on the Fund's securities lending transactions, including substitute dividend payments received by the Fund with respect to a security out on loan, will not be eligible for treatment as qualified dividend income.
Taxable ordinary dividends received and distributed by the Fund on its REIT holdings may be eligible to be reported by the Fund, and treated by individual shareholders, as “qualified REIT dividends” that are eligible for a 20% deduction on their federal income tax returns. Individuals must satisfy holding period and other requirements in order to be eligible for this deduction. Without further legislation, the deduction will sunset after 2025. Shareholders should consult their own tax professionals concerning their eligibility for this deduction.
Dividends received and distributed by the Fund on shares of stock of domestic corporations (excluding REITs) may be eligible for the dividends-received deduction applicable to corporate shareholders. Corporations must satisfy certain requirements in order to claim the deduction. Also, distributions attributable to income earned on the Fund's securities lending transactions, including substitute dividend payments received by the Fund with respect to a security out on loan, will not be eligible for the dividends-received deduction.
The Fund may declare a capital gain dividend consisting of the excess (if any) of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carryforwards of the Fund. Capital losses may be carried forward indefinitely and retain their character as either short-term or long-term.
Fundamental Policies
The Fund is subject to the following fundamental investment policies, which cannot be changed in any material way without the approval of the holders of a majority of the Fund’s shares. For these purposes, a “majority” of shares means shares representing the lesser of (1) 67% or more of the Fund's net assets voted, so long as shares representing more than 50% of the Fund’s net assets are present or represented by proxy or (2) more than 50% of the Fund's net assets.
Borrowing. The Fund may borrow money only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.
Commodities. The Fund may invest in commodities only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.
Diversification. With respect to 75% of its total assets, the Fund may not (1) purchase more than 10% of the outstanding voting securities of any one issuer or (2) purchase securities of any issuer if, as a result, more than 5% of the Fund’s total assets would be invested in that issuer’s securities. This limitation does not apply to obligations of the U.S. government or its agencies or instrumentalities.
Industry Concentration. The Fund will not concentrate its investments in the securities of issuers whose principal business activities are in the same industry or group of industries.
Loans. The Fund may make loans to another person only as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.
Real Estate. The Fund may not invest directly in real estate unless it is acquired as a result of ownership of securities or other instruments. This restriction shall not prevent the Fund from investing in securities or other instruments (1) issued by companies that invest, deal, or otherwise engage in transactions in real estate or (2) backed or secured by real estate or interests in real estate.
Senior Securities. The Fund may not issue senior securities except as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over the Fund.
Underwriting. The Fund may not act as an underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 (the 1933 Act), in connection with the purchase and sale of portfolio securities.
Compliance with the fundamental policies previously described is generally measured at the time the securities are purchased. Unless otherwise required by the 1940 Act (as is the case with borrowing), if a percentage restriction is adhered to at the time the investment is made, a later change in percentage resulting from a change in the market value of assets will not constitute a violation of such restriction. All fundamental policies must comply with applicable regulatory requirements. For more details, see Investment Strategies, Risks, and Nonfundamental Policies.
None of these policies prevents the Fund from having an ownership interest in Vanguard. As a part owner of Vanguard, the Fund may own securities issued by Vanguard, make loans to Vanguard, and contribute to Vanguard’s costs or other financial requirements. See Management of the Fund for more information.
Investment Strategies, Risks, and Nonfundamental Policies
Some of the investment strategies and policies described on the following pages and in the Fund's prospectus set forth percentage limitations on the Fund's investment in, or holdings of, certain securities or other assets. Unless otherwise required by law, compliance with these strategies and policies will be determined immediately after the acquisition of such securities or assets by the Fund. Subsequent changes in values, net assets, or other circumstances will not be considered when determining whether the investment complies with the Fund's investment strategies and policies.
The following investment strategies, risks, and policies supplement the Fund's investment strategies, risks, and policies set forth in the prospectus. With respect to the different investments discussed as follows, the Fund may acquire such investments to the extent consistent with its investment strategies and policies.
Asset-Backed Securities. Asset-backed securities represent a participation in, or are secured by and payable from, pools of underlying assets such as debt securities, bank loans, motor vehicle installment sales contracts, installment loan contracts, leases of various types of real and personal property, receivables from revolving credit (i.e., credit card) agreements, and other categories of receivables. These underlying assets are securitized through the use of trusts and special purpose entities. Payment of interest and repayment of principal on asset-backed securities may be largely dependent upon the cash flows generated by the underlying assets backing the securities and, in certain cases, may be supported by letters of credit, surety bonds, or other credit enhancements. The rate of principal payments on asset-backed securities is related to the rate of principal payments, including prepayments, on the underlying assets. The credit quality of asset-backed securities depends primarily on the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. The value of asset-backed securities may be affected by the various factors described above and other factors, such as changes in interest rates, the availability of information concerning the pool and its structure, the creditworthiness of the servicing agent for the pool, the originator of the underlying assets, or the entities providing the credit enhancement.
Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate, as a result of the pass-through of prepayments of principal on the underlying assets. Prepayments of principal by borrowers or foreclosure or other enforcement action by creditors shortens the term of the underlying assets. The occurrence of prepayments is a function of several factors, such as the level of interest rates, the general economic conditions, the location and age of the underlying obligations, and other social and demographic conditions. A fund’s ability to maintain positions in asset-backed securities is affected by the reductions in the principal amount of the underlying assets because of prepayments. A fund’s ability to reinvest such prepayments of principal (as well as interest and other distributions and sale proceeds) at a comparable yield is subject to generally prevailing interest rates at that time. The value of asset-backed securities varies with changes in market interest rates generally and the differentials in yields among various kinds of U.S. government securities, mortgage-backed securities, and asset-backed securities. In periods of rising interest rates, the rate of prepayment tends to decrease, thereby lengthening the average life of the underlying securities. Conversely, in periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the average life of such assets. Because prepayments of principal generally occur when interest rates are declining, an investor, such as a fund, generally has to reinvest the proceeds of such prepayments at lower interest rates than those at which the assets were previously invested. Therefore, asset-backed securities have less potential for capital appreciation in periods of falling interest rates than other income-bearing securities of comparable maturity.
Because asset-backed securities generally do not have the benefit of a security interest in the underlying assets that is comparable to a mortgage, asset-backed securities present certain additional risks that are not present with mortgage-backed securities. For example, revolving credit receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give debtors the right to set off certain amounts owed, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles rather than by real property. Most issuers of automobile receivables permit loan servicers to retain possession of the underlying assets. If the servicer of a pool of underlying assets sells them to another party, there is the risk that the purchaser could acquire an interest superior to that of holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issue of asset-backed securities and technical requirements under state law, the trustee for the holders of the automobile receivables may not have a proper security interest in the automobiles. Therefore, there is the possibility that recoveries on repossessed collateral may not be available to support payments on these securities. Asset-backed securities have been, and may continue to be, subject to greater liquidity risks when worldwide economic and liquidity conditions deteriorate. In addition, government actions and proposals that affect the terms of underlying home and consumer loans, thereby changing demand for products financed by those loans, as well as the inability of borrowers to refinance existing loans, have had and may continue to have a negative effect on the valuation and liquidity of asset-backed securities.
Bank Loans, Loan Interests, and Direct Debt Instruments. Loan interests and direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates (in the case of loans and loan participations); to suppliers of goods or services (in the case of trade claims or other receivables); or to other parties. These investments involve a risk of loss in case of default, insolvency, or the bankruptcy of the borrower; may not be deemed to be securities under certain federal securities laws; and may offer less legal protection to the purchaser in the event of fraud or misrepresentation, or there may be a requirement that a purchaser supply additional cash to a borrower on demand.
Purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the borrower for payment of interest and repayment of principal. Direct debt instruments may not be rated by a rating agency. If scheduled interest or principal payments are not made, or are not made in a timely manner, the value of the instrument may be adversely affected. Loans that are fully secured provide more protections than unsecured loans in the event of failure to make scheduled interest or principal payments. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrower’s obligation or that the collateral could be liquidated. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks and may be highly speculative. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or they may pay only a small fraction of the amount owed. Direct indebtedness of countries, particularly developing countries, also involves a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due.
Corporate loans and other forms of direct corporate indebtedness in which a fund may invest generally are made to finance internal growth, mergers, acquisitions, stock repurchases, refinancing of existing debt, leveraged buyouts, and other corporate activities. A significant portion of the corporate indebtedness purchased by a fund may represent interests in loans or debt made to finance highly leveraged corporate acquisitions (known as “leveraged buyout” transactions), leveraged recapitalization loans, and other types of acquisition financing. Another portion may also represent loans incurred in restructuring or “work-out” scenarios, including super-priority debtor-in-possession facilities in bankruptcy and acquisition of assets out of bankruptcy. Loans in restructuring or work-out scenarios may be especially vulnerable to the inherent uncertainties in restructuring processes. In addition, the highly leveraged capital structure of the borrowers in any such transactions, whether in acquisition financing or restructuring, may make such loans especially vulnerable to adverse or unusual economic or market conditions.
Loans and other forms of direct indebtedness generally are subject to restrictions on transfer, and only limited opportunities may exist to sell them in secondary markets. As a result, a fund may be unable to sell loans and other forms of direct indebtedness at a time when it may otherwise be desirable to do so or may be able to sell them only at a price that is less than their fair value.
Investments in loans through direct assignment of a financial institution’s interests with respect to a loan may involve additional risks. For example, if a loan is foreclosed, the purchaser could become part owner of any collateral and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is at least conceivable that, under emerging legal theories of lender liability, a purchaser could be held liable as a co-lender. Direct debt instruments may also involve a risk of insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. Unless the purchaser has direct recourse against the borrower, the purchaser may have to rely on the agent to apply appropriate credit remedies against a borrower under the terms of the loan or other indebtedness. If assets held by the agent for the benefit of a purchaser were determined to be subject to the claims of the agent’s general creditors, the purchaser might incur certain costs and delays in realizing payment on the loan or loan participation and could suffer a loss of principal and/or interest.
Direct indebtedness may include letters of credit, revolving credit facilities, or other standby financing commitments that obligate purchasers to make additional cash payments on demand. These commitments may have the effect of requiring a purchaser to increase its investment in a borrower when it would not otherwise have done so, even if the borrower’s condition makes it unlikely that the amount will ever be repaid.
A fund’s investment policies will govern the amount of total assets that it may invest in any one issuer or in issuers within the same industry. For purposes of these limitations, a fund generally will treat the borrower as the “issuer” of indebtedness held by the fund. In the case of loan participations in which a bank or other lending institution serves as financial intermediary between a fund and the borrower, if the participation does not shift to the fund the direct debtor-creditor relationship with the borrower, SEC interpretations require the fund, in some circumstances, to treat
both the lending bank or other lending institution and the borrower as “issuers” for purposes of the fund’s investment policies. Treating a financial intermediary as an issuer of indebtedness may restrict a fund’s ability to invest in indebtedness related to a single financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many different companies and industries.
Borrowing. A fund’s ability to borrow money is limited by its investment policies and limitations; by the 1940 Act; and by applicable exemptions, no-action letters, interpretations, and other pronouncements issued from time to time by the SEC and its staff or any other regulatory authority with jurisdiction. Under the 1940 Act, a fund is required to maintain continuous asset coverage (i.e., total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowings not in excess of 5% of the fund’s total assets (at the time of borrowing) made for temporary or emergency purposes. Any borrowings for temporary purposes in excess of 5% of the fund’s total assets must maintain continuous asset coverage. If the 300% asset coverage should decline as a result of market fluctuations or for other reasons, a fund may be required to sell some of its portfolio holdings within three days (excluding Sundays and holidays) to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time.
Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a fund’s portfolio. Money borrowed will be subject to interest costs that may or may not be recovered by earnings on the securities purchased with the proceeds of such borrowing. A fund also may be required to maintain minimum average balances in connection with a borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.
A borrowing transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4 under the 1940 Act.
Common Stock. Common stock represents an equity or ownership interest in an issuer. Common stock typically entitles the owner to vote on the election of directors and other important matters, as well as to receive dividends on such stock. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds, other debt holders, and owners of preferred stock take precedence over the claims of those who own common stock.
Convertible Securities. Convertible securities are hybrid securities that combine the investment characteristics of bonds and common stocks. Convertible securities typically consist of debt securities or preferred stock that may be converted (on a voluntary or mandatory basis) within a specified period of time (normally for the entire life of the security) into a certain amount of common stock or other equity security of the same or a different issuer at a predetermined price. Convertible securities also include debt securities with warrants or common stock attached and derivatives combining the features of debt securities and equity securities. Other convertible securities with features and risks not specifically referred to herein may become available in the future. Convertible securities involve risks similar to those of both fixed income and equity securities. In a corporation’s capital structure, convertible securities are senior to common stock but are usually subordinated to senior debt obligations of the issuer.
The market value of a convertible security is a function of its “investment value” and its “conversion value.” A security’s “investment value” represents the value of the security without its conversion feature (i.e., a nonconvertible debt security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer, and the seniority of the security in the issuer’s capital structure. A security’s “conversion value” is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security will trade like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. In that circumstance, the convertible security takes on the characteristics of a bond, and its price moves in the opposite direction from interest rates. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security will be more heavily influenced by fluctuations in the market price of the underlying security. In that case, the convertible security’s price may be as volatile as that of common stock. Because both interest rates and market movements can influence its value, a convertible security generally is not as sensitive to interest rates as a similar debt security, nor is it as sensitive to changes in share price as its underlying equity security. Convertible securities are often rated below investment-grade or are not rated, and they are generally subject to a high degree of credit risk.
Although all markets are prone to change over time, the generally high rate at which convertible securities are retired (through mandatory or scheduled conversions by issuers or through voluntary redemptions by holders) and replaced with newly issued convertible securities may cause the convertible securities market to change more rapidly than other markets. For example, a concentration of available convertible securities in a few economic sectors could elevate the sensitivity of the convertible securities market to the volatility of the equity markets and to the specific risks of those sectors. Moreover, convertible securities with innovative structures, such as mandatory-conversion securities and equity-linked securities, have increased the sensitivity of the convertible securities market to the volatility of the equity markets and to the special risks of those innovations, which may include risks different from, and possibly greater than, those associated with traditional convertible securities. A convertible security may be subject to redemption at the option of the issuer at a price set in the governing instrument of the convertible security. If a convertible security held by a fund is subject to such redemption option and is called for redemption, the fund must allow the issuer to redeem the security, convert it into the underlying common stock, or sell the security to a third party.
Cybersecurity Risks. The increased use of technology to conduct business could subject a fund and its third-party service providers (including, but not limited to, investment advisors, transfer agents, and custodians) to risks associated with cybersecurity. In general, a cybersecurity incident can occur as a result of a deliberate attack designed to gain unauthorized access to digital systems. If the attack is successful, an unauthorized person or persons could misappropriate assets or sensitive information, corrupt data, or cause operational disruption. A cybersecurity incident could also occur unintentionally if, for example, an authorized person inadvertently released proprietary or confidential information. Vanguard has developed robust technological safeguards and business continuity plans to prevent, or reduce the impact of, potential cybersecurity incidents. Additionally, Vanguard has a process for assessing the information security and/or cybersecurity programs implemented by a fund’s third-party service providers, which helps minimize the risk of potential incidents that could impact a Vanguard fund or its shareholders. Despite these measures, a cybersecurity incident still has the potential to disrupt business operations, which could negatively impact a fund and/or its shareholders. Some examples of negative impacts that could occur as a result of a cybersecurity incident include, but are not limited to, the following: a fund may be unable to calculate its net asset value (NAV), a fund’s shareholders may be unable to transact business, a fund may be unable to process transactions, or a fund may be unable to safeguard its data or the personal information of its shareholders.
Debt Securities. A debt security, sometimes called a fixed income security, consists of a certificate or other evidence of a debt (secured or unsecured) upon which the issuer of the debt security promises to pay the holder a fixed, variable, or floating rate of interest for a specified length of time and to repay the debt on the specified maturity date. Some debt securities, such as zero-coupon bonds, do not make regular interest payments but are issued at a discount to their principal or maturity value. Debt securities include a variety of fixed income obligations, including, but not limited to, corporate bonds, government securities, municipal securities, convertible securities, mortgage-backed securities, and asset-backed securities. Debt securities include investment-grade securities, non-investment-grade securities, and unrated securities. Debt securities are subject to a variety of risks, such as interest rate risk, income risk, call risk, prepayment risk, extension risk, inflation risk, credit risk, liquidity risk, coupon deferral risk, lower recovery value risk, and (in the case of foreign securities) country risk and currency risk. The reorganization of an issuer under the federal bankruptcy laws or an out-of-court restructuring of an issuer’s capital structure may result in the issuer’s debt securities being cancelled without repayment, repaid only in part, or repaid in part or in whole through an exchange thereof for any combination of cash, debt securities, convertible securities, equity securities, or other instruments or rights in respect to the same issuer or a related entity.
Debt Securities—Inflation-Indexed Securities. Inflation-indexed securities are debt securities, the principal value of which is periodically adjusted to reflect the rate of inflation as indicated by the Consumer Price Index (CPI). Inflation-indexed securities may be issued by the U.S. government, by agencies and instrumentalities of the U.S. government, and by corporations. Two structures are common. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the CPI accruals as part of a semiannual coupon payment.
The periodic adjustment of U.S. inflation-indexed securities is tied to the CPI, which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation, and energy. Inflation-indexed securities issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will correlate to the rate of inflation in the United States.
Inflation—a general rise in prices of goods and services—erodes the purchasing power of an investor’s portfolio. For example, if an investment provides a “nominal” total return of 5% in a given year and inflation is 2% during that period, the inflation-adjusted, or real, return is 3%. Inflation, as measured by the CPI, has generally occurred during the past 50 years, so investors should be conscious of both the nominal and real returns of their investments. Investors in inflation-indexed securities funds who do not reinvest the portion of the income distribution that is attributable to inflation adjustments will not maintain the purchasing power of the investment over the long term. This is because interest earned depends on the amount of principal invested, and that principal will not grow with inflation if the investor fails to reinvest the principal adjustment paid out as part of a fund’s income distributions. Although inflation-indexed securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise because of reasons other than inflation (e.g., changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
If the periodic adjustment rate measuring inflation (i.e., the CPI) falls, the principal value of inflation-indexed securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed securities, even during a period of deflation. However, the current market value of the inflation-indexed securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-indexed securities should change in response to changes in real interest rates. Real interest rates, in turn, are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-indexed securities. In contrast, if nominal interest rates were to increase at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed securities.
Coupon payments that a fund receives from inflation-indexed securities are included in the fund’s gross income for the period during which they accrue. Any increase in principal for an inflation-indexed security resulting from inflation adjustments is considered by Internal Revenue Service (IRS) regulations to be taxable income in the year it occurs. For direct holders of an inflation-indexed security, this means that taxes must be paid on principal adjustments, even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments each quarter in the form of cash or reinvested shares (which, like principal adjustments, are taxable to shareholders). It may be necessary for the fund to liquidate portfolio positions, including when it is not advantageous to do so, in order to make required distributions.
Debt Securities—Non-Investment-Grade Securities. Non-investment-grade securities, also referred to as “high-yield securities” or “junk bonds,” are debt securities that are rated lower than the four highest rating categories by a nationally recognized statistical rating organization (e.g., lower than Baa3/P-2 by Moody’s Investors Service, Inc. (Moody’s) or below BBB–/A-2 by Standard & Poor’s Financial Services LLC (Standard & Poor’s)) or, if unrated, are determined to be of comparable quality by the fund’s advisor. These securities are generally considered to be, on balance, predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation, and they will generally involve more credit risk than securities in the investment-grade categories. Non-investment-grade securities generally provide greater income and opportunity for capital appreciation than higher quality securities, but they also typically entail greater price volatility and principal and income risk.
Analysis of the creditworthiness of issuers of high-yield securities may be more complex than for issuers of investment-grade securities. Thus, reliance on credit ratings in making investment decisions entails greater risks for high-yield securities than for investment-grade securities. The success of a fund’s advisor in managing high-yield securities is more dependent upon its own credit analysis than is the case with investment-grade securities.
Some high-yield securities are issued by smaller, less-seasoned companies, while others are issued as part of a corporate restructuring such as an acquisition, a merger, or a leveraged buyout. Companies that issue high-yield securities are often highly leveraged and may not have more traditional methods of financing available to them. Therefore, the risk associated with acquiring the securities of such issuers generally is greater than is the case with investment-grade securities. Some high-yield securities were once rated as investment-grade but have been downgraded to junk bond status because of financial difficulties experienced by their issuers.
The market values of high-yield securities tend to reflect individual issuer developments to a greater extent than do investment-grade securities, which in general react to fluctuations in the general level of interest rates. High-yield securities also tend to be more sensitive to economic conditions than are investment-grade securities. An actual or anticipated economic downturn or sustained period of rising interest rates, for example, could cause a decline in junk bond prices because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its debt securities. If an issuer of high-yield securities defaults, in addition to risking payment of all or a portion of interest and principal, a fund investing in such securities may incur additional expenses to seek recovery.
The secondary market on which high-yield securities are traded may be less liquid than the market for investment-grade securities. Less liquidity in the secondary trading market could adversely affect the ability of a fund’s advisor to sell a high-yield security or the price at which a fund’s advisor could sell a high-yield security, and it could also adversely affect the daily net asset value of fund shares. When secondary markets for high-yield securities are less liquid than the market for investment-grade securities, it may be more difficult to value the securities because such valuation may require more research, and elements of judgment may play a greater role in the valuation of the securities.
Except as otherwise provided in a fund’s prospectus, if a credit rating agency changes the rating of a portfolio security held by a fund, the fund may retain the portfolio security if the advisor deems it in the best interests of shareholders.
Debt Securities—Structured and Indexed Securities. Structured securities (also called “structured notes”) and indexed securities are derivative debt securities, the interest rate or principal of which is determined by an unrelated indicator. Indexed securities include structured notes as well as securities other than debt securities. The value of the principal of and/or interest on structured and indexed securities is determined by reference to changes in the value of a specific asset, reference rate, or index (the reference) or the relative change in two or more references. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased, depending upon changes in the applicable reference. The terms of the structured and indexed securities may provide that, in certain circumstances, no principal is due at maturity and, therefore, may result in a loss of invested capital. Structured and indexed securities may be positively or negatively indexed, so that appreciation of the reference may produce an increase or a decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rate or the value of the structured or indexed security at maturity may be calculated as a specified multiple of the change in the value of the reference; therefore, the value of such security may be very volatile. Structured and indexed securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference. Structured or indexed securities may also be more volatile, less liquid, and more difficult to accurately price than less complex securities or more traditional debt securities, which could lead to an overvaluation or an undervaluation of the securities.
Debt Securities—U.S. Government Securities. The term “U.S. government securities” refers to a variety of debt securities that are issued or guaranteed by the U.S. Treasury, by various agencies of the U.S. government, or by various instrumentalities that have been established or sponsored by the U.S. government. The term also refers to repurchase agreements collateralized by such securities.
U.S. Treasury securities are backed by the full faith and credit of the U.S. government, meaning that the U.S. government is required to repay the principal in the event of default. Other types of securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government. The U.S. government, however, does not guarantee the market price of any U.S. government securities. In the case of securities not backed by the full faith and credit of the U.S. government, the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment and may not be able to assert a claim against the United States itself in the event the agency or instrumentality does not meet its commitment.
Some of the U.S. government agencies that issue or guarantee securities include the Government National Mortgage Association, the Export-Import Bank of the United States, the Federal Housing Administration, the Maritime Administration, the Small Business Administration, and the Tennessee Valley Authority. An instrumentality of the U.S. government is a government agency organized under federal charter with government supervision. Instrumentalities issuing or guaranteeing securities include, among others, the Federal Deposit Insurance Corporation, the Federal Home Loan Banks, and the Federal National Mortgage Association. From time to time, uncertainty regarding the status of negotiations in the U.S. government to increase the statutory debt ceiling could increase the risk that the U.S. government may default on payments on certain U.S. government securities, cause the credit rating of the U.S.
government to be downgraded, increase volatility in the stock and bond markets, result in higher interest rates, reduce prices of U.S. Treasury securities, and/or increase the costs of various kinds of debt. If a U.S. government-sponsored entity is negatively impacted by legislative or regulatory action, is unable to meet its obligations, or its creditworthiness declines, the performance of a fund that holds securities of the entity may be adversely impacted.
Debt Securities—Variable and Floating Rate Securities. Variable and floating rate securities are debt securities that provide for periodic adjustments in the interest rate paid on the security. Variable rate securities provide for a specified periodic adjustment in the interest rate, while floating rate securities have interest rates that change whenever there is a change in a designated benchmark or reference rate (such as the Secured Overnight Financing Rate (SOFR) or another reference rate) or the issuer’s credit quality. There is a risk that the current interest rate on variable and floating rate securities may not accurately reflect current market interest rates or adequately compensate the holder for the current creditworthiness of the issuer. Some variable or floating rate securities are structured with liquidity features such as (1) put options or tender options that permit holders (sometimes subject to conditions) to demand payment of the unpaid principal balance plus accrued interest from the issuers or certain financial intermediaries or (2) auction-rate features, remarketing provisions, or other maturity-shortening devices designed to enable the issuer to refinance or redeem outstanding debt securities (market-dependent liquidity features). Variable or floating rate securities that include market-dependent liquidity features may have greater liquidity risk than other securities. The greater liquidity risk may exist, for example, because of the failure of a market-dependent liquidity feature to operate as intended (as a result of the issuer’s declining creditworthiness, adverse market conditions, or other factors) or the inability or unwillingness of a participating broker-dealer to make a secondary market for such securities. As a result, variable or floating rate securities that include market-dependent liquidity features may lose value, and the holders of such securities may be required to retain them until the later of the repurchase date, the resale date, or the date of maturity. A demand instrument with a demand notice exceeding seven days may be considered illiquid if there is no secondary market for such security.
Debt Securities—Zero-Coupon and Pay-in-Kind Securities. Zero-coupon and pay-in-kind securities are debt securities that do not make regular cash interest payments. Zero-coupon securities generally do not pay interest. Zero-coupon Treasury bonds are U.S. Treasury notes and bonds that have been stripped of their unmatured interest coupons, or the coupons themselves, and also receipts or certificates representing an interest in such stripped debt obligations and coupons. The timely payment of coupon interest and principal on these instruments remains guaranteed by the full faith and credit of the U.S. government. Pay-in-kind securities pay interest through the issuance of additional securities. These securities are generally issued at a discount to their principal or maturity value. Because such securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. Although these securities do not pay current cash income, federal income tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount and other noncash income on such securities accrued during that year. Each fund that holds such securities intends to pass along such interest as a component of the fund’s distributions of net investment income. It may be necessary for the fund to liquidate portfolio positions, including when it is not advantageous to do so, in order to make required distributions.
Depositary Receipts. Depositary receipts (also sold as participatory notes) are securities that evidence ownership interests in a security or a pool of securities that have been deposited with a “depository.” Depositary receipts may be sponsored or unsponsored and include American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), and Global Depositary Receipts (GDRs). For ADRs, the depository is typically a U.S. financial institution, and the underlying securities are issued by a foreign issuer. For other depositary receipts, the depository may be a foreign or a U.S. entity, and the underlying securities may have a foreign or a U.S. issuer. Depositary receipts will not necessarily be denominated in the same currency as their underlying securities. Generally, ADRs are issued in registered form, denominated in U.S. dollars, and designed for use in the U.S. securities markets. Other depositary receipts, such as GDRs and EDRs, may be issued in bearer form and denominated in other currencies, and they are generally designed for use in securities markets outside the United States. Although the two types of depositary receipt facilities (sponsored and unsponsored) are similar, there are differences regarding a holder’s rights and obligations and the practices of market participants.
A depository may establish an unsponsored facility without participation by (or acquiescence of) the underlying issuer; typically, however, the depository requests a letter of nonobjection from the underlying issuer prior to establishing the facility. Holders of unsponsored depositary receipts generally bear all the costs of the facility. The depository usually
charges fees upon the deposit and withdrawal of the underlying securities, the conversion of dividends into U.S. dollars or other currency, the disposition of noncash distributions, and the performance of other services. The depository of an unsponsored facility frequently is under no obligation to distribute shareholder communications received from the underlying issuer or to pass through voting rights to depositary receipt holders with respect to the underlying securities.
Sponsored depositary receipt facilities are created in generally the same manner as unsponsored facilities, except that sponsored depositary receipts are established jointly by a depository and the underlying issuer through a deposit agreement. The deposit agreement sets out the rights and responsibilities of the underlying issuer, the depository, and the depositary receipt holders. With sponsored facilities, the underlying issuer typically bears some of the costs of the depositary receipts (such as dividend payment fees of the depository), although most sponsored depositary receipt holders may bear costs such as deposit and withdrawal fees. Depositories of most sponsored depositary receipts agree to distribute notices of shareholder meetings, voting instructions, and other shareholder communications and information to the depositary receipt holders at the underlying issuer’s request.
For purposes of a fund’s investment policies, investments in depositary receipts will be deemed to be investments in the underlying securities. Thus, a depositary receipt representing ownership of common stock will be treated as common stock. Depositary receipts do not eliminate all of the risks associated with directly investing in the securities of foreign issuers.
Derivatives. A derivative is a financial instrument that has a value based on—or “derived from”—the values of other assets, reference rates, or indexes. Derivatives may relate to a wide variety of underlying references, such as commodities, stocks, bonds, interest rates, currency exchange rates, and related indexes. Derivatives include futures contracts and options on futures contracts, certain forward-commitment transactions, options on securities, caps, floors, collars, swap agreements, and certain other financial instruments. Some derivatives, such as futures contracts and certain options, are traded on U.S. commodity and securities exchanges, while other derivatives, such as swap agreements, may be privately negotiated and entered into in the over-the-counter market (OTC Derivatives) or may be cleared through a clearinghouse (Cleared Derivatives) and traded on an exchange or swap execution facility. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), certain swap agreements, such as certain standardized credit default and interest rate swap agreements, must be cleared through a clearinghouse and traded on an exchange or swap execution facility. This could result in an increase in the overall costs of such transactions. While the intent of derivatives regulatory reform is to mitigate risks associated with derivatives markets, the regulations could, among other things, increase liquidity and decrease pricing for more standardized products while decreasing liquidity and increasing pricing for less standardized products. The risks associated with the use of derivatives are different from, and possibly greater than, the risks associated with investing directly in the securities or assets on which the derivatives are based.
Derivatives may be used for a variety of purposes, including—but not limited to—hedging, managing risk, seeking to stay fully invested, seeking to reduce transaction costs, seeking to simulate an investment in equity or debt securities or other investments, and seeking to add value by using derivatives to more efficiently implement portfolio positions when derivatives are favorably priced relative to equity or debt securities or other investments. Some investors may use derivatives primarily for speculative purposes while other uses of derivatives may not constitute speculation. There is no assurance that any derivatives strategy used by a fund’s advisor will succeed. The other parties to a fund’s OTC Derivatives contracts (usually referred to as “counterparties”) will not be considered the issuers thereof for purposes of certain provisions of the 1940 Act and the IRC, although such OTC Derivatives may qualify as securities or investments under such laws. A fund’s advisor(s), however, will monitor and adjust, as appropriate, the fund’s credit risk exposure to OTC Derivative counterparties.
Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks, bonds, and other traditional investments. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions.
When a fund enters into a Cleared Derivative, an initial margin deposit with a Futures Commission Merchant (FCM) is required. Initial margin deposits are typically calculated as an amount equal to the volatility in market value of a Cleared Derivative over a fixed period. If the value of the fund’s Cleared Derivatives declines, the fund will be required to make additional “variation margin” payments to the FCM to settle the change in value. If the value of the fund’s Cleared Derivatives increases, the FCM will be required to make additional “variation margin” payments to the fund to settle the change in value. This process is known as “marking-to-market” and is calculated on a daily basis.
For OTC Derivatives, a fund is subject to the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the counterparty or the failure of the counterparty to make required payments or otherwise comply with the terms of the contract. Additionally, the use of credit derivatives can result in losses if a fund’s advisor does not correctly evaluate the creditworthiness of the issuer on which the credit derivative is based.
Derivatives may be subject to liquidity risk, which exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with certain OTC Derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Derivatives may be subject to pricing or “basis” risk, which exists when a particular derivative becomes extraordinarily expensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity.
Because certain derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. A derivative transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to a fund’s interest. A fund bears the risk that its advisor will incorrectly forecast future market trends or the values of assets, reference rates, indexes, or other financial or economic factors in establishing derivative positions for the fund. If the advisor attempts to use a derivative as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the derivative will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many derivatives (in particular, OTC Derivatives) are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.
On October 28, 2020, the Securities and Exchange Commission adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). The Fund was required to implement and comply with Rule 18f-4 by August 19, 2022. Rule 18f-4 imposes limits on the amount of derivatives a fund can enter into, eliminates the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, as amended, treats derivatives as senior securities, and requires funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager.
The Fund intends to comply with Rule 4.5 under the Commodity Exchange Act (CEA), under which a fund may be excluded from the definition of the term Commodity Pool Operator (CPO) if the fund meets certain conditions such as limiting its investments in certain CEA-regulated instruments (e.g., futures, options, or swaps) and complying with certain marketing restrictions. Accordingly, Vanguard is not subject to registration or regulation as a CPO with respect to the Fund under the CEA. The Fund will only enter into futures contracts and futures options that are traded on a U.S. or foreign exchange, board of trade, or similar entity or that are quoted on an automated quotation system.
Environmental, Social, and Governance (ESG) Considerations. ESG risk factors, either quantitative or qualitative, may be used as a component of certain funds’ investment processes as a means to assess long-term risk to shareholder value (e.g., risk analysis, credit analysis, or investment opportunities) as the advisor deems appropriate. The weight given to ESG factors may vary across types of investments, industries, regions, and issuers; may change over time; and not every ESG factor may be identified or evaluated. Consideration of ESG factors may affect a fund’s exposure to certain issuers or industries. The advisor’s assessment of an issuer may differ from that of other funds or an investor’s assessment of such issuer. As a result, securities selected by the advisor may not reflect the beliefs and values of any particular investor. The advisor may be dependent on the availability of timely, complete, and accurate ESG data being reported by issuers and/or third-party research providers to evaluate ESG factors. ESG factors are often not uniformly measured or defined, which could impact an advisor’s ability to assess an issuer. Where ESG risk factor analysis is used as one part of an overall investment process (as may be the case for actively managed funds included in this Statement of Additional Information), such funds may still invest in securities of issuers that all market participants may not view as ESG-focused or that may be viewed as having a high ESG risk profile.
A fund’s advisor may consider environmental risks such as climate change to be a material risk to many companies and their shareholders’ long-term financial success. As a result, the advisor may engage with particular issuers held by a fund to discuss science-based targets that address long-term risk to shareholder value resulting from climate change, as long as such targets are not contrary to the investment objective and strategy of the fund.
Each fund has adopted procedures and guidelines for monitoring portfolio holding human rights practices and violations pursuant to which it may assess regulatory, reputational, or other risks that may affect long-term shareholder value associated with the alleged activity. In extraordinary circumstances a fund may divest of a portfolio holding where doing so is deemed appropriate.
Exchange-Traded Funds. A fund may purchase shares of exchange-traded funds (ETFs). Typically, a fund would purchase ETF shares for the same reason it would purchase (and as an alternative to purchasing) futures contracts: to obtain exposure to all or a portion of the stock or bond market. ETF shares enjoy several advantages over futures. Depending on the market, the holding period, and other factors, ETF shares can be less costly and more tax-efficient than futures. In addition, ETF shares can be purchased for smaller sums, offer exposure to market sectors and styles for which there is no suitable or liquid futures contract, and do not involve leverage.
An investment in an ETF generally presents the same principal risks as an investment in a conventional fund (i.e., one that is not exchange-traded) that has the same investment objective, strategies, and policies. The price of an ETF can fluctuate within a wide range, and a fund could lose money investing in an ETF if the prices of the securities owned by the ETF go down. In addition, ETFs are subject to the following risks that do not apply to conventional funds: (1) the market price of an ETF’s shares may trade at a discount or a premium to their net asset value; (2) an active trading market for an ETF’s shares may not develop or be maintained; and (3) trading of an ETF’s shares may be halted by the activation of individual or marketwide trading halts (which halt trading for a specific period of time when the price of a particular security or overall market prices decline by a specified percentage). Trading of an ETF’s shares may also be halted if the shares are delisted from the exchange without first being listed on another exchange or if the listing exchange’s officials determine that such action is appropriate in the interest of a fair and orderly market or for the protection of investors.
Most ETFs are investment companies. Therefore, a fund’s purchases of ETF shares generally are subject to the limitations on, and the risks of, a fund’s investments in other investment companies, which are described under the heading “Other Investment Companies.”
Foreign Securities. Typically, foreign securities are considered to be equity or debt securities issued by entities organized, domiciled, or with a principal executive office outside the United States, such as foreign corporations and governments. Securities issued by certain companies organized outside the United States may not be deemed to be foreign securities if the company’s principal operations are conducted from the United States or when the company’s equity securities trade principally on a U.S. stock exchange. Foreign securities may trade in U.S. or foreign securities markets. A fund may make foreign investments either directly by purchasing foreign securities or indirectly by purchasing depositary receipts or depositary shares of similar instruments (depositary receipts) for foreign securities. Direct investments in foreign securities may be made either on foreign securities exchanges or in the over-the-counter (OTC) markets. Investing in foreign securities involves certain special risk considerations that are not typically associated with investing in securities of U.S. companies or governments.
Because foreign issuers are not generally subject to uniform accounting, auditing, and financial reporting standards and practices comparable to those applicable to U.S. issuers, there may be less publicly available information about certain foreign issuers than about U.S. issuers. Evidence of securities ownership may be uncertain in many foreign countries. As a result, there are risks that could result in a loss to the fund, including, but not limited to, the risk that a fund’s trade details could be incorrectly or fraudulently entered at the time of a transaction. Securities of foreign issuers are generally more volatile and less liquid than securities of comparable U.S. issuers, and foreign investments may be effected through structures that may be complex or confusing. In certain countries, there is less government supervision and regulation of stock exchanges, brokers, and listed companies than in the United States. The risk that securities traded on foreign exchanges may be suspended, either by the issuers themselves, by an exchange, or by government authorities, is also heightened. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, war, terrorism, nationalization, limitations on the removal of funds or other assets, or diplomatic developments that could affect U.S. investments in those countries. Additionally, the imposition of economic or other sanctions imposed on the United States by a foreign country, or imposed on a foreign country or issuer by the United States, could impair a fund’s ability to buy, sell, hold, receive, deliver, or otherwise transact in certain investment securities or obtain exposure to foreign securities and assets. This
may negatively impact the value and/or liquidity of a fund’s investments and could impair a fund’s ability to meet its investment objective or invest in accordance with its investment strategy. Sanctions could also result in the devaluation of a country’s currency, a downgrade in the credit ratings of a country or issuers in a country, or a decline in the value and/or liquidity of securities of issuers in that country.
Although an advisor will endeavor to achieve the most favorable execution costs for a fund’s portfolio transactions in foreign securities under the circumstances, commissions and other transaction costs are generally higher than those on U.S. securities. In addition, it is expected that the custodian arrangement expenses for a fund that invests primarily in foreign securities will be somewhat greater than the expenses for a fund that invests primarily in domestic securities. Additionally, bankruptcy laws vary by jurisdiction and cash deposits may be subject to a custodian’s creditors. Certain foreign governments levy withholding or other taxes against dividend and interest income from, capital gains on the sale of, or transactions in foreign securities. Although in some countries a portion of these taxes is recoverable by the fund, the nonrecovered portion of foreign withholding taxes will reduce the income received from such securities.
The value of the foreign securities held by a fund that are not U.S. dollar-denominated may be significantly affected by changes in currency exchange rates. The U.S. dollar value of a foreign security generally decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and it tends to increase when the value of the U.S. dollar falls against such currency (as discussed under the heading “Foreign Securities—Foreign Currency Transactions,” a fund may attempt to hedge its currency risks). In addition, the value of fund assets may be affected by losses and other expenses incurred from converting between various currencies in order to purchase and sell foreign securities, as well as by currency restrictions, exchange control regulations, currency devaluations, and political and economic developments.
Foreign Securities—Emerging Market Risk. Investing in emerging market countries involves certain risks not typically associated with investing in the United States, and it imposes risks greater than, or in addition to, risks of investing in more developed foreign countries. These risks may significantly affect the value of emerging market investments and include: (i) nationalization or expropriation of assets or confiscatory taxation; (ii) currency devaluations and other currency exchange rate fluctuations; (iii) greater social, economic, and political uncertainty and instability (including amplified risk of war and terrorism); (iv) more substantial government involvement in and control over the economy; (v) less government supervision and regulation of the securities markets and participants in those markets and possible arbitrary and unpredictable enforcement of securities regulations and other laws, which may increase the risk of market manipulation; (vi) controls on foreign investment and limitations on repatriation of invested capital and on a fund’s ability to exchange local currencies for U.S. dollars; (vii) unavailability of currency-hedging techniques in certain emerging market countries; (viii) generally smaller, less seasoned, or newly-organized companies; (ix) differences in, or lack of, corporate governance, accounting, auditing, recordkeeping, and financial reporting standards, which may result in unavailability of material information about issuers and impede evaluation of such issuers; (x) difficulty in obtaining and/or enforcing a judgment in a court outside the United States; and (xi) greater price volatility, substantially less liquidity, and significantly smaller market capitalization of securities markets. Also, any change in the leadership or politics of emerging market countries, or the countries that exercise a significant influence over those countries, may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities. Furthermore, high rates of inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries. Custodial expenses and other investment-related costs are often more expensive in emerging market countries, which can reduce a fund’s income from investments in securities or debt instruments of emerging market country issuers. Additionally, information regarding companies located in emerging markets may be less available and less reliable, which can impede the ability to evaluate such companies. There may also be limited regulatory oversight of certain foreign subcustodians that hold foreign securities subject to the supervision of a fund’s primary U.S.-based custodian. A fund may be limited in its ability to recover assets if a foreign subcustodian becomes bankrupt or otherwise unable or unwilling to return assets to the fund, which may expose the fund to risk, especially in circumstances where the fund’s primary custodian may not be contractually obligated to make the fund whole for the particular loss.
Emerging market investments also carry the risk that strained international relations may give rise to retaliatory actions, including actions through financial markets such as purchase and ownership restrictions, sanctions, tariffs, cyberattacks, and unpredictable enforcement of securities regulations and other laws. Such actual and/or threatened retaliatory actions may impact emerging market economies and issuers in which a fund invests. For example, in China, ownership of companies in certain sectors by foreign individuals and entities is prohibited. In order to facilitate investment in these companies by foreign individuals, many Chinese companies have created variable interest entities (“VIEs”) that provide exposure to the Chinese company through contractual arrangements instead of equity ownership. VIE structures are
subject to risks associated with breach of the contractual arrangements, including difficulty in enforcing any judgments outside of the United States, and do not offer the same level of investor protection as direct ownership. Additionally, while VIEs are a longstanding industry practice, they have not been approved by Chinese regulators. Chinese regulators could prohibit Chinese companies from accessing foreign investment through VIEs or sever their ability to transmit economic and governance rights to foreign individuals and entities. Such actions would significantly reduce, and possibly permanently eliminate, the market value of VIEs held by a fund.
Foreign Securities—China Bonds Risk. The People’s Republic of China (China) continues to limit direct foreign investments, generally in industries deemed important to national interests. Foreign investment in Chinese securities is also subject to substantial restrictions, although Chinese regulators have begun to introduce programs through which foreign investors can gain direct access to certain Chinese securities markets. The People’s Bank of China (PBoC) has established a program that permits eligible foreign investors to invest directly in securities traded on the Chinese Interbank Bond Market (CIBM). A fund may invest in the bonds available on the CIBM through Bond Connect and the Hong Kong Monetary Authority that allows investors from mainland China and overseas to trade in each other’s respective markets. Bond Connect provides a connection between mainland China- and Hong Kong-based financial institutions, permitting investors to trade between the mainland China and Hong Kong markets electronically, thus eliminating the stricter restrictions that were present under previous access models. While the CIBM is relatively large and trading volumes are generally high, the market remains subject to similar risks as bond markets in other emerging market countries.
Investing in securities traded on the CIBM through Bond Connect is also subject to regulatory risks. The relevant rules and regulations of, the structure and terms of, and a fund’s access to Bond Connect may be subject to change with minimal notice and have the potential to be applied retroactively. Additionally, as is the case with other emerging market economies, China’s ability to develop and sustain its legal, tax, regulatory, financial reporting, accounting, and recordkeeping systems could influence the course of foreign investment. In particular, the Chinese legal system constitutes a significant risk factor for investors. The interpretation and enforcement of Chinese laws and regulations are uncertain, and investments in China may not be subject to the same degree of legal protection as in other developed countries.
In the event account opening or trading is suspended on the CIBM, a fund’s ability to invest in securities traded on the CIBM will be adversely affected and may negatively affect the fund. Furthermore, if Bond Connect is not operating, a fund may not be able to acquire or dispose of bonds through Bond Connect in a timely manner, which could adversely affect the fund’s performance.
Market volatility and potential lack of liquidity due to low trading volume of certain bonds on the CIBM may result in significant fluctuations in the prices of certain bonds traded on the CIBM. The bid-ask spreads of the prices of such securities may be large, and a fund may therefore incur significant costs and may suffer losses when selling such investments. The bonds traded on the CIBM may be difficult or impossible to sell, which may impact a fund’s ability to acquire or dispose of such securities at their expected prices. A fund is also exposed to risks associated with settlement procedures and default of counterparties.
Bond Connect trades are settled in RMB, which is currently restricted and not freely convertible. As a result, a fund’s investments through Bond Connect will be exposed to currency risk and incur currency conversion costs, and it cannot be guaranteed that investors will have timely access to a reliable supply of RMB. RMB is the only currency of China. Although both onshore RMB (CNY) and offshore RMB (CNH) are the same currency, they are traded in different and separate markets. These markets operate separately and can be subject to different liquidity constraints and market forces, meaning their valuations can vary. As part of standard fund management practices, a fund may hedge the foreign exchange (FX) exposure that arises from the inclusion of Chinese RMB-denominated bonds into the base currency of the fund.
Trading through Bond Connect is performed through newly developed trading platforms and operational systems. There is no assurance that such systems will function properly (in particular, under extreme market conditions) or will continue to be adapted to changes and developments in the market. In the event relevant systems fail to function properly, trading through Bond Connect may be disrupted. A fund’s ability to trade through Bond Connect may therefore be adversely affected. In addition, where a fund invests in securities traded on the CIBM through Bond Connect, it may be subject to risks of delays inherent in order placing and/or settlement.
Any changes in the application of tax law to China-sourced dividends and interest from non-government bonds paid to a fund, future clarifications thereof, and/or subsequent retroactive enforcement by Chinese tax authorities may result in a loss to a fund.
Foreign Securities—Foreign Currency Transactions. The value in U.S. dollars of a fund’s non-dollar-denominated foreign securities may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the fund may incur costs in connection with conversions between various currencies. To seek to minimize the impact of such factors on net asset values, a fund may engage in foreign currency transactions in connection with its investments in foreign securities. A fund will enter into foreign currency transactions only to attempt to “hedge” the currency risk associated with investing in foreign securities. Although such transactions tend to minimize the risk of loss that would result from a decline in the value of the hedged currency, they also may limit any potential gain that might result should the value of such currency increase.
Currency exchange transactions may be conducted either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market or through forward contracts to purchase or sell foreign currencies. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into with large commercial banks or other currency traders who are participants in the interbank market. Currency exchange transactions also may be effected through the use of swap agreements or other derivatives.
Currency exchange transactions may be considered borrowings. A currency exchange transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
By entering into a forward contract for the purchase or sale of foreign currency involved in underlying security transactions, a fund may be able to protect itself against part or all of the possible loss between trade and settlement dates for that purchase or sale resulting from an adverse change in the relationship between the U.S. dollar and such foreign currency. This practice is sometimes referred to as “transaction hedging.” In addition, when the advisor reasonably believes that a particular foreign currency may suffer a substantial decline against the U.S. dollar, a fund may enter into a forward contract to sell an amount of foreign currency approximating the value of some or all of its portfolio securities denominated in such foreign currency. This practice is sometimes referred to as “portfolio hedging.” Similarly, when the advisor reasonably believes that the U.S. dollar may suffer a substantial decline against a foreign currency, a fund may enter into a forward contract to buy that foreign currency for a fixed dollar amount.
A fund may also attempt to hedge its foreign currency exchange rate risk by engaging in currency futures, options, and “cross-hedge” transactions. In cross-hedge transactions, a fund holding securities denominated in one foreign currency will enter into a forward currency contract to buy or sell a different foreign currency (one that the advisor reasonably believes generally tracks the currency being hedged with regard to price movements). The advisor may select the tracking (or substitute) currency rather than the currency in which the security is denominated for various reasons, including in order to take advantage of pricing or other opportunities presented by the tracking currency or to take advantage of a more liquid or more efficient market for the tracking currency. Such cross-hedges are expected to help protect a fund against an increase or decrease in the value of the U.S. dollar against certain foreign currencies.
A fund may hold a portion of its assets in bank deposits denominated in foreign currencies so as to facilitate investment in foreign securities as well as protect against currency fluctuations and the need to convert such assets into U.S. dollars (thereby also reducing transaction costs). To the extent these assets are converted back into U.S. dollars, the value of the assets so maintained will be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations.
Forecasting the movement of the currency market is extremely difficult. Whether any hedging strategy will be successful is highly uncertain. Moreover, it is impossible to forecast with precision the market value of portfolio securities at the expiration of a forward currency contract. Accordingly, a fund may be required to buy or sell additional currency on the spot market (and bear the expense of such transaction) if its advisor’s predictions regarding the movement of foreign currency or securities markets prove inaccurate. In addition, the use of cross-hedging transactions may involve special risks and may leave a fund in a less advantageous position than if such a hedge had not been established. Because forward currency contracts are privately negotiated transactions, there can be no assurance that a fund will have flexibility to roll over a forward currency contract upon its expiration if it desires to do so. Additionally, there can be no assurance that the other party to the contract will perform its services thereunder.
Foreign Securities—Foreign Investment Companies. Some of the countries in which a fund may invest may not permit, or may place economic restrictions on, direct investment by outside investors. Fund investments in such countries may be permitted only through foreign government-approved or authorized investment vehicles, which may
include other investment companies. Such investments may be made through registered or unregistered closed-end investment companies that invest in foreign securities. Investing through such vehicles may involve layered fees or expenses and may also be subject to the limitations on, and the risks of, a fund’s investments in other investment companies, which are described under the heading “Other Investment Companies.”
Foreign Securities—Russian Market Risk. There are significant risks inherent in investing in Russian securities. The underdeveloped state of Russia’s banking system subjects the settlement, clearing, and registration of securities transactions to significant risks. In March of 2013, the National Settlement Depository (NSD) began acting as a central depository for the majority of Russian equity securities; the NSD is now recognized as the Central Securities Depository in Russia.
For Russian issuers with fewer than 50 shareholders, ownership records are maintained only by registrars who are under contract with the issuers and are currently not settled with the NSD. Although a Russian subcustodian will maintain copies of the registrar’s records (Share Extracts) on its premises, such Share Extracts are not recorded with the NSD and may not be legally sufficient to establish ownership of securities. The registrars may not be independent from the issuer, are not necessarily subject to effective state supervision, and may not be licensed with any governmental entity. A fund will endeavor to ensure by itself or through a custodian or other agent that the fund’s interest continues to be appropriately recorded for Russian issuers with fewer than 50 shareholders by inspecting the share register and by obtaining extracts of share registers through regular confirmations. However, these extracts have no legal enforceability, and the possibility exists that a subsequent illegal amendment or other fraudulent act may deprive the fund of its ownership rights or may improperly dilute its interest. In addition, although applicable Russian regulations impose liability on registrars for losses resulting from their errors, a fund may find it difficult to enforce any rights it may have against the registrar or issuer of the securities in the event of loss of share registration.
Russia’s large-scale invasion of Ukraine has resulted in sanctions against Russian governmental institutions, Russian entities, and Russian individuals that may result in the devaluation of Russian currency; a downgrade in the country’s credit rating; a freeze of Russian foreign assets; a decline in the value and liquidity of Russian securities, properties, or interests; and other adverse consequences to the Russian economy and Russian assets. In addition, a fund’s ability to price, buy, sell, receive, or deliver Russian investments has been and may continue to be impaired. These sanctions, and the resulting disruption of the Russian economy, may cause volatility in other regional and global markets and may negatively impact the performance of various sectors and industries, as well as companies in other countries, which could have a negative effect on the performance of a fund, even if the fund does not have direct exposure to securities of Russian issuers.
Futures Contracts and Options on Futures Contracts. Futures contracts and options on futures contracts are derivatives. A futures contract is a standardized agreement between two parties to buy or sell at a specific time in the future a specific quantity of a commodity at a specific price. The commodity may consist of an asset, a reference rate, or an index. A security futures contract relates to the sale of a specific quantity of shares of a single equity security or a narrow-based securities index. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying commodity. The buyer of a futures contract enters into an agreement to purchase the underlying commodity on the settlement date and is said to be “long” the contract. The seller of a futures contract enters into an agreement to sell the underlying commodity on the settlement date and is said to be “short” the contract. The price at which a futures contract is entered into is established either in the electronic marketplace or by open outcry on the floor of an exchange between exchange members acting as traders or brokers. Open futures contracts can be liquidated or closed out by physical delivery of the underlying commodity or payment of the cash settlement amount on the settlement date, depending on the terms of the particular contract. Some financial futures contracts (such as security futures) provide for physical settlement at maturity. Other financial futures contracts (such as those relating to interest rates, foreign currencies, and broad-based securities indexes) generally provide for cash settlement at maturity. In the case of cash-settled futures contracts, the cash settlement amount is equal to the difference between the final settlement or market price for the relevant commodity on the last trading day of the contract and the price for the relevant commodity agreed upon at the outset of the contract. Most futures contracts, however, are not held until maturity but instead are “offset” before the settlement date through the establishment of an opposite and equal futures position.
The purchaser or seller of a futures contract is not required to deliver or pay for the underlying commodity unless the contract is held until the settlement date. However, both the purchaser and seller are required to deposit “initial margin” with a futures commission merchant (FCM) when the futures contract is entered into. Initial margin deposits are typically calculated as an amount equal to the volatility in market value of a contract over a fixed period. If the value of the fund’s position declines, the fund will be required to make additional “variation margin” payments to the FCM to
settle the change in value. If the value of the fund’s position increases, the FCM will be required to make additional “variation margin” payments to the fund to settle the change in value. This process is known as “marking-to-market” and is calculated on a daily basis. A futures transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
An option on a futures contract (or futures option) conveys the right, but not the obligation, to purchase (in the case of a call option) or sell (in the case of a put option) a specific futures contract at a specific price (called the “exercise” or “strike” price) any time before the option expires. The seller of an option is called an option writer. The purchase price of an option is called the premium. The potential loss to an option buyer is limited to the amount of the premium plus transaction costs. This will be the case, for example, if the option is held and not exercised prior to its expiration date. Generally, an option writer sells options with the goal of obtaining the premium paid by the option buyer. If an option sold by an option writer expires without being exercised, the writer retains the full amount of the premium. The option writer, however, has unlimited economic risk because its potential loss, except to the extent offset by the premium received when the option was written, is equal to the amount the option is “in-the-money” at the expiration date. A call option is in-the-money if the value of the underlying futures contract exceeds the exercise price of the option. A put option is in-the-money if the exercise price of the option exceeds the value of the underlying futures contract. Generally, any profit realized by an option buyer represents a loss for the option writer.
A fund that takes the position of a writer of a futures option is required to deposit and maintain initial and variation margin with respect to the option, as previously described in the case of futures contracts. A futures option transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
Futures Contracts and Options on Futures Contracts—Risks. The risk of loss in trading futures contracts and in writing futures options can be substantial because of the low margin deposits required, the extremely high degree of leverage involved in futures and options pricing, and the potential high volatility of the futures markets. As a result, a relatively small price movement in a futures position may result in immediate and substantial loss (or gain) for the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, a purchase or sale of a futures contract, and the writing of a futures option, may result in losses in excess of the amount invested in the position. In the event of adverse price movements, a fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if the fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements (and segregation requirements, if applicable) at a time when it may be disadvantageous to do so. In addition, on the settlement date, a fund may be required to make delivery of the instruments underlying the futures positions it holds.
A fund could suffer losses if it is unable to close out a futures contract or a futures option because of an illiquid secondary market. Futures contracts and futures options may be closed out only on an exchange that provides a secondary market for such products. However, there can be no assurance that a liquid secondary market will exist for any particular futures product at any specific time. Thus, it may not be possible to close a futures or option position. Moreover, most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day’s settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day, and therefore does not limit potential losses because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. The inability to close futures and options positions also could have an adverse impact on the ability to hedge a portfolio investment or to establish a substitute for a portfolio investment. U.S. Treasury futures are generally not subject to such daily limits.
A fund bears the risk that its advisor will incorrectly predict future market trends. If the advisor attempts to use a futures contract or a futures option as a hedge against, or as a substitute for, a portfolio investment, the fund will be
exposed to the risk that the futures position will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving futures products can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments.
A fund could lose margin payments it has deposited with its FCM if, for example, the FCM breaches its agreement with the fund or becomes insolvent or goes into bankruptcy. In that event, the fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM’s other customers, potentially resulting in losses to the fund.
Hybrid Instruments. A hybrid instrument, or hybrid, is an interest in an issuer that combines the characteristics of an equity security, a debt security, a commodity, and/or a derivative. A hybrid may have characteristics that, on the whole, more strongly suggest the existence of a bond, stock, or other traditional investment, but a hybrid may also have prominent features that are normally associated with a different type of investment. Moreover, hybrid instruments may be treated as a particular type of investment for one regulatory purpose (such as taxation) and may be simultaneously treated as a different type of investment for a different regulatory purpose (such as securities or commodity regulation). Hybrids can be used as an efficient means of pursuing a variety of investment goals, including increased total return, duration management, and currency hedging. Because hybrids combine features of two or more traditional investments and may involve the use of innovative structures, hybrids present risks that may be similar to, different from, or greater than those associated with traditional investments with similar characteristics.
Examples of hybrid instruments include convertible securities, which combine the investment characteristics of bonds and common stocks; perpetual bonds, which are structured like fixed income securities, have no maturity date, and may be characterized as debt or equity for certain regulatory purposes; contingent convertible securities, which are fixed income securities that, under certain circumstances, either convert into common stock of the issuer or undergo a principal write-down by a predetermined percentage if the issuer’s capital ratio falls below a predetermined trigger level; and trust-preferred securities, which are preferred stocks of a special-purpose trust that holds subordinated debt of the corporate parent. Another example of a hybrid is a commodity-linked bond, such as a bond issued by an oil company that pays a small base level of interest with additional interest that accrues in correlation to the extent to which oil prices exceed a certain predetermined level. Such a hybrid would be a combination of a bond and a call option on oil.
In the case of hybrids that are structured like fixed income securities (such as structured notes), the principal amount or the interest rate is generally tied (positively or negatively) to the price of some commodity, currency, securities index, interest rate, or other economic factor (each, a benchmark). For some hybrids, the principal amount payable at maturity or the interest rate may be increased or decreased, depending on changes in the value of the benchmark. Other hybrids do not bear interest or pay dividends. The value of a hybrid or its interest rate may be a multiple of a benchmark and, as a result, may be leveraged and move (up or down) more steeply and rapidly than the benchmark, thus magnifying movements within the benchmark. These benchmarks may be sensitive to economic and political events, such as commodity shortages and currency devaluations, which cannot be readily foreseen by the purchaser of a hybrid. Under certain conditions, the redemption value of a hybrid could be zero. Thus, an investment in a hybrid may entail significant market risks that are not associated with a similar investment in a traditional, U.S. dollar-denominated bond with a fixed principal amount that pays a fixed rate or floating rate of interest. The purchase of hybrids also exposes a fund to the credit risk of the issuer of the hybrids. Depending on the level of a fund’s investment in hybrids, these risks may cause significant fluctuations in the fund’s net asset value. Hybrid instruments may also carry liquidity risk since the instruments are often “customized” to meet the needs of an issuer or, sometimes, the portfolio needs of a particular investor, and therefore the number of investors that are willing and able to buy such instruments in the secondary market may be smaller than that for more traditional securities.
Certain issuers of hybrid instruments known as structured products may be deemed to be investment companies as defined in the 1940 Act. As a result, a fund’s investments in these products may be subject to the limitations described under the heading “Other Investment Companies.”
Interfund Borrowing and Lending. The SEC has granted an exemption permitting registered open-end Vanguard funds to participate in Vanguard’s interfund lending program. This program allows the Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes. The program is subject to a number of conditions, including, among other things, the requirements that (1) no fund may borrow or lend money through the program unless it receives a more favorable interest rate than is typically available from a bank for a comparable transaction, (2) no fund may lend money if the loan would cause its aggregate outstanding loans through the program to exceed 15% of its net assets at the time of the loan, and (3) a fund’s interfund loans to any one fund shall not
exceed 5% of the lending fund’s net assets. In addition, a Vanguard fund may participate in the program only if and to the extent that such participation is consistent with the fund’s investment objective and investment policies. The boards of trustees of the Vanguard funds are responsible for overseeing the interfund lending program. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional borrowing costs.
Investing for Control. Each Vanguard fund invests in securities and other instruments for the sole purpose of achieving a specific investment objective. As such, a Vanguard fund does not seek to acquire, individually or collectively with any other Vanguard fund, enough of a company’s outstanding voting stock to have control over management decisions. A Vanguard fund does not invest for the purpose of controlling a company’s management.
Market Disruption. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Market disruptions may exacerbate political, social, and economic risks discussed above and in a fund’s prospectus. Additionally, market disruptions may result in increased market volatility; regulatory trading halts; closure of domestic or foreign exchanges, markets, or governments; or market participants operating pursuant to business continuity plans for indeterminate periods of time. Such events can be highly disruptive to economies and markets and significantly impact individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of a fund’s investments and operation of a fund. These events could also result in the closure of businesses that are integral to a fund’s operations or otherwise disrupt the ability of employees of fund service providers to perform essential tasks on behalf of a fund.
Mortgage-Backed Securities. Mortgage-backed securities represent direct or indirect participation in, or are collateralized by and payable from, mortgage loans secured by real property or instruments derived from such loans and may be based on different types of mortgages, including those on residential properties or commercial real estate. Mortgage-backed securities include various types of securities, such as government stripped mortgage-backed securities, adjustable rate mortgage-backed securities, and collateralized mortgage obligations.
Generally, mortgage-backed securities represent partial interests in pools of mortgage loans assembled for sale to investors by various governmental agencies, such as the Government National Mortgage Association (GNMA); by government-related organizations, such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC); and by private issuers, such as commercial banks, savings and loan institutions, and mortgage bankers. The average maturity of pass-through pools of mortgage-backed securities in which a fund may invest varies with the maturities of the underlying mortgage instruments. In addition, a pool’s average maturity may be shortened by unscheduled payments on the underlying mortgages. Factors affecting mortgage prepayments include the level of interest rates, the general economic and social conditions, the location of the mortgaged property, and the age of the mortgage. Because prepayment rates of individual mortgage pools vary widely, the average life of a particular pool cannot be predicted accurately.
Mortgage-backed securities may be classified as private, government, or government-related, depending on the issuer or guarantor. Private mortgage-backed securities represent interest in pass-through pools consisting principally of conventional residential or commercial mortgage loans created by nongovernment issuers, such as commercial banks, savings and loan associations, and private mortgage insurance companies. Private mortgage-backed securities may not be readily marketable. In addition, mortgage-backed securities have been subject to greater liquidity risk when worldwide economic and liquidity conditions deteriorate. U.S. government mortgage-backed securities are backed by the full faith and credit of the U.S. government. GNMA, the principal U.S. guarantor of these securities, is a wholly owned U.S. government corporation within the Department of Housing and Urban Development. Government-related mortgage-backed securities are not backed by the full faith and credit of the U.S. government. Issuers include FNMA and FHLMC, which are congressionally chartered corporations. In September 2008, the U.S. Treasury placed FNMA and FHLMC under conservatorship and appointed the Federal Housing Finance Agency (FHFA) to manage their daily operations. In addition, the U.S. Treasury entered into purchase agreements with FNMA and FHLMC to provide them with capital in exchange for senior preferred stock. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA. Participation certificates representing interests in mortgages from FHLMC’s national portfolio are guaranteed as to the timely payment of interest and principal by FHLMC. Private, government, or government-related entities may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be alternative mortgage instruments (i.e., mortgage instruments whose principal or interest payments may vary or whose terms to maturity may be shorter than customary).
Mortgage-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. Prepayments of principal by
mortgagors or mortgage foreclosures shorten the term of the mortgage pool underlying the mortgage-backed security. A fund’s ability to maintain positions in mortgage-backed securities is affected by the reductions in the principal amount of such securities resulting from prepayments. A fund’s ability to reinvest prepayments of principal at comparable yield is subject to generally prevailing interest rates at that time. The values of mortgage-backed securities vary with changes in market interest rates generally and the differentials in yields among various kinds of government securities, mortgage-backed securities, and asset-backed securities. In periods of rising interest rates, the rate of prepayment tends to decrease, thereby lengthening the average life of a pool of mortgages supporting a mortgage-backed security. Conversely, in periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the average life of such a pool. Because prepayments of principal generally occur when interest rates are declining, an investor, such as a fund, generally has to reinvest the proceeds of such prepayments at lower interest rates than those at which its assets were previously invested. Therefore, mortgage-backed securities have less potential for capital appreciation in periods of falling interest rates than other income-bearing securities of comparable maturity.
Mortgage-Backed Securities—Adjustable Rate Mortgage-Backed Securities. Adjustable rate mortgage-backed securities (ARMBSs) have interest rates that reset at periodic intervals. Acquiring ARMBSs permits a fund to participate in increases in prevailing current interest rates through periodic adjustments in the coupons of mortgages underlying the pool on which ARMBSs are based. Such ARMBSs generally have higher current yield and lower price fluctuations than is the case with more traditional fixed income debt securities of comparable rating and maturity. However, because the interest rates on ARMBSs are reset only periodically, changes in market interest rates or in the issuer’s creditworthiness may affect their value. In addition, when prepayments of principal are made on the underlying mortgages during periods of rising interest rates, a fund can reinvest the proceeds of such prepayments at rates higher than those at which they were previously invested. Mortgages underlying most ARMBSs, however, have limits on the allowable annual or lifetime increases that can be made in the interest rate that the mortgagor pays. Therefore, if current interest rates rise above such limits over the period of the limitation, a fund holding an ARMBS does not benefit from further increases in interest rates. Moreover, when interest rates are in excess of coupon rates (i.e., the rates being paid by mortgagors) of the mortgages, ARMBSs behave more like fixed income securities and less like adjustable rate securities and are thus subject to the risks associated with fixed income securities. In addition, during periods of rising interest rates, increases in the coupon rate of adjustable rate mortgages generally lag current market interest rates slightly, thereby creating the potential for capital depreciation on such securities.
Mortgage-Backed Securities—Collateralized Mortgage Obligations. Collateralized mortgage obligations (CMOs) are mortgage-backed securities that are collateralized by whole loan mortgages or mortgage pass-through securities. The bonds issued in a CMO transaction are divided into groups, and each group of bonds is referred to as a “tranche.” Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage pass-through securities in the collateral pool are used to first pay interest and then pay principal to the CMO bondholders. The bonds issued under a traditional CMO structure are retired sequentially as opposed to the pro-rata return of principal found in traditional pass-through obligations. Subject to the various provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount required to pay the stated interest) is used to retire the bonds. Under a CMO structure, the repayment of principal among the different tranches is prioritized in accordance with the terms of the particular CMO issuance. The “fastest-pay” tranches of bonds, as specified in the prospectus for the issuance, would initially receive all principal payments. When those tranches of bonds are retired, the next tranche (or tranches) in the sequence, as specified in the prospectus, receives all of the principal payments until that tranche is retired. The sequential retirement of bond groups continues until the last tranche is retired. Accordingly, the CMO structure allows the issuer to use cash flows of long-maturity, monthly pay collateral to formulate securities with short, intermediate, and long final maturities and expected average lives and risk characteristics.
In recent years, new types of CMO tranches have evolved. These include floating rate CMOs, planned amortization classes, accrual bonds, and CMO residuals. These newer structures affect the amount and timing of principal and interest received by each tranche from the underlying collateral. Under certain of these new structures, given classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a fund invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-backed securities.
CMOs may include real estate mortgage investment conduits (REMICs). REMICs, which were authorized under the Tax Reform Act of 1986, are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. A REMIC is a CMO that qualifies for special tax treatment under the IRC and invests in certain mortgages principally secured by interests in real property. Investors may purchase beneficial interests in REMICs, which are known as “regular” interests, or “residual” interests. Guaranteed REMIC pass-through certificates (REMIC Certificates) issued by FNMA or FHLMC represent beneficial ownership interests in a REMIC trust consisting principally
of mortgage loans or FNMA, FHLMC, or GNMA-guaranteed mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of interest and also guarantees the payment of principal, as payments are required to be made on the underlying mortgage participation certificates. FNMA REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by FNMA.
The primary risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure of the particular CMO transaction (i.e., the priority of the individual tranches). An increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) will affect the yield, the average life, and the price of CMOs. The prices of certain CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may also not be as liquid as other securities.
Mortgage-Backed Securities—Hybrid ARMs. A hybrid adjustable rate mortgage (hybrid ARM) is a type of mortgage in which the interest rate is fixed for a specified period and then resets periodically, or floats, for the remaining mortgage term. Hybrid ARMs are usually referred to by their fixed and floating periods. For example, a 5/1 ARM refers to a mortgage with a 5-year fixed interest rate period, followed by a 1-year interest rate adjustment period. During the initial interest period (i.e., the initial five years for a 5/1 hybrid ARM), hybrid ARMs behave more like fixed income securities and are thus subject to the risks associated with fixed income securities. All hybrid ARMs have reset dates. A reset date is the date when a hybrid ARM changes from a fixed interest rate to a floating interest rate. At the reset date, a hybrid ARM can adjust by a maximum specified amount based on a margin over an identified index. Like ARMBSs, hybrid ARMs have periodic and lifetime limitations on the increases that can be made to the interest rates that mortgagors pay. Therefore, if during a floating rate period interest rates rise above the interest rate limits of the hybrid ARM, a fund holding the hybrid ARM does not benefit from further increases in interest rates.
Mortgage-Backed Securities—Mortgage Dollar Rolls. A mortgage dollar roll is a transaction in which a fund sells a mortgage-backed security to a dealer and simultaneously agrees to purchase a similar security (but not the same security) in the future at a predetermined price. A mortgage-dollar-roll program may be structured to simulate an investment in mortgage-backed securities at a potentially lower cost, or with potentially reduced administrative burdens, than directly holding mortgage-backed securities. For accounting purposes, each transaction in a mortgage dollar roll is viewed as a separate purchase and sale of a mortgage-backed security. These transactions may increase a fund’s portfolio turnover rate. The fund receives cash for a mortgage-backed security in the initial transaction and enters into an agreement that requires the fund to purchase a similar mortgage-backed security in the future.
The counterparty with which a fund enters into a mortgage-dollar-roll transaction is obligated to provide the fund with similar securities to purchase as those originally sold by the fund. These securities generally must (1) be issued by the same agency and be part of the same program; (2) have similar original stated maturities; (3) have identical net coupon rates; and (4) satisfy “good delivery” requirements, meaning that the aggregate principal amounts of the securities delivered and received back must be within a certain percentage of the initial amount delivered. Mortgage dollar rolls will be used only if consistent with a fund’s investment objective and strategies and will not be used to change a fund’s risk profile.
Mortgage-Backed Securities—Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities (SMBSs) are derivative multiclass mortgage-backed securities. SMBSs may be issued by agencies or instrumentalities of the U.S. government or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks, and special purpose entities formed or sponsored by any of the foregoing.
SMBSs are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the “IO” class), while the other class will receive all of the principal (the principal-only or “PO” class). The price and yield to maturity on an IO class are extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a fund may fail to recoup some or all of its initial investment in these securities, even if the security is in one of the highest rating categories.
Although SMBSs are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed, and accordingly, these securities may be deemed “illiquid” and thus subject to a fund’s limitations on investment in illiquid securities.
Municipal Bonds. Municipal bonds are debt obligations issued by states, municipalities, U.S. jurisdictions or territories, and other political subdivisions and by agencies, authorities, and instrumentalities of states and multistate agencies or authorities (collectively, municipalities). Typically, the interest payable on municipal bonds is, in the opinion of bond counsel to the issuer at the time of issuance, exempt from federal income tax.
Municipal bonds include securities from a variety of sectors, each of which has unique risks, and can be divided into government bonds (i.e., bonds issued to provide funding for governmental projects, such as public roads or schools) and conduit bonds (i.e., bonds issued to provide funding for a third-party permitted to use municipal bond proceeds, such as airports or hospitals). The Fund will not concentrate in any one industry or group of industries; tax-exempt securities issued by states, municipalities, and their political subdivisions are not considered to be part of an industry. However, if a municipal bond’s income is derived from a specific project, the securities will be considered to be from the industry of that project. Municipal bonds include, but are not limited to, general obligation bonds, limited obligation bonds, and revenue bonds, including industrial development bonds issued pursuant to federal tax law.
General obligation bonds are secured by the issuer’s pledge of its full faith, credit, and taxing power for the payment of principal and interest. Limited obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Revenue or special tax bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax, but not from general tax revenues.
Revenue bonds involve the credit risk of the underlying project or enterprise (or its corporate user) rather than the credit risk of the issuing municipality. Under the IRC, certain limited obligation bonds are considered “private activity bonds,” and interest paid on such bonds is treated as an item of tax preference for purposes of calculating federal alternative minimum tax liability. Tax-exempt private activity bonds and industrial development bonds generally are also classified as revenue bonds and thus are not payable from the issuer’s general revenues. The credit and quality of private activity bonds and industrial development bonds are usually related to the credit of the corporate user of the facilities. Payment of interest on and repayment of principal of such bonds are the responsibility of the corporate user (and/or any guarantor). Some municipal bonds may be issued as variable or floating rate securities and may incorporate market-dependent liquidity features (see discussion of “Debt Securities—Variable and Floating Rate Securities”). A tax-exempt fund will generally invest only in securities deemed tax-exempt by a nationally recognized bond counsel, but there is no guarantee that the interest payments on municipal bonds will continue to be tax-exempt for the life of the bonds.
Some longer-term municipal bonds give the investor a “put option,” which is the right to sell the security back to the issuer at par (face value) prior to maturity, within a specified number of days following the investor’s request—usually one to seven days. This demand feature enhances a security’s liquidity by shortening its maturity and enables it to trade at a price equal to or very close to par. If a demand feature terminates prior to being exercised, a fund would hold the longer-term security, which could experience substantially more volatility. Municipal bonds that are issued as variable or floating rate securities incorporating market-dependent liquidity features may have greater liquidity risk than other municipal bonds (see discussion of “Debt Securities—Variable and Floating Rate Securities”).
Some municipal bonds feature credit enhancements, such as lines of credit, letters of credit, municipal bond insurance, and standby bond purchase agreements (SBPAs). SBPAs include lines of credit that are issued by a third party, usually a bank, to enhance liquidity and ensure repayment of principal and any accrued interest if the underlying municipal bond should default. Municipal bond insurance (which is usually purchased by the bond issuer from a private, nongovernmental insurance company) provides an unconditional and irrevocable guarantee that the insured bond’s principal and interest will be paid when due. Insurance does not guarantee the price of the bond or the share price of any fund. The credit quality of an insured bond reflects the higher of the credit quality of the insurer, based on its claims-paying ability, or the credit quality of the underlying bond issuer or obligor. The obligation of a municipal bond insurance company to pay a claim extends over the life of each insured bond. Although defaults on insured municipal bonds have been historically low and municipal bond insurers historically have met their claims, there is no assurance this will continue. A higher-than-expected default rate could strain the insurer’s loss reserves and adversely affect its ability to pay claims to bondholders. The number of municipal bond insurers is relatively small, and not all of them are assessed as high credit quality. An SBPA can include a liquidity facility that is provided to pay the purchase price of any
bonds that cannot be remarketed. The obligation of the liquidity provider (usually a bank) is only to advance funds to purchase tendered bonds that cannot be remarketed and does not cover principal or interest under any other circumstances. The liquidity provider’s obligations under the SBPA are usually subject to numerous conditions, including the continued creditworthiness of the underlying borrower or bond issuer.
Municipal bonds also include tender option bonds, which are municipal bond structured products created by dividing the income stream provided by an underlying security, such as municipal bonds or preferred shares issued by a tax-exempt bond fund, to create two securities issued by a special-purpose trust, one short-term and one long-term. The interest rate on the short-term component is periodically reset. The short-term component has negligible interest rate risk, while the long-term component has all of the risk of the underlying security. After income is paid on the short-term securities at current rates, the residual income goes to the long-term securities. Therefore, rising short-term interest rates result in lower income for the longer-term portion, and vice versa. The longer-term components can be very volatile and may be less liquid than other municipal bonds of comparable maturity. These securities have been developed in the secondary market to meet the demand for short-term, tax-exempt securities.
Municipal securities also include a variety of structures geared toward accommodating municipal-issuer short-term cash-flow requirements. These structures include, but are not limited to, general market notes, commercial paper, put bonds, and variable-rate demand obligations (VRDOs). VRDOs comprise a significant percentage of the outstanding debt in the short-term municipal market. VRDOs can be structured to provide a wide range of maturity options (1 day to over 360 days) to the underlying issuing entity and are typically issued at par. The longer the maturity option, the greater the degree of liquidity risk (the risk of not receiving an asking price of par or greater) and reinvestment risk (the risk that the proceeds from maturing bonds must be reinvested at a lower interest rate).
Although most municipal bonds are exempt from federal income tax, some are not. Taxable municipal bonds include Build America Bonds (BABs). The borrowing costs of BABs are subsidized by the federal government, but BABs are subject to state and federal income tax. BABs were created pursuant to the American Recovery and Reinvestment Act of 2009 (ARRA) to offer an alternative form of financing to state and local governments whose primary means for accessing the capital markets had been through the issuance of tax-exempt municipal bonds. BABs also include Recovery Zone Economic Development Bonds, which are subsidized more heavily by the federal government than other BABs and are designed to finance certain types of projects in distressed geographic areas.
Under ARRA, an issuer of a BAB is entitled to receive payments from the U.S. Treasury over the life of the BAB equal to 35% of the interest paid (or 45% of the interest paid in the case of a Recovery Zone Economic Development Bond). For example, if a state or local government were to issue a BAB at a taxable interest rate of 10% of the par value of the bond, the U.S. Treasury would make a payment directly to the issuing government of 35% of that interest (3.5% of the par value of the bond) or 45% of the interest (4.5% of the par value of the bond) in the case of a Recovery Zone Economic Development Bond. Thus, the state or local government’s net borrowing cost would be 6.5% or 5.5%, respectively, on BABs that pay 10% interest. In other cases, holders of a BAB receive a 35% or 45% tax credit, respectively. The BAB program expired on December 31, 2010. BABs outstanding prior to the expiration of the program continue to be eligible for the federal interest rate subsidy or tax credit, which continues for the life of the BABs; however, the federal interest rate subsidy or tax credit has been reduced by the government sequester. Additionally, bonds issued following expiration of the program are not eligible for federal payment or tax credit. In addition to BABs, a fund may invest in other municipal bonds that pay taxable interest.
The reorganization under the federal bankruptcy laws of an issuer of, or payment obligor with respect to, municipal bonds may result in the municipal bonds being canceled without repayment; repaid only in part; or repaid in part or whole through an exchange thereof for any combination of cash, municipal bonds, debt securities, convertible securities, equity securities, or other instruments or rights in respect to the same issuer or payment obligor or a related entity. Certain issuers are not eligible to file for bankruptcy.
Municipal Bonds—Risks. Municipal bonds are subject to credit risk. The yields of municipal bonds depend on, among other things, general money market conditions, conditions in the municipal bond market, size of a particular offering, maturity of the obligation, and credit quality of the issue. Consequently, municipal bonds with the same maturity, coupon, and credit quality may have different yields, while municipal bonds of the same maturity and coupon, but with different credit quality, may have the same yield. It is the responsibility of a fund’s investment management advisor to appraise independently the fundamental quality of bonds held by the fund. Information about the financial condition of an issuer of municipal bonds may not be as extensive as that which is made available by corporations whose securities are publicly traded. Obligations of issuers of municipal bonds are generally subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors.
Congress, state legislatures, or other governing authorities may seek to extend the time for payment of principal or interest, or both, or to impose other constraints upon enforcement of such obligations. For example, from time to time, proposals have been introduced before Congress to restrict or eliminate the federal income tax exemption for interest on municipal bonds. Also, from time to time, proposals have been introduced before state and local legislatures to restrict or eliminate the state and local income tax exemption for interest on municipal bonds. Similar proposals may be introduced in the future. If any such proposal were enacted, it might restrict or eliminate the ability of a fund to achieve its respective investment objective. In that event, the fund’s trustees and officers would reevaluate its investment objective and policies and consider recommending to its shareholders changes in such objective and policies.
There is also the possibility that, as a result of litigation or other conditions, the power or ability of issuers to meet their obligations for the payment of interest and principal on their municipal bonds may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may, from time to time, have the effect of introducing uncertainties in the market for municipal bonds or certain segments thereof or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal, or political developments might affect all or a substantial portion of a fund’s municipal bonds in the same manner. For example, a state specific tax-exempt fund is subject to state-specific risk, which is the chance that the fund, because it invests primarily in securities issued by a particular state and its municipalities, is more vulnerable to unfavorable developments in that state than are funds that invest in municipal securities of many states. Unfavorable developments in any economic sector may have far-reaching ramifications on a state’s overall municipal market. In the event that a particular obligation held by a fund is assessed at a credit quality below the minimum investment level permitted by the investment policies of such fund, the fund’s investment advisor, pursuant to oversight from the trustees, will carefully assess the creditworthiness of the obligation to determine whether it continues to meet the policies and objective of the fund.
Municipal bonds are subject to interest rate risk, which is the chance that bond prices will decline over short or even long periods because of rising interest rates. Interest rate risk is higher for long-term bonds, whose prices are much more sensitive to interest rate changes than are the prices of shorter-term bonds. Generally, prices of longer-maturity issues tend to fluctuate more than prices of shorter-maturity issues. Prices and yields on municipal bonds are dependent on a variety of factors, such as the financial condition of the issuer, the general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. A number of these factors, including the ratings of particular issues, are subject to change from time to time.
Municipal bonds are subject to call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupons or interest rates before their maturity dates. A fund would then lose any price appreciation above the bond’s call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the fund’s income. Call risk is generally high for long-term bonds. Conversely, municipal bonds are also subject to extension risk, which is the chance that during periods of rising interest rates, certain debt securities will be paid off substantially more slowly than originally anticipated, and the value of those securities may fall. Extension risk is generally high for long-term bonds.
Municipal bonds may be deemed to be illiquid as determined by or in accordance with methods adopted by a fund’s board of trustees. In determining the liquidity and appropriate valuation of a municipal bond, a fund’s advisor may consider the following factors relating to the security, among others: (1) the frequency of trades and quotes; (2) the number of dealers willing to purchase or sell the security; (3) the willingness of dealers to undertake to make a market; (4) the nature of the marketplace trades, including the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer; and (5) the factors unique to a particular security, including general creditworthiness of the issuer and the likelihood that the marketability of the securities will be maintained throughout the time the security is held by the fund.
Options. An option is a derivative. An option on a security (or index) is a contract that gives the holder of the option, in return for the payment of a “premium,” the right, but not the obligation, to buy from (in the case of a call option) or sell to (in the case of a put option) the writer of the option the security underlying the option (or the cash value of the index) at a specified exercise price prior to the expiration date of the option. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price (in the case of a call option) or to pay the exercise price upon delivery of the underlying security (in the case of a put option). The writer of an option on an index has the obligation upon exercise of the option to pay an amount equal to the cash value of the index minus the exercise price, multiplied by the specified multiplier for the index option. The multiplier for an index option determines the size of the investment position the option represents. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size, and strike price, the
terms of over-the-counter (OTC) options (options not traded on exchanges) generally are established through negotiation with the other party to the option contract. Although this type of arrangement allows the purchaser or writer greater flexibility to tailor an option to its needs, OTC options generally involve credit risk to the counterparty, whereas for exchange-traded, centrally cleared options, credit risk is mutualized through the involvement of the applicable clearing house.
The buyer (or holder) of an option is said to be “long” the option, while the seller (or writer) of an option is said to be “short” the option. A call option grants to the holder the right to buy (and obligates the writer to sell) the underlying security at the strike price, which is the predetermined price at which the option may be exercised. A put option grants to the holder the right to sell (and obligates the writer to buy) the underlying security at the strike price. The purchase price of an option is called the “premium.” The potential loss to an option buyer is limited to the amount of the premium plus transaction costs. This will be the case if the option is held and not exercised prior to its expiration date. Generally, an option writer sells options with the goal of obtaining the premium paid by the option buyer, but that person could also seek to profit from an anticipated rise or decline in option prices. If an option sold by an option writer expires without being exercised, the writer retains the full amount of the premium. The option writer, however, has unlimited economic risk because its potential loss, except to the extent offset by the premium received when the option was written, is equal to the amount the option is “in-the-money” at the expiration date. A call option is in-the-money if the value of the underlying position exceeds the exercise price of the option. A put option is in-the-money if the exercise price of the option exceeds the value of the underlying position. Generally, any profit realized by an option buyer represents a loss for the option writer. The writing of an option will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
If a trading market, in particular options, were to become unavailable, investors in those options (such as the funds) would be unable to close out their positions until trading resumes, and they may be faced with substantial losses if the value of the underlying instrument moves adversely during that time. Even if the market were to remain available, there may be times when options prices will not maintain their customary or anticipated relationships to the prices of the underlying instruments and related instruments. Lack of investor interest, changes in volatility, or other factors or conditions might adversely affect the liquidity, efficiency, continuity, or even the orderliness of the market for particular options.
A fund bears the risk that its advisor will not accurately predict future market trends. If the advisor attempts to use an option as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the option will have or will develop imperfect or no correlation with the portfolio investment, which could cause substantial losses for the fund. Although hedging strategies involving options can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.
OTC Swap Agreements. An over-the-counter (OTC) swap agreement, which is a type of derivative, is an agreement between two parties (counterparties) to exchange payments at specified dates (periodic payment dates) on the basis of a specified amount (notional amount) with the payments calculated with reference to a specified asset, reference rate, or index.
Examples of OTC swap agreements include, but are not limited to, interest rate swaps, credit default swaps, equity swaps, commodity swaps, foreign currency swaps, index swaps, excess return swaps, and total return swaps. Most OTC swap agreements provide that when the periodic payment dates for both parties are the same, payments are netted and only the net amount is paid to the counterparty entitled to receive the net payment. Consequently, a fund’s current obligations (or rights) under an OTC swap agreement will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each counterparty. OTC swap agreements allow for a wide variety of transactions. For example, fixed rate payments may be exchanged for floating rate payments; U.S. dollar-denominated payments may be exchanged for payments denominated in a different currency; and payments tied to the price of one asset, reference rate, or index may be exchanged for payments tied to the price of another asset, reference rate, or index.
An OTC option on an OTC swap agreement, also called a “swaption,” is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium.” A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.
The use of OTC swap agreements by a fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. OTC swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of an OTC swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions.
OTC swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. If an OTC swap transaction is particularly large or if the relevant market is illiquid (as is the case with many OTC swaps), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. In addition, OTC swap transactions may be subject to a fund’s limitation on investments in illiquid securities.
OTC swap agreements may be subject to pricing risk, which exists when a particular swap becomes extraordinarily expensive or inexpensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity or to realize the intrinsic value of the OTC swap agreement.
Because certain OTC swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain OTC swaps have the potential for unlimited loss, regardless of the size of the initial investment. A leveraged OTC swap transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4.
Like most other investments, OTC swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a fund’s interest. A fund bears the risk that its advisor will not accurately forecast future market trends or the values of assets, reference rates, indexes, or other economic factors in establishing OTC swap positions for the fund. If the advisor attempts to use an OTC swap as a hedge against, or as a substitute for, a portfolio investment, the fund will be exposed to the risk that the OTC swap will have or will develop imperfect or no correlation with the portfolio investment. This could cause substantial losses for the fund. Although hedging strategies involving OTC swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments. Many OTC swaps are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a fund.
The use of an OTC swap agreement also involves the risk that a loss may be sustained as a result of the insolvency or bankruptcy of the counterparty or the failure of the counterparty to make required payments or otherwise comply with the terms of the agreement. Additionally, the use of credit default swaps can result in losses if a fund’s advisor does not correctly evaluate the creditworthiness of the issuer on which the credit swap is based.
Other Investment Companies. A fund may invest in other investment companies, including ETFs, non-exchange traded U.S. registered open-end investment companies (mutual funds), and closed-end investment companies, to the extent permitted by applicable law or SEC exemption. Under Section 12(d)(1) of the 1940 Act, a fund may invest up to 10% of its assets in shares of investment companies generally and up to 5% of its assets in any one investment company, as long as no investment represents more than 3% of the voting stock of an acquired investment company. In addition, no funds for which Vanguard acts as an advisor may, in the aggregate, own more than 10% of the voting stock of a closed-end investment company. SEC Rule 12d1-4 under the 1940 Act permits registered investment companies to invest in other registered investment companies beyond the limits in Section 12(d)(1), subject to certain conditions, including that funds with different investment advisors must enter into a fund of funds investment agreement. Rule 12d1-4 is also designed to limit the use of complex fund structures. Under Rule 12d1-4, an acquired fund is prohibited from purchasing or otherwise acquiring the securities of another investment company or private fund if, immediately after the purchase, the securities of investment companies and private funds owned by the acquired fund have an aggregate value in excess of 10% of the value of the acquired fund’s total assets, subject to certain
limited exceptions. Accordingly, to the extent a fund’s shares are sold to other investment companies in reliance on Rule 12d1-4, the acquired fund will be limited in the amount it could invest in other investment companies and private funds. If a fund invests in other investment companies, shareholders will bear not only their proportionate share of the fund’s expenses (including operating expenses and the fees of the advisor), but they also may indirectly bear similar expenses of the underlying investment companies. Certain investment companies, such as business development companies (BDCs), are more akin to operating companies and, as such, their expenses are not direct expenses paid by fund shareholders and are not used to calculate the fund’s net asset value. SEC rules nevertheless require that any expenses incurred by a BDC be included in a fund’s expense ratio as “Acquired Fund Fees and Expenses.” The expense ratio of a fund that holds a BDC will thus overstate what the fund actually spends on portfolio management, administrative services, and other shareholder services by an amount equal to these Acquired Fund Fees and Expenses. The Acquired Fund Fees and Expenses are not included in a fund’s financial statements, which provide a clearer picture of a fund’s actual operating expenses. Shareholders would also be exposed to the risks associated not only with the investments of the fund but also with the portfolio investments of the underlying investment companies. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that typically trade on a stock exchange or over-the-counter at a premium or discount to their net asset value. Others are continuously offered at net asset value but also may be traded on the secondary market.
A fund may be limited to purchasing a particular share class of other investment companies (underlying funds). In certain cases, an investor may be able to purchase lower-cost shares of such underlying funds separately, and therefore be able to construct, and maintain over time, a similar portfolio of investments while incurring lower overall expenses.
Preferred Stock. Preferred stock represents an equity or ownership interest in an issuer. Preferred stock normally pays dividends at a specified rate and has precedence over common stock in the event the issuer is liquidated or declares bankruptcy. However, in the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over the claims of those who own preferred and common stock. Preferred stock, unlike common stock, often has a stated dividend rate payable from the corporation’s earnings. Preferred stock dividends may be cumulative or noncumulative, participating, or auction rate. “Cumulative” dividend provisions require all or a portion of prior unpaid dividends to be paid before dividends can be paid to the issuer’s common stock. “Participating” preferred stock may be entitled to a dividend exceeding the stated dividend in certain cases. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of such stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as provisions allowing the stock to be called or redeemed, which can limit the benefit of a decline in interest rates. Preferred stock is subject to many of the risks to which common stock and debt securities are subject. In addition, preferred stock may be subject to more abrupt or erratic price movements than common stock or debt securities because preferred stock may trade with less frequency and in more limited volume.
Reliance on Service Providers, Data Providers, and Other Technology. Vanguard funds rely upon the performance of service providers to execute several key functions, which may include functions integral to a fund’s operations. Failure by any service provider to carry out its obligations to a fund could disrupt the business of the fund and could have an adverse effect on the fund’s performance. A fund’s service providers’ reliance on certain technology or information vendors (e.g., trading systems, investment analysis tools, benchmark analytics, and tax and accounting tools) could also adversely affect a fund and its shareholders. For example, a fund’s investment advisor may use models and/or data with respect to potential investments for the fund. When models or data prove to be incorrect or incomplete, any decisions made in reliance upon such models or data expose a fund to potential risks.
Repurchase Agreements. A repurchase agreement is an agreement under which a fund acquires a debt security (generally a security issued by the U.S. government or an agency thereof, a banker’s acceptance, or a certificate of deposit) from a bank, a broker, a dealer, or another counterparty that meets minimum credit requirements and simultaneously agrees to resell such security to the seller at an agreed-upon price and date (normally, the next business day). Because the security purchased constitutes collateral for the repurchase obligation, a repurchase agreement may be considered a loan that is collateralized by the security purchased. The resale price reflects an agreed-upon interest rate effective for the period the instrument is held by a fund and is unrelated to the interest rate on the underlying instrument. In these transactions, the securities acquired by a fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and be held by a custodian bank until repurchased. In addition, the investment advisor will monitor a fund’s repurchase agreement transactions generally and will evaluate the creditworthiness of any bank, broker, dealer, or other counterparty that meets minimum credit requirements to a repurchase agreement relating to a fund. The aggregate amount of any such agreements is not limited, except to the extent required by law.
The use of repurchase agreements involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under bankruptcy or other laws, a court may determine that the underlying security is collateral for a loan by the fund not within its control, and therefore the realization by the fund on such collateral may be automatically stayed. Finally, it is possible that the fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement.
Restricted and Illiquid Securities/Investments (including Private Placements). Illiquid securities/investments are investments that a fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The SEC generally limits aggregate holdings of illiquid securities/investments by a mutual fund to 15% of its net assets (5% for money market funds). A fund may experience difficulty valuing and selling illiquid securities/investments and, in some cases, may be unable to value or sell certain illiquid securities for an indefinite period of time. Illiquid securities may include a wide variety of investments, such as (1) repurchase agreements maturing in more than seven days (unless the agreements have demand/redemption features), (2) OTC options contracts and certain other derivatives (including certain swap agreements), (3) fixed time deposits that are not subject to prepayment or do not provide for withdrawal penalties upon prepayment (other than overnight deposits), (4) certain loan interests and other direct debt instruments, (5) certain municipal lease obligations, (6) private equity investments, (7) commercial paper issued pursuant to Section 4(a)(2) of the 1933 Act, and (8) securities whose disposition is restricted under the federal securities laws. Illiquid securities/investments may include restricted, privately placed securities (such as private investments in public equity (PIPEs) or special purpose acquisition companies (SPACs)) that, under the federal securities laws, generally may be resold only to qualified institutional buyers. If a market develops for a restricted security held by a fund, it may be treated as a liquid security in accordance with guidelines approved by the board of trustees.
Reverse Repurchase Agreements. In a reverse repurchase agreement, a fund sells a security to another party, such as a bank or broker-dealer, in return for cash and agrees to repurchase that security at an agreed-upon price and time. Under a reverse repurchase agreement, the fund continues to receive any principal and interest payments on the underlying security during the term of the agreement. Reverse repurchase agreements involve the risk that the market value of securities retained by the fund may decline below the repurchase price of the securities sold by the fund that it is obligated to repurchase. In addition to the risk of such a loss, fees charged to the fund may exceed the return the fund earns from investing the proceeds received from the reverse repurchase agreement transaction. A reverse repurchase agreement may be considered a borrowing transaction for purposes of the 1940 Act. A reverse repurchase agreement transaction will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by a fund, if the fund complies with Rule 18f-4. A fund will enter into reverse repurchase agreements only with parties whose creditworthiness has been reviewed and found satisfactory by the advisor. If the buyer in a reverse repurchase agreement becomes insolvent or files for bankruptcy, a fund’s use of proceeds from the sale may be restricted while the other party or its trustee or receiver determines if it will honor the fund’s right to repurchase the securities. If the fund is unable to recover the securities it sold in a reverse repurchase agreement, it would realize a loss equal to the difference between the value of the securities and the payment it received for them.
Securities Lending. A fund may lend its securities to financial institutions (typically brokers, dealers, and banks) to generate income for the fund. There are certain risks associated with lending securities, including counterparty, credit, market, regulatory, and operational risks. Vanguard considers the creditworthiness of the borrower, among other factors, in making decisions with respect to the lending of securities, subject to oversight by the board of trustees. If the borrower defaults on its obligation to return the securities lent because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities lent or in gaining access to the collateral. These delays and costs could be greater for certain types of foreign securities, as well as certain types of borrowers that are subject to global regulatory regimes. If a fund is not able to recover the securities lent, the fund may sell the collateral and purchase a replacement security in the market. Collateral investments are subject to market appreciation or depreciation. The value of the collateral could decrease below the value of the replacement investment by the time the replacement investment is purchased. Currently, a fund invests cash collateral into Vanguard Market Liquidity Fund, an affiliated money market fund that invests in high-quality, short-term money market instruments.
The terms and the structure of the loan arrangements, as well as the aggregate amount of securities loans, must be consistent with the 1940 Act and the rules or interpretations of the SEC thereunder. These provisions limit the amount
of securities a fund may lend to 33⅓% of the fund’s total assets and require that (1) the borrower pledge and maintain with the fund collateral consisting of cash, an irrevocable letter of credit, or securities issued or guaranteed by the U.S. government having at all times not less than 100% of the value of the securities lent; (2) the borrower add to such collateral whenever the price of the securities lent rises (i.e., the borrower “marks to market” on a daily basis); (3) the loan be made subject to termination by the fund at any time; and (4) the fund receives reasonable interest on the loan (which may include the fund investing any cash collateral in interest-bearing short-term investments), any distribution on the lent securities, and any increase in their market value. Loan arrangements made by a fund will comply with any other applicable regulatory requirements. At the present time, the SEC does not object if an investment company pays reasonable negotiated fees in connection with lent securities, so long as such fees are set forth in a written contract and approved by the investment company’s trustees. In addition, voting rights pass with the lent securities, but if a fund has knowledge that a material event will occur affecting securities on loan, and in respect to which the holder of the securities will be entitled to vote or consent, the lender must be entitled to call the loaned securities in time to vote or consent. A fund bears the risk that there may be a delay in the return of the securities, which may impair the fund’s ability to vote on such a matter. See Tax Status of the Fund for information about certain tax consequences related to a fund’s securities lending activities.
Pursuant to Vanguard’s securities lending policy, Vanguard’s fixed income and money market funds are not permitted to, and do not, lend their investment securities.
Tax Matters—Federal Tax Discussion. Discussion herein of U.S. federal income tax matters summarizes some of the important, generally applicable U.S. federal tax considerations relevant to investment in a fund based on the IRC, U.S. Treasury regulations, and other applicable authorities. These authorities are subject to change by legislative, administrative, or judicial action, possibly with retroactive effect. The Fund has not requested and will not request an advance ruling from the Internal Revenue Service (IRS) as to the U.S. federal income tax matters discussed in this Statement of Additional Information. In some cases, a fund’s tax position may be uncertain under current tax law and an adverse determination or future guidance by the IRS with respect to such a position could adversely affect the fund and its shareholders, including the fund’s ability to continue to qualify as a regulated investment company or to continue to pursue its current investment strategy. A shareholder should consult his or her tax professional for information regarding the particular situation and the possible application of U.S. federal, state, local, foreign, and other taxes.
Tax Matters—Federal Tax Treatment of Derivatives, Hedging, and Related Transactions. A fund’s transactions in derivative instruments (including, but not limited to, options, futures, forward contracts, and swap agreements), as well as any of the fund’s hedging, short sale, securities loan, or similar transactions, may be subject to one or more special tax rules that accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund’s securities, convert long-term capital gains into short-term capital gains, or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing, and character of distributions to shareholders.
Because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether a fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.
Tax Matters—Federal Tax Treatment of Futures Contracts. For federal income tax purposes, a fund generally must recognize, as of the end of each taxable year, any net unrealized gains and losses on certain futures contracts, as well as any gains and losses actually realized during the year. In these cases, any gain or loss recognized with respect to a futures contract is considered to be 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to the holding period of the contract. Gains and losses on certain other futures contracts (primarily non-U.S. futures contracts) are not recognized until the contracts are closed and are treated as long-term or short-term, depending on the holding period of the contract. Sales of futures contracts that are intended to hedge against a change in the value of securities held by a fund may affect the holding period of such securities and, consequently, the nature of the gain or loss on such securities upon disposition. A fund may be required to defer the recognition of losses on one position, such as futures contracts, to the extent of any unrecognized gains on a related offsetting position held by the fund.
A fund will distribute to shareholders annually any net capital gains that have been recognized for federal income tax purposes on futures transactions. Such distributions will be combined with distributions of capital gains realized on the fund’s other investments, and shareholders will be advised on the nature of the distributions.
Tax Matters—Federal Tax Treatment of Non-U.S. Currency Transactions. Special rules generally govern the federal income tax treatment of a fund’s transactions in the following: non-U.S. currencies; non-U.S. currency-denominated debt obligations; and certain non-U.S. currency options, futures contracts, forward contracts, and similar instruments. Accordingly, if a fund engages in these types of transactions it may have ordinary income or loss to the extent that such income or loss results from fluctuations in the value of the non-U.S. currency concerned. Such ordinary income could accelerate fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any ordinary loss so created will generally reduce ordinary income distributions and, in some cases, could require the recharacterization of prior ordinary income distributions. Net ordinary losses cannot be carried forward by the fund to offset income or gains realized in subsequent taxable years.
Any gain or loss attributable to the non-U.S. currency component of a transaction engaged in by a fund that is not subject to these special currency rules (such as foreign equity investments other than certain preferred stocks) will generally be treated as a capital gain or loss and will not be segregated from the gain or loss on the underlying transaction.
To the extent a fund engages in non-U.S. currency hedging, the fund may elect or be required to apply other rules that could affect the character, timing, or amount of the fund’s gains and losses. For more information, see “Tax Matters—Federal Tax Treatment of Derivatives, Hedging, and Related Transactions.”
Tax Matters—Foreign Tax Credit. Foreign governments may withhold taxes on dividends and interest paid with respect to foreign securities held by a fund. Foreign governments may also impose taxes on other payments or gains with respect to foreign securities. If, at the close of its fiscal year, more than 50% of a fund’s total assets are invested in securities of foreign issuers, the fund may elect to pass through to shareholders the ability to deduct or, if they meet certain holding period requirements, take a credit for foreign taxes paid by the fund. Similarly, if at the close of each quarter of a fund’s taxable year, at least 50% of its total assets consist of interests in other regulated investment companies, the fund is permitted to elect to pass through to its shareholders the foreign income taxes paid by the fund in connection with foreign securities held directly by the fund or held by a regulated investment company in which the fund invests that has elected to pass through such taxes to shareholders.
Tax Matters—Passive Foreign Investment Companies. To the extent that a fund invests in stock in a foreign company, such stock may constitute an equity investment in a passive foreign investment company (PFIC). A foreign company is generally a PFIC if 75% or more of its gross income is passive or if 50% or more of its assets produce passive income. Capital gains on the sale of an interest in a PFIC will be deemed ordinary income regardless of how long a fund held it. Also, a fund may be subject to corporate income tax and an interest charge on certain dividends and capital gains earned in respect to PFIC interests, whether or not such amounts are distributed to shareholders. To avoid such tax and interest, a fund may elect to “mark to market” its PFIC interests, that is, to treat such interests as sold on the last day of a fund’s fiscal year, and to recognize any unrealized gains (or losses, to the extent of previously recognized gains) as ordinary income (or loss) each year. Distributions from a fund that are attributable to income or gains earned in respect to PFIC interests are characterized as ordinary income.
Tax Matters—Real Estate Mortgage Investment Conduits. If a fund invests directly or indirectly, including through a REIT or other pass-through entity, in residual interests in real estate mortgage investment conduits (REMICs) or equity interests in taxable mortgage pools (TMPs), a portion of the fund’s income that is attributable to a residual interest in a REMIC or an equity interest in a TMP (such portion referred to in the IRC as an “excess inclusion”) will be subject to U.S. federal income tax in all events—including potentially at the fund level—under a notice issued by the IRS in October 2006 and U.S. Treasury regulations that have yet to be issued but may apply retroactively. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related interest directly. In general, excess inclusion income allocated to shareholders (1) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions); (2) will constitute unrelated business taxable income (UBTI) to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan, or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity, which otherwise might not be required, to file a tax return and pay tax on such income; and (3) in the case of a non-U.S. investor, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the IRC. As a result, a fund investing in such interests may not be suitable for charitable remainder trusts. See “Tax Matters—Tax-Exempt Investors.”
Tax Matters—Tax Considerations for Non-U.S. Investors. U.S. withholding and estate taxes and certain U.S. tax reporting requirements may apply to any investments made by non-U.S. investors in Vanguard funds. Certain properly reported distributions of qualifying interest income or short-term capital gain made by a fund to its non-U.S. investors are exempt from U.S. withholding taxes, provided the investors furnish valid tax documentation (i.e., IRS Form W-8) certifying as to their non-U.S. status.
A fund is permitted, but is not required, to report any of its distributions as eligible for such relief, and some distributions (e.g., distributions of interest a fund receives from non-U.S. issuers) are not eligible for this relief. For some funds, Vanguard has chosen to report qualifying distributions and apply the withholding exemption to those distributions when made to non-U.S. shareholders who invest directly with Vanguard. For other funds, Vanguard may choose not to apply the withholding exemption to qualifying fund distributions made to direct shareholders, but may provide the reporting to such shareholders. In these cases, a shareholder may be able to reclaim such withholding tax directly from the IRS.
If shareholders hold fund shares (including ETF shares) through a broker or intermediary, their broker or intermediary may apply this relief to properly reported qualifying distributions made to shareholders with respect to those shares. If a shareholder’s broker or intermediary instead collects withholding tax where the fund has provided the proper reporting, the shareholder may be able to reclaim such withholding tax from the IRS. Please consult your broker or intermediary regarding the application of these rules.
This relief does not apply to any withholding required under the Foreign Account Tax Compliance Act (FATCA), which generally requires a fund to obtain information sufficient to identify the status of each of its shareholders. If a shareholder fails to provide this information or otherwise fails to comply with FATCA, a fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on fund distributions. Please consult your tax advisor for more information about these rules.
Tax Matters—Tax-Exempt Investors. Income of a fund that would be UBTI if earned directly by a tax-exempt entity will not generally be attributed as UBTI to a tax-exempt shareholder of the fund. Notwithstanding this “blocking” effect, a tax-exempt shareholder could realize UBTI by virtue of its investment in a fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of IRC Section 514(b).
A tax-exempt shareholder may also recognize UBTI if a fund recognizes “excess inclusion income” derived from direct or indirect investments in residual interests in REMICs or equity interests in TMPs. See “Tax Matters—Real Estate Mortgage Investment Conduits.”
In addition, special tax consequences apply to charitable remainder trusts that invest in a fund that invests directly or indirectly in residual interests in REMICs or equity interests in TMPs. Charitable remainder trusts and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in a fund.
Time Deposits. Time deposits are subject to the same risks that pertain to domestic issuers of money market instruments, most notably credit risk (and, to a lesser extent, income risk, market risk, and liquidity risk). Additionally, time deposits of foreign branches of U.S. banks and foreign branches of foreign banks may be subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital, in the form of U.S. dollars, from flowing across its borders. Other risks include adverse political and economic developments, the extent and quality of government regulation of financial markets and institutions, the imposition of foreign withholding taxes, and expropriation or nationalization of foreign issuers. However, time deposits of such issuers will undergo the same type of credit analysis as domestic issuers in which a Vanguard fund invests and will have at least the same financial strength as the domestic issuers approved for the fund.
Warrants. Warrants are instruments that give the holder the right, but not the obligation, to buy an equity security at a specific price for a specific period of time. Changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These factors can make warrants more speculative than other types of investments. Other kinds of warrants exist, including, but not limited to, warrants linked to countries’ economic performance or to commodity prices such as oil prices. These warrants may be subject to risk from fluctuation of underlying assets or indexes, as well as credit risk that the issuer does not pay on the obligations and risk that the data used for warrant payment calculation does not accurately reflect the true underlying commodity price or economic performance.
When-Issued, Delayed-Delivery, and Forward-Commitment Transactions. When-issued, delayed-delivery, and forward-commitment transactions involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Typically, no interest accrues to the purchaser until the security is delivered. When purchasing securities pursuant to one of these transactions, payment for the securities is not required until the delivery date. However, the purchaser assumes the rights and risks of ownership, including the risks of price and yield fluctuations and the risk that the security will not be issued as anticipated. When a fund has sold a security pursuant to one of these transactions, the fund does not participate in further gains or losses with respect to the security. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, the fund could miss a favorable price or yield opportunity or suffer a loss. A fund may renegotiate a when-issued or forward-commitment transaction and may sell the underlying securities before delivery, which may result in capital gains or losses for the fund. When-issued, delayed-delivery, and forward-commitment transactions will not be considered to constitute the issuance, by a fund, of a “senior security,” as that term is defined in Section 18(g) of the 1940 Act, and therefore such transaction will not be subject to the 300% asset coverage requirement otherwise applicable to borrowings by the fund, if the fund complies with Rule 18f-4.
Sale of Investor Shares of the Fund in Japan. In connection with the offering of the Fund’s Investor Shares in Japan, the Fund has undertaken to the Japanese Securities Dealers Association that the Fund may not (1) borrow money, except for temporary or emergency purposes in an amount not exceeding 10% of the Fund‘s net assets; (2) together with other mutual funds managed by Vanguard, acquire more than 50% of the outstanding voting securities of any issuer; (3) invest more than 15% of its net assets in illiquid securities (which include securities restricted as to resale unless they are determined to be readily marketable in accordance with procedures established by the board of trustees); and (4) sell securities short at any time in excess of its net asset value.
If the undertaking is violated, the Fund will, promptly after discovery, take such action as may be necessary to cause the violation to cease, which shall be the only obligation of the Fund and the only remedy in respect to the violation. This undertaking will remain in effect as long as (1) shares of the Fund are qualified for offer or sale in Japan and (2) the undertaking is required by “Standards of Selection of Foreign Investment Fund Securities” established under the Rules of Foreign Securities Transactions by the Japanese Securities Dealers Association.
Share Price
Multiple-class funds do not have a single share price. Rather, each class has a share price, also known as net asset value (NAV), which is calculated as of the close of regular trading on the New York Stock Exchange (NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for business (a business day). In the rare event the NYSE experiences unanticipated disruptions and is unavailable at the close of the trading day, the Fund reserves the right to treat such day as a business day and calculate NAVs as of the close of regular trading on the Nasdaq (or another alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s discretion), generally 4 p.m., Eastern time. The NAV per share is computed by dividing the total assets, minus liabilities, allocated to the share class by the number of Fund shares outstanding for that class. On U.S. holidays or other days when the NYSE is closed, the NAV is not calculated, and the Fund does not sell or redeem shares. However, on those days the value of the Fund’s assets may be affected to the extent that the Fund holds securities that change in value on those days (such as foreign securities that trade on foreign markets that are open).
The NYSE typically observes the following holidays: New Year’s Day; Martin Luther King, Jr., Day; Presidents’ Day (Washington’s Birthday); Good Friday; Memorial Day; Juneteenth National Independence Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. Although the Fund expects the same holidays to be observed in the future, the NYSE may modify its holiday schedule or hours of operation at any time.
Purchase and Redemption of Shares
Purchase of Shares
The purchase price of shares of the Fund is the NAV per share next determined after the purchase request is received in good order, as defined in the Fund's prospectus.
Exchange of Securities for Shares of the Fund. Shares of the Fund may be purchased “in kind” (i.e., in exchange for securities, rather than for cash) at the discretion of the Fund’s portfolio manager. Such securities must not be restricted as to transfer and must have a value that is readily ascertainable. Securities accepted by the Fund will be valued, as set forth in the Fund’s prospectus, as of the time of the next determination of NAV after such acceptance. All dividend,
subscription, or other rights that are reflected in the market price of accepted securities at the time of valuation become the property of the Fund and must be delivered to the Fund by the investor upon receipt from the issuer. A gain or loss for federal income tax purposes, depending upon the cost of the securities tendered, would be realized by the investor upon the exchange. Investors interested in purchasing fund shares in kind should contact Vanguard.
Redemption of Shares
The redemption price of shares of the Fund is the NAV per share next determined after the redemption request is received in good order, as defined in the Fund’s prospectus.
The Fund can postpone payment of redemption proceeds for up to seven calendar days. In addition, the Fund can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days (1) during any period that the NYSE is closed or trading on the NYSE is restricted as determined by the SEC; (2) during any period when an emergency exists, as defined by the SEC, as a result of which it is not reasonably practicable for the Fund to dispose of securities it owns or to fairly determine the value of its assets; or (3) for such other periods as the SEC may permit.
The Trust has filed a notice of election with the SEC to pay in cash all redemptions requested by any shareholder of record limited in amount during any 90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such period.
If Vanguard determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly or partly in cash, the Fund may pay the redemption price in whole or in part by a distribution in kind of readily marketable securities held by the Fund in lieu of cash in conformity with applicable rules of the SEC and in accordance with procedures adopted by the Fund's board of trustees. Investors may incur brokerage charges on the sale of such securities received in payment of redemptions.
The Fund does not charge a redemption fee. Shares redeemed may be worth more or less than what was paid for them, depending on the market value of the securities held by the Fund.
Vanguard processes purchase and redemption requests through a pooled account. Pending investment direction or distribution of redemption proceeds, the assets in the pooled account are invested and any earnings (the “float”) are allocated proportionately among the Vanguard funds in order to offset fund expenses. Other than the float, Vanguard treats assets held in the pooled account as the assets of each shareholder making such purchase or redemption request.
Right to Change Policies
Vanguard reserves the right, without notice, to (1) alter, add, or discontinue any conditions of purchase (including eligibility requirements), redemption, exchange, conversion, service, or privilege at any time and (2) alter, impose, discontinue, or waive any purchase fee, redemption fee, account service fee, or other fee charged to a shareholder or a group of shareholders. Changes may affect any or all investors. These actions will be taken when, at the sole discretion of Vanguard management, Vanguard believes they are in the best interest of a fund.
Account Restrictions
Vanguard reserves the right to: (1) redeem all or a portion of a fund/account to meet a legal obligation, including tax withholding, tax lien, garnishment order, or other obligation imposed on your account by a court or government agency; (2) redeem shares, close an account, or suspend account privileges, features, or options in the case of threatening conduct or activity; (3) redeem shares, close an account, or suspend account privileges, features, or options if Vanguard believes or suspects that not doing so could result in a suspicious, fraudulent, or illegal transaction; (4) place restrictions on the ability to redeem any or all shares in an account if it is required to do so by a court or government agency; (5) place restrictions on the ability to redeem any or all shares in an account if Vanguard believes that doing so will prevent fraud or financial exploitation or abuse, or will protect vulnerable investors; (6) freeze any account and/or suspend account services if Vanguard has received reasonable notice of a dispute regarding the assets in an account, including notice of a dispute between the registered or beneficial account owners; and (7) freeze any account and/or suspend account services upon initial notification to Vanguard of the death of an account owner.
Investing With Vanguard Through Other Firms
The Fund has authorized certain agents to accept on its behalf purchase and redemption orders, and those agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund’s behalf (collectively, Authorized Agents). The Fund will be deemed to have received a purchase or redemption order when an Authorized Agent accepts the order in accordance with the Fund’s instructions. In most instances, a customer order that is properly transmitted to an Authorized Agent will be priced at the NAV per share next determined after the order is received by the Authorized Agent.
Management of the Fund
Vanguard
The Fund is part of the Vanguard group of investment companies, which consists of over 200 funds. Each fund is a series of a Delaware statutory trust. The funds obtain virtually all of their corporate management, administrative, and distribution services through the trusts’ jointly owned subsidiary, Vanguard. Vanguard may contract with certain third-party service providers to assist Vanguard in providing certain administrative and/or accounting services with respect to the funds, subject to Vanguard’s oversight. Vanguard also provides investment advisory services to certain Vanguard funds. All of these services are provided at Vanguard’s total cost of operations pursuant to the Fifth Amended and Restated Funds’ Service Agreement (the Agreement).
Vanguard employs a supporting staff of management and administrative personnel needed to provide the requisite services to the funds and also furnishes the funds with necessary office space, furnishings, and equipment. Each fund (other than a fund of funds) pays its share of Vanguard's total expenses, which are allocated among the funds under methods approved by the board of trustees of each fund. In addition, each fund bears its own direct expenses, such as legal, auditing, and custodial fees.
Pursuant to an agreement between Vanguard and State Street Bank and Trust Company (State Street), State Street provides services for the Fund. These services include, but are not limited to: (i) the calculation of the Fund's daily NAVs and (ii) the furnishing of financial reports. The fees paid to State Street under this agreement are based on a combination of flat and asset based fees. As of the fiscal year ended September 30, 2022, State Street had received fees from the Fund for administrative services rendered as shown in the table below.
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Vanguard Wellesley Income Fund |
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The funds’ officers are also employees of Vanguard.
Vanguard, Vanguard Marketing Corporation (VMC), the funds, and the funds’ advisors have adopted codes of ethics designed to prevent employees who may have access to nonpublic information about the trading activities of the funds (access persons) from profiting from that information. The codes of ethics permit access persons to invest in securities for their own accounts, including securities that may be held by a fund, but place substantive and procedural restrictions on the trading activities of access persons. For example, the codes of ethics require that access persons receive advance approval for most securities trades to ensure that there is no conflict with the trading activities of the funds.
Vanguard was established and operates under the Agreement. The Agreement provides that each Vanguard fund may be called upon to invest up to 0.40% of its net assets in Vanguard. The amounts that each fund has invested are adjusted from time to time in order to maintain the proportionate relationship between each fund’s relative net assets and its contribution to Vanguard’s capital.
As of September 30, 2022, the Fund had contributed capital to Vanguard as follows:
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Capital
Contribution
to Vanguard |
Percentage of
Fund’s Average
Net Assets |
Percent of
Vanguard Funds’
Contribution |
Vanguard Wellesley Income Fund |
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Management. Corporate management and administrative services include (1) executive staff, (2) accounting and financial, (3) legal and regulatory, (4) shareholder account maintenance, (5) monitoring and control of custodian relationships, (6) shareholder reporting, and (7) review and evaluation of advisory and other services provided to the funds by third parties.
Distribution. Vanguard Marketing Corporation, 100 Vanguard Boulevard, Malvern, PA 19355, a wholly owned subsidiary of Vanguard, is the principal underwriter for the funds and in that capacity performs and finances marketing, promotional, and distribution activities (collectively, marketing and distribution activities) that are primarily intended to result in the sale of the funds’ shares. VMC offers shares of each fund for sale on a continuous basis and will use all reasonable efforts in connection with the distribution of shares of the funds. VMC performs marketing and distribution activities in accordance with the conditions of a 1981 SEC exemptive order that permits the Vanguard funds to internalize and jointly finance the marketing, promotion, and distribution of their shares. The funds’ trustees review and approve the marketing and distribution expenses incurred by the funds, including the nature and cost of the activities and the desirability of each fund’s continued participation in the joint arrangement.
To ensure that each fund’s participation in the joint arrangement falls within a reasonable range of fairness, each fund contributes to VMC’s marketing and distribution expenses in accordance with an SEC-approved formula. Under that formula, one half of the marketing and distribution expenses are allocated among the funds based upon their relative net assets. The remaining half of those expenses is allocated among the funds based upon each fund’s sales for the preceding 24 months relative to the total sales of the funds as a group, provided, however, that no fund’s aggregate quarterly rate of contribution for marketing and distribution expenses shall exceed 125% of the average marketing and distribution expense rate for Vanguard and that no fund shall incur annual marketing and distribution expenses in excess of 0.20% of its average month-end net assets. Each fund’s contribution to these marketing and distribution expenses helps to maintain and enhance the attractiveness and viability of the Vanguard complex as a whole, which benefits all of the funds and their shareholders.
VMC’s principal marketing and distribution expenses are for advertising, promotional materials, and marketing personnel. Other marketing and distribution activities of an administrative nature that VMC undertakes on behalf of the funds may include, but are not limited to:
◾ Conducting or publishing Vanguard-generated research and analysis concerning the funds, other investments, the financial markets, or the economy.
◾ Providing views, opinions, advice, or commentary concerning the funds, other investments, the financial markets, or the economy.
◾ Providing analytical, statistical, performance, or other information concerning the funds, other investments, the financial markets, or the economy.
◾ Providing administrative services in connection with investments in the funds or other investments, including, but not limited to, shareholder services, recordkeeping services, and educational services.
◾ Providing products or services that assist investors or financial service providers (as defined below) in the investment decision-making process.
VMC performs most marketing and distribution activities itself. Some activities may be conducted by third parties pursuant to shared marketing arrangements under which VMC agrees to share the costs and performance of marketing and distribution activities in concert with a financial service provider. Financial service providers include, but are not limited to, investment advisors, broker-dealers, financial planners, financial consultants, banks, and insurance companies. Under these cost- and performance-sharing arrangements, VMC may pay or reimburse a financial service provider (or a third party it retains) for marketing and distribution activities that VMC would otherwise perform. VMC’s cost- and performance-sharing arrangements may be established in connection with Vanguard investment products or services offered or provided to or through the financial service providers.
VMC’s arrangements for shared marketing and distribution activities may vary among financial service providers, and its payments or reimbursements to financial service providers in connection with shared marketing and distribution activities may be significant. VMC, as a matter of policy, does not pay asset-based fees, sales-based fees, or account-based fees to financial service providers in connection with its marketing and distribution activities for the Vanguard funds. VMC does make fixed dollar payments to financial service providers when sponsoring, jointly sponsoring, financially supporting, or participating in conferences, programs, seminars, presentations, meetings, or other events involving fund shareholders, financial service providers, or others concerning the funds, other investments, the financial markets, or the economy, such as industry conferences, prospecting trips, due diligence visits, training or education meetings, and sales presentations. VMC also makes fixed dollar payments to financial
service providers for data regarding funds, such as statistical information regarding sales of fund shares. In addition, VMC makes fixed dollar payments for expenses associated with financial service providers’ use of Vanguard’s funds including, but not limited to, the use of funds in model portfolios. These payments may be used for services including, but not limited to, technology support and development; platform support and development; due diligence related to products used on a platform; legal, regulatory, and compliance expenses related to a platform; and other platform-related services.
In connection with its marketing and distribution activities, VMC may give financial service providers (or their representatives) (1) promotional items of nominal value that display Vanguard’s logo, such as golf balls, shirts, towels, pens, and mouse pads; (2) gifts that do not exceed $100 per person annually and are not preconditioned on achievement of a sales target; (3) an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment that is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target; and (4) reasonable travel and lodging accommodations to facilitate participation in marketing and distribution activities.
VMC policy prohibits marketing and distribution activities that are intended, designed, or likely to compromise suitability determinations by, or the fulfillment of any fiduciary duties or other obligations that apply to, financial service providers. Nonetheless, VMC’s marketing and distribution activities are primarily intended to result in the sale of the funds’ shares, and as such, its activities, including shared marketing and distribution activities and fixed dollar payments as described above, may influence applicable financial service providers (or their representatives) to recommend, promote, include, or invest in a Vanguard fund or share class. In addition, Vanguard or any of its subsidiaries may retain a financial service provider to provide consulting or other services, and that financial service provider also may provide services to investors. Investors should consider the possibility that any of these activities, relationships, or payments may influence a financial service provider’s (or its representatives’) decision to recommend, promote, include, or invest in a Vanguard fund or share class. Each financial service provider should consider its suitability determinations, fiduciary duties, and other legal obligations (or those of its representatives) in connection with any decision to consider, recommend, promote, include, or invest in a Vanguard fund or share class.
The following table describes the expenses of Vanguard and VMC that are incurred by the Fund. Amounts captioned “Management and Administrative Expenses” include the Fund's allocated share of expenses associated with the management, administrative, and transfer agency services Vanguard provides to the Vanguard funds. Amounts captioned “Marketing and Distribution Expenses” include the Fund's allocated share of expenses associated with the marketing and distribution activities that VMC conducts on behalf of the Vanguard funds.
As is the case with all mutual funds, transaction costs incurred by the Fund for buying and selling securities are not reflected in the table. Annual Shared Fund Operating Expenses are based on expenses incurred in the fiscal years ended September 30, 2020, 2021, and 2022, and are presented as a percentage of the Fund's average month-end net assets.
Annual Shared Fund Operating Expenses
(Shared Expenses Deducted From Fund Assets) |
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Vanguard Wellesley Income Fund |
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Management and Administrative Expenses |
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Marketing and Distribution Expenses |
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The Fund's investment advisors may direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the Fund part of the commissions generated. Such rebates are used solely to reduce the Fund's management and administrative expenses and are not reflected in these totals.
Officers and Trustees
Each Vanguard fund is governed by the board of trustees of its trust and a single set of officers. Consistent with the board’s corporate governance principles, the trustees believe that their primary responsibility is oversight of the management of each fund for the benefit of its shareholders, not day-to-day management. The trustees set broad policies for the funds; select investment advisors; monitor fund operations, regulatory compliance, performance, and costs; nominate and select new trustees; and elect fund officers. Vanguard manages the day-to-day operations of the funds under the direction of the board of trustees.
The trustees play an active role, as a full board and at the committee level, in overseeing risk management for the funds. The trustees delegate the day-to-day risk management of the funds to various groups, including portfolio review, investment management, risk management, compliance, legal, fund accounting, and fund financial services. These groups provide the trustees with regular reports regarding investment, valuation, liquidity, and compliance, as well as the risks associated with each. The trustees also oversee risk management for the funds through regular interactions with the funds’ internal and external auditors.
The full board participates in the funds’ risk oversight, in part, through the Vanguard funds’ compliance program, which covers the following broad areas of compliance: investment and other operations; recordkeeping; valuation and pricing; communications and disclosure; reporting and accounting; oversight of service providers; fund governance; and codes of ethics, insider trading controls, and protection of nonpublic information. The program seeks to identify and assess risk through various methods, including through regular interdisciplinary communications between compliance professionals and business personnel who participate on a daily basis in risk management on behalf of the funds. The funds’ chief compliance officer regularly provides reports to the board in writing and in person.
The audit committee of the board, which is composed of F. Joseph Loughrey, Mark Loughridge, Sarah Bloom Raskin, and Peter F. Volanakis, each of whom is an independent trustee, oversees management of financial risks and controls. The audit committee serves as the channel of communication between the independent auditors of the funds and the board with respect to financial statements and financial reporting processes, systems of internal control, and the audit process. Vanguard’s head of internal audit reports directly to the audit committee and provides reports to the committee in writing and in person on a regular basis. Although the audit committee is responsible for overseeing the management of financial risks, the entire board is regularly informed of these risks through committee reports.
All of the trustees bring to each fund’s board a wealth of executive leadership experience derived from their service as executives (in many cases chief executive officers), board members, and leaders of diverse public operating companies, academic institutions, and other organizations. In determining whether an individual is qualified to serve as a trustee of the funds, the board considers a wide variety of information about the trustee, and multiple factors contribute to the board’s decision. Each trustee is determined to have the experience, skills, and attributes necessary to serve the funds and their shareholders because each trustee demonstrates an exceptional ability to consider complex business and financial matters, evaluate the relative importance and priority of issues, make decisions, and contribute effectively to the deliberations of the board. The board also considers the individual experience of each trustee and determines that the trustee’s professional experience, education, and background contribute to the diversity of perspectives on the board. The business acumen, experience, and objective thinking of the trustees are considered invaluable assets for Vanguard management and, ultimately, the Vanguard funds’ shareholders. The specific roles and experience of each board member that factor into this determination are presented on the following pages. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482.
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Position(s)
Held With Fund |
Vanguard
Funds’ Trustee/
Officer Since |
Principal Occupation(s)
During the Past Five Years,
Outside Directorships,
and Other Experience |
Number of
Vanguard Funds
Overseen by
Trustee/Officer |
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Mortimer J. Buckley
(1969) |
Chairman of the
Board, Chief
Executive
Officer, and
President |
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Chairman of the board (2019–present) of Vanguard and
of each of the investment companies served by
Vanguard; chief executive officer (2018–present) of
Vanguard; chief executive officer, president, and
trustee (2018–present) of each of the investment
companies served by Vanguard; president and director
(2017–present) of Vanguard; and president
(2018–present) of Vanguard Marketing Corporation.
Chief investment officer (2013–2017), managing
director (2002–2017), head of the Retail Investor Group
(2006–2012), and chief information officer (2001–2006)
of Vanguard. Trustee and vice chair of The Shipley
School. Member of the board of governors of the
Investment Company Institute and of FINRA. |
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1 Mr. Buckley is considered an “interested person” as defined in the 1940 Act because he is an officer of the Trust. |
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Position(s)
Held With Fund |
Vanguard
Funds’ Trustee/
Officer Since |
Principal Occupation(s)
During the Past Five Years,
Outside Directorships,
and Other Experience |
Number of
Vanguard Funds
Overseen by
Trustee/Officer |
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Head of Global Operations at Airbnb (2020–present).
Vice President of AppleCare (2012–2020). Member of
the board of Out & Equal (2002–2006), the University
of California, Berkeley School of Engineering
(2020–present), and Santa Clara University’s School of
Business (2018–present). |
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Emerson U. Fullwood
(1948) |
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Executive chief staff and marketing officer for North
America and corporate vice president (retired 2008) of
Xerox Corporation (document management products
and services). Former president of the Worldwide
Channels Group, Latin America, and Worldwide
Customer Service and executive chief staff officer of
Developing Markets of Xerox. Executive in residence
and 2009–2010 Distinguished Minett Professor at the
Rochester Institute of Technology. Member of the
board of directors of the University of Rochester
Medical Center, the Monroe Community College
Foundation, the United Way of Rochester, North
Carolina A&T University, Roberts Wesleyan College,
and the Rochester Philharmonic Orchestra. Trustee of
the University of Rochester. |
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F. Joseph Loughrey
(1949) |
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President and chief operating officer (retired 2009) and
vice chairman of the board (2008–2009) of Cummins
Inc. (industrial machinery). Chairman of the board of
Hillenbrand, Inc. (specialized consumer services).
Director of the V Foundation. Member of the advisory
council for the College of Arts and Letters at the
University of Notre Dame. Chairman of the board of
Saint Anselm College. |
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Senior vice president and chief financial officer (retired
2013) of IBM (information technology services).
Fiduciary member of IBM’s Retirement Plan
Committee (2004–2013), senior vice president and
general manager (2002–2004) of IBM Global Financing,
vice president and controller (1998–2002) of IBM, and
a variety of other prior management roles at IBM.
Member of the Council on Chicago Booth. |
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Adjunct professor of finance at the University of Notre
Dame (2020–present). Chief investment officer and
vice president of the University of Notre Dame (retired
2020). Assistant professor of finance at the Mendoza
College of Business, University of Notre Dame (retired
2020), and member of the Notre Dame 403(b)
Investment Committee. Member of the board of
Catholic Investment Services, Inc. (investment
advisors), the board of superintendence of the Institute
for the Works of Religion, and the board of directors of
Paxos Trust Company (finance). |
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Chief executive officer of Purposeful (2021–present).
Board chair (2020), chief executive officer (2011–2020),
and president (2010–2019) of The Guardian Life
Insurance Company of America. Chief operating officer
(2010–2011) and executive vice president (2008–2010)
of Individual Life and Disability of The Guardian Life
Insurance Company of America. Member of the board
of the Economic Club of New York. Trustee of the
Partnership for New York City (business leadership),
the Chief Executives for Corporate Purpose, and the
New York-Presbyterian Hospital. |
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Position(s)
Held With Fund |
Vanguard
Funds’ Trustee/
Officer Since |
Principal Occupation(s)
During the Past Five Years,
Outside Directorships,
and Other Experience |
Number of
Vanguard Funds
Overseen by
Trustee/Officer |
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George Gund Professor of Finance and Banking,
Emeritus at the Harvard Business School (retired
2011). Chief investment officer and co-managing
partner of HighVista Strategies LLC (private
investment firm). Board member (2018–present) of RIT
Capital Partners (investment firm); investment
committee member of Partners Health Care System. |
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Sarah Bloom Raskin
(1961) |
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Deputy secretary (2014–2017) of the United States
Department of the Treasury. Governor (2010–2014) of
the Federal Reserve Board. Commissioner
(2007–2010) of financial regulation for the State of
Maryland. Colin W. Brown Distinguished Professor of
the Practice (2021–present), Professor (2020–present),
Distinguished Fellow of the Global Financial Markets
Center (2020–present), and Rubenstein Fellow
(2017–2020) of Duke University; trustee
(2017–present) of Amherst College; member of the
Amherst College Investment Committee
(2019–present); and member of the Regenerative
Crisis Response Committee (2020–present). |
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President of Morehouse College (2018–present).
Professor of Business Administration Emeritus at
Harvard University (2017–2018) and Dean (2011–2016)
and Professor of Management at Georgetown
University, McDonough School of Business
(2016–2017). Director of DTE Energy Company
(2013–present). Trustee of Common Fund
(2019–present). |
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Peter F. Volanakis
(1955) |
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President and chief operating officer (retired 2010) of
Corning Incorporated (communications equipment)
and director of Corning Incorporated (2000–2010) and
Dow Corning (2001–2010). Director (2012) of SPX
Corporation (multi-industry manufacturing). Overseer
of the Amos Tuck School of Business Administration,
Dartmouth College (2001–2013). Member of the BMW
Group Mobility Council. |
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Principal of Vanguard. Chief compliance officer
(November 2022–present) of Vanguard and of each of
the investment companies served by Vanguard. Chief
compliance officer (2018–2022) and deputy chief
compliance officer (2017–2019) of State Street. |
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Christine M. Buchanan
(1970) |
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Principal of Vanguard. Chief financial officer
(2021–present) and treasurer (2017–2021) of each of
the investment companies served by Vanguard.
Partner (2005–2017) at KPMG (audit, tax, and advisory
services). |
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Investment
Stewardship
Officer |
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Principal of Vanguard. Investment stewardship officer
(2020–present) of each of the investment companies
served by Vanguard. Head of Investor Advocacy
(2020–present) and head of Marketing Strategy and
Planning (2017–2020) at Vanguard. Special Assistant to
the President of the United States (2015). |
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Treasurer (February 2022–present) of each of the
investment companies served by Vanguard. Fund
transfer agent controller (2019–2022) and director of
Audit Services (2017–2019) at Vanguard. Senior
manager (2015–2017) at PriceWaterhouseCoopers
(audit and assurance, consulting, and tax services). |
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Position(s)
Held With Fund |
Vanguard
Funds’ Trustee/
Officer Since |
Principal Occupation(s)
During the Past Five Years,
Outside Directorships,
and Other Experience |
Number of
Vanguard Funds
Overseen by
Trustee/Officer |
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Principal of Vanguard. Controller (2015–present) of
each of the investment companies served by
Vanguard. Head of International Fund Services (2008–
2014) at Vanguard. |
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General counsel (2016–present) of Vanguard.
Secretary (2016–present) of Vanguard and of each of
the investment companies served by Vanguard.
Managing director (2016–present) of Vanguard.
Managing director and general counsel of Global Cards
and Consumer Services (2014–2016) at Citigroup.
Counsel (2003–2014) at American Express.
Non-executive director of the board of National Grid
(energy). |
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Finance director (2017–present) and treasurer (2017)
of each of the investment companies served by
Vanguard. Managing director (2016–present) of
Vanguard. Chief financial officer (2016–present) of
Vanguard. Director (2016–present) of Vanguard
Marketing Corporation. Executive vice president and
chief financial officer (2006–2016) of MassMutual
Financial Group. |
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All but one of the trustees are independent. The independent trustees designate a lead independent trustee. The lead independent trustee is a spokesperson and principal point of contact for the independent trustees and is responsible for coordinating the activities of the independent trustees, including calling regular executive sessions of the independent trustees; developing the agenda of each meeting together with the chairman; and chairing the meetings of the independent trustees. The lead independent trustee also chairs the meetings of the audit, compensation, and nominating committees. The board also has two investment committees, which consist of independent trustees and the sole interested trustee.
The independent trustees appoint the chairman of the board. The roles of chairman of the board and chief executive officer currently are held by the same person; as a result, the chairman of the board is an “interested” trustee. The independent trustees generally believe that the Vanguard funds’ chief executive officer is best qualified to serve as chairman and that fund shareholders benefit from this leadership structure through accountability and strong day-to-day leadership.
Board Committees: The Trust's board has the following committees:
◾ Audit Committee: This committee oversees the accounting and financial reporting policies, the systems of internal controls, and the independent audits of each fund. The following independent trustees serve as members of the committee: Mr. Loughrey, Mr. Loughridge, Ms. Raskin, and Mr. Volanakis. The committee held six meetings during the Trust's fiscal year ended September 30, 2022.
◾ Compensation Committee: This committee oversees the compensation programs established by each fund for the benefit of its trustees. All independent trustees serve as members of the committee. The committee held two meetings during the Trust's fiscal year ended September 30, 2022.
◾ Investment Committees: These committees assist the board in its oversight of investment advisors to the funds and in the review and evaluation of materials relating to the board’s consideration of investment advisory agreements with the funds. Each trustee serves on one of two investment committees. Each investment committee held four meetings during the Trust's fiscal year ended September 30, 2022.
◾ Nominating Committee: This committee nominates candidates for election to the board of trustees of each fund. The committee also has the authority to recommend the removal of any trustee. All independent trustees serve as members of the committee. The committee held five meetings during the Trust's fiscal year ended September 30, 2022.
The Nominating Committee will consider shareholder recommendations for trustee nominees. Shareholders may send recommendations to Mr. Loughridge, chairman of the committee.
Trustees retire in accordance with the funds' governing documents and policies, and typically by age 75.
Trustee Compensation
The same individuals serve as trustees of all Vanguard funds and each fund pays a proportionate share of the trustees’ compensation. Vanguard funds also employ their officers on a shared basis; however, officers are compensated by Vanguard, not the funds.
Independent Trustees. The funds compensate their independent trustees (i.e., the ones who are not also officers of the funds) in two ways:
◾ The independent trustees receive an annual fee for their service to the funds, which is subject to reduction based on absences from scheduled board meetings.
◾ The independent trustees are reimbursed for the travel and other expenses that they incur in attending board meetings.
“Interested” Trustee. Mr. Buckley serves as a trustee, but is not paid in this capacity. He is, however, paid in his role as an officer of Vanguard.
Compensation Table. The following table provides compensation details for each of the trustees. We list the amounts paid as compensation by the Fund for each trustee. In addition, the table shows the total amount of compensation paid to each trustee by all Vanguard funds.
VANGUARD WELLESLEY INCOME FUND
TRUSTEES’ COMPENSATION TABLE
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Aggregate
Compensation From
the Funds1 |
Total Compensation
From All Vanguard
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1
The amounts shown in this column are based on the Trust's fiscal year ended September 30, 2022.
2
The amounts reported in this column reflect the total compensation paid to each trustee for his or her service as trustee of 206 Vanguard funds for the 2022 calendar year.
3
Ms. Bunch became a member of the Funds’ board effective November 2021.
4
Ms. Gutmann retired from service effective February 2022.
Ownership of Fund Shares
All current trustees allocate their investments among the various Vanguard funds based on their own investment needs. The following table shows each trustee’s ownership of shares of the Fund and of all Vanguard funds served by the trustee as of December 31, 2022.
VANGUARD WELLESLEY INCOME FUND
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Dollar Range of
Fund Shares
Owned by Trustee |
Aggregate Dollar Range
of Vanguard Fund Shares
Owned by Trustee |
Vanguard Wellesley Income Fund |
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As of December 31, 2022, the trustees and officers of the funds owned, in the aggregate, less than 1% of each class of each fund’s outstanding shares.
As of December 31, 2022, the following owned of record 5% or more of the outstanding shares of each class:
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Vanguard Wellesley Income Fund |
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CHARLES SCHWAB & CO INC SAN
FRANCISCO, CA |
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NATIONAL FINANCIAL SERV CORP
JERSEY CITY, NJ |
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TD AMERITRADE INC OMAHA, NE |
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Portfolio Holdings Disclosure Policies and Procedures
Introduction
Vanguard and the boards of trustees of the Vanguard funds (the Boards) have adopted Portfolio Holdings Disclosure Policies and Procedures (Policies and Procedures) to govern the disclosure of the portfolio holdings of each Vanguard fund. Vanguard and the Boards considered each of the circumstances under which Vanguard fund portfolio holdings may be disclosed to different categories of persons under the Policies and Procedures. Vanguard and the Boards also considered actual and potential material conflicts that could arise in such circumstances between the interests of Vanguard fund shareholders, on the one hand, and those of the fund’s investment advisor, distributor, or any affiliated person of the fund, its investment advisor, or its distributor, on the other. After giving due consideration to such matters and after the exercise of their fiduciary duties and reasonable business judgment, Vanguard and the Boards determined that the Vanguard funds have a legitimate business purpose for disclosing portfolio holdings to the persons described in each of the circumstances set forth in the Policies and Procedures and that the Policies and Procedures are reasonably designed to ensure that disclosure of portfolio holdings and information about portfolio holdings is in the best interests of fund shareholders and appropriately addresses the potential for material conflicts of interest.
The Boards exercise continuing oversight of the disclosure of Vanguard fund portfolio holdings by (1) overseeing the implementation and enforcement of the Policies and Procedures, the Code of Ethics, and the Policies and Procedures Designed to Prevent the Misuse of Inside Information (collectively, the portfolio holdings governing policies) by the chief compliance officer of Vanguard and the Vanguard funds; (2) considering reports and recommendations by the chief compliance officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940) that may arise in connection with any portfolio holdings governing policies; and (3) considering whether to approve or ratify any amendment to any portfolio holdings governing policies.
Vanguard and the Boards reserve the right to amend the Policies and Procedures at any time and from time to time without prior notice at their sole discretion. For purposes of the Policies and Procedures, the term “portfolio holdings” means the equity and debt securities (e.g., stocks and bonds) held by a Vanguard fund and does not mean the cash investments, derivatives, and other investment positions (collectively, other investment positions) held by the fund.
Online Disclosure of Ten Largest Stock Holdings
Each actively managed Vanguard fund generally will seek to disclose the fund’s ten largest stock portfolio holdings and the percentage of the fund’s total assets that each of these holdings represents as of the end of the most recent calendar quarter (quarter-end ten largest stock holdings with weightings) online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the calendar quarter. Each Vanguard index fund generally will seek to disclose the fund’s ten largest stock portfolio holdings and the percentage of the fund’s total assets that each of these holdings represents as of the end of the most recent month (month-end ten largest stock holdings with weightings) online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the month. In addition, Vanguard funds generally will seek to disclose the fund’s ten largest stock portfolio holdings and the aggregate percentage of the fund’s total assets (and, for balanced funds, the aggregate percentage of the fund’s equity securities) that these holdings represent as of the end of the most recent month (month-end ten largest stock holdings) online at vanguard.com, in the “Portfolio” section of the
fund’s Portfolio & Management page, 10 business days after the end of the month. Together, the quarter-end and month-end ten largest stock holdings are referred to as the ten largest stock holdings. Online disclosure of the ten largest stock holdings is made to all categories of persons, including individual investors, institutional investors, intermediaries, third-party service providers, rating and ranking organizations, affiliated persons of a Vanguard fund, and all other persons.
Online Disclosure of Complete Portfolio Holdings
Each actively managed Vanguard fund, unless otherwise stated, generally will seek to disclose the fund’s complete portfolio holdings as of the end of the most recent calendar quarter online at vanguard.com 30 calendar days after the end of the calendar quarter. In accordance with Rule 2a-7 under the 1940 Act, each of the Vanguard money market funds will disclose the fund’s complete portfolio holdings as of the last business day of the prior month online at vanguard.com no later than the fifth business day of the current month. The complete portfolio holdings information for money market funds will remain available online for at least six months after the initial posting. Vanguard Market Neutral Fund and Vanguard Alternative Strategies Fund generally will seek to disclose the Fund’s complete portfolio holdings as of the end of the most recent calendar quarter online at vanguard.com 60 calendar days after the end of the calendar quarter. Each Vanguard index fund generally will seek to disclose the fund’s complete portfolio holdings as of the end of the most recent month online at vanguard.com, in the “Portfolio” section of the fund’s Portfolio & Management page, 15 calendar days after the end of the month. Online disclosure of complete portfolio holdings is made to all categories of persons, including individual investors, institutional investors, intermediaries, third-party service providers, rating and ranking organizations, affiliated persons of a Vanguard fund, and all other persons. Vanguard will review complete portfolio holdings before disclosure is made and, except with respect to the complete portfolio holdings of the Vanguard money market funds, may withhold any portion of the fund’s complete portfolio holdings from disclosure when deemed to be in the best interests of the fund after consultation with a Vanguard fund’s investment advisor.
Disclosure of Complete Portfolio Holdings to Service Providers Subject to Confidentiality and Trading Restrictions
Vanguard, for legitimate business purposes, may disclose Vanguard fund complete portfolio holdings at times it deems necessary and appropriate to rating and ranking organizations; financial printers; proxy voting service providers; pricing information vendors; issuers of guaranteed investment contracts for stable value portfolios; third parties that deliver analytical, statistical, or consulting services; and other third parties that provide services (collectively, Service Providers) to Vanguard, Vanguard subsidiaries, and/or the Vanguard funds. Disclosure of complete portfolio holdings to a Service Provider is conditioned on the Service Provider being subject to a written agreement imposing a duty of confidentiality, including a duty not to trade on the basis of any material nonpublic information.
The frequency with which complete portfolio holdings may be disclosed to a Service Provider, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed to the Service Provider, is determined based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure to a Service Provider varies and may be as frequent as daily, with no lag. Disclosure of Vanguard fund complete portfolio holdings by Vanguard to a Service Provider must be authorized by a Vanguard fund officer or a Principal in Vanguard’s Portfolio Review Department or Office of the General Counsel. Any disclosure of Vanguard fund complete portfolio holdings to a Service Provider as previously described may also include a list of the other investment positions that make up the fund, such as cash investments and derivatives.
Currently, Vanguard discloses complete portfolio holdings to the following Service Providers as part of ongoing arrangements that serve legitimate business purposes: Abel/Noser Corporation; Advisor Software, Inc.; Alcom Printing Group, Inc.; Apple Press, L.C.; Bloomberg L.P.; Brilliant Graphics, Inc.; Broadridge Financial Solutions, Inc.; Brown Brothers Harriman & Co.; Charles River Systems, Inc.; FactSet Research Systems Inc.; Innovation Printing & Communications; Institutional Shareholder Services, Inc.; Intelligencer Printing Company; Investment Technology Group, Inc.; Lipper, Inc.; Markit WSO Corporation; McMunn Associates, Inc.; Reuters America Inc.; R.R. Donnelley, Inc.; State Street Bank and Trust Company; and Trade Informatics LLC.
Disclosure of Complete Portfolio Holdings to Vanguard Affiliates and Certain Fiduciaries Subject to Confidentiality and Trading Restrictions
Vanguard may disclose complete portfolio holdings between and among the following persons (collectively, Affiliates and Fiduciaries) for legitimate business purposes within the scope of their official duties and responsibilities, subject to such persons’ continuing legal duty of confidentiality and legal duty not to trade on the basis of any material nonpublic information, as such duties are imposed under the Code of Ethics, the Policies and Procedures Designed to Prevent the Misuse of Inside Information, by agreement, or under applicable laws, rules, and regulations: (1) persons who are subject to the Code of Ethics or the Policies and Procedures Designed to Prevent the Misuse of Inside Information; (2) an investment advisor, distributor, administrator, transfer agent, or custodian to a Vanguard fund; (3) an accounting firm, an auditing firm, or outside legal counsel retained by Vanguard, a Vanguard subsidiary, or a Vanguard fund; (4) an investment advisor to whom complete portfolio holdings are disclosed for due diligence purposes when the advisor is in merger or acquisition talks with a Vanguard fund’s current advisor; and (5) a newly hired investment advisor or sub-advisor to whom complete portfolio holdings are disclosed prior to the time it commences its duties.
The frequency with which complete portfolio holdings may be disclosed between and among Affiliates and Fiduciaries, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed between and among the Affiliates and Fiduciaries, is determined by such Affiliates and Fiduciaries based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure between and among Affiliates and Fiduciaries varies and may be as frequent as daily, with no lag. Any disclosure of Vanguard fund complete portfolio holdings to any Affiliates and Fiduciaries as previously described may also include a list of the other investment positions that make up the fund, such as cash investments and derivatives. Disclosure of Vanguard fund complete portfolio holdings or other investment positions by Vanguard, VMC, or a Vanguard fund to Affiliates and Fiduciaries must be authorized by a Vanguard fund officer or a Principal of Vanguard.
Currently, Vanguard discloses complete portfolio holdings to the following Affiliates and Fiduciaries as part of ongoing arrangements that serve legitimate business purposes: Vanguard and each investment advisor, custodian, and independent registered public accounting firm identified in each fund’s Statement of Additional Information.
Disclosure of Portfolio Holdings to Trading Counterparties in the Normal Course of Managing a Fund’s Assets
An investment advisor, administrator, or custodian for a Vanguard fund may, for legitimate business purposes within the scope of its official duties and responsibilities, disclose portfolio holdings (whether partial portfolio holdings or complete portfolio holdings) and other investment positions that make up the fund to any trading counterparty, including one or more broker-dealers or banks, during the course of, or in connection with, normal day-to-day securities and derivatives transactions with or through such trading counterparties subject to the counterparty’s legal obligation not to use or disclose material nonpublic information concerning the fund’s portfolio holdings, other investment positions, securities transactions, or derivatives transactions without the consent of the fund or its agents. The Vanguard funds have not given their consent to any such use or disclosure and no person or agent of Vanguard is authorized to give such consent except as approved in writing by the Boards of the Vanguard funds. Disclosure of portfolio holdings or other investment positions by Vanguard to broker-dealers must be authorized by a Vanguard fund officer or a Principal of Vanguard.
In addition to the disclosures described below to Authorized Participants, a Vanguard fund investment advisor or administrator may also disclose portfolio holdings information to other current or prospective fund shareholders in connection with the dissemination of information necessary for transactions in Creation Units (as defined below) or other large transactions with a Vanguard fund. Such shareholders are typically Authorized Participants or other financial institutions that have been authorized by VMC to purchase and redeem large blocks of shares (Creation Units), but may also include market makers and other institutional market participants and entities to whom a Vanguard fund advisor or administrator may provide information in connection with transactions in a Vanguard fund.
Disclosure of Nonmaterial Information
The Policies and Procedures permit Vanguard fund officers, Vanguard fund portfolio managers, and other Vanguard representatives (collectively, Approved Vanguard Representatives) to disclose any views, opinions, judgments, advice, or commentary, or any analytical, statistical, performance, or other information, in connection with or relating to a
Vanguard fund or its portfolio holdings and/or other investment positions (collectively, commentary and analysis) or any changes in the portfolio holdings of a Vanguard fund that occurred after the end of the most recent calendar quarter (recent portfolio changes) to any person if (1) such disclosure serves a legitimate business purpose, (2) such disclosure does not effectively result in the disclosure of the complete portfolio holdings of any Vanguard fund (which can be disclosed only in accordance with the Policies and Procedures), and (3) such information does not constitute material nonpublic information. Disclosure of commentary and analysis or recent portfolio changes by Vanguard, VMC, or a Vanguard fund must be authorized by a Vanguard fund officer or a Principal of Vanguard.
An Approved Vanguard Representative must make a good faith determination whether the information constitutes material nonpublic information, which involves an assessment of the particular facts and circumstances. Vanguard believes that in most cases recent portfolio changes that involve a few or even several securities in a diversified portfolio or commentary and analysis would be immaterial and would not convey any advantage to a recipient in making an investment decision concerning a Vanguard fund. Nonexclusive examples of commentary and analysis about a Vanguard fund include (1) the allocation of the fund’s portfolio holdings and other investment positions among various asset classes, sectors, industries, and countries; (2) the characteristics of the stock and bond components of the fund’s portfolio holdings and other investment positions; (3) the attribution of fund returns by asset class, sector, industry, and country; and (4) the volatility characteristics of the fund. Approved Vanguard Representatives may, at their sole discretion, deny any request for information made by any person, and may do so for any reason or for no reason. Approved Vanguard Representatives include, for purposes of the Policies and Procedures, persons employed by or associated with Vanguard or a subsidiary of Vanguard who have been authorized by Vanguard’s Portfolio Review Department to disclose recent portfolio changes and/or commentary and analysis in accordance with the Policies and Procedures.
Disclosure of Portfolio Holdings Related Information to the Issuer of a Security for Legitimate Business Purposes
Vanguard, at its sole discretion, may disclose portfolio holdings information concerning a security held by one or more Vanguard funds to the issuer of such security if the issuer presents, to the satisfaction of Vanguard’s Enterprise Financial Services unit, convincing evidence that the issuer has a legitimate business purpose for such information. Disclosure of this information to an issuer is conditioned on the issuer being subject to a written agreement imposing a duty of confidentiality, including a duty not to trade on the basis of any material nonpublic information. The frequency with which portfolio holdings information concerning a security may be disclosed to the issuer of such security, and the length of the lag, if any, between the date of the information and the date on which the information is disclosed to the issuer, is determined based on the facts and circumstances, including, without limitation, the nature of the portfolio holdings information to be disclosed, the risk of harm to the funds and their shareholders, and the legitimate business purposes served by such disclosure. The frequency of disclosure to an issuer cannot be determined in advance of a specific request and will vary based upon the particular facts and circumstances and the legitimate business purposes, but in unusual situations could be as frequent as daily, with no lag. Disclosure of portfolio holdings information concerning a security held by one or more Vanguard funds to the issuer of such security must be authorized by a Vanguard fund officer or a Principal in Vanguard’s Portfolio Review Department or Office of the General Counsel.
Disclosure of Portfolio Holdings as Required by Applicable Law
Vanguard fund portfolio holdings (whether partial portfolio holdings or complete portfolio holdings) and other investment positions that make up a fund shall be disclosed to any person as required by applicable laws, rules, and regulations. Examples of such required disclosure include, but are not limited to, disclosure of Vanguard fund portfolio holdings (1) in a filing or submission with the SEC or another regulatory body, (2) in connection with seeking recovery on defaulted bonds in a federal bankruptcy case, (3) in connection with a lawsuit, or (4) as required by court order. Disclosure of portfolio holdings or other investment positions by Vanguard, VMC, or a Vanguard fund as required by applicable laws, rules, and regulations must be authorized by a Vanguard fund officer or a Principal of Vanguard.
Prohibitions on Disclosure of Portfolio Holdings
No person is authorized to disclose Vanguard fund portfolio holdings or other investment positions (whether online at vanguard.com, in writing, by fax, by email, orally, or by other means) except in accordance with the Policies and Procedures. In addition, no person is authorized to make disclosure pursuant to the Policies and Procedures if such disclosure is otherwise unlawful under the antifraud provisions of the federal securities laws (as defined in Rule 38a-1
under the 1940 Act). Furthermore, Vanguard’s management, at its sole discretion, may determine not to disclose portfolio holdings or other investment positions that make up a Vanguard fund to any person who would otherwise be eligible to receive such information under the Policies and Procedures, or may determine to make such disclosures publicly as provided by the Policies and Procedures.
Prohibitions on Receipt of Compensation or Other Consideration
The Policies and Procedures prohibit a Vanguard fund, its investment advisor, and any other person or entity from paying or receiving any compensation or other consideration of any type for the purpose of obtaining disclosure of Vanguard fund portfolio holdings or other investment positions. “Consideration” includes any agreement to maintain assets in the fund or in other investment companies or accounts managed by the investment advisor or by any affiliated person of the investment advisor.
Investment Advisory and Other Services
For funds that are advised by independent third-party advisory firms unaffiliated with Vanguard, the board of trustees of each fund hires investment advisory firms, not individual portfolio managers, to provide investment advisory services to such funds. Vanguard negotiates each advisory agreement, which contains advisory fee arrangements, on an arm’s length basis with the advisory firm. Each advisory agreement is reviewed annually by each fund’s board of trustees, taking into account numerous factors, which include, without limitation, the nature, extent, and quality of the services provided; investment performance; and the fair market value of the services provided. Each advisory agreement is between the Trust and the advisory firm, not between the Trust and the portfolio manager. The structure of the advisory fee paid to the unaffiliated investment advisory firm is described in the following sections. In addition, the firm has established policies and procedures designed to address the potential for conflicts of interest. The firm’s compensation structure and management of potential conflicts of interest are summarized by the advisory firm in the following sections for the fiscal year ended September 30, 2022.
The Fund is a party to an investment advisory agreement with Wellington Management Company LLP, whereby the advisor manages the investment and reinvestment of the Fund’s assets. In this capacity, the advisor continuously reviews, supervises, and administers the Fund’s investment program. The advisor discharges its responsibilities subject to the supervision and oversight of Vanguard’s Portfolio Review Department and the officers and trustees of the Fund. Vanguard’s Portfolio Review Department is responsible for recommending changes in a fund’s advisory arrangements to the fund’s board of trustees, including changes in the amount of assets allocated to each advisor and recommendations to hire, terminate, or replace an advisor.
Wellington Management Company LLP (Wellington Management) is a Delaware limited liability partnership with principal offices at 280 Congress Street, Boston, MA 02210. As of September 30, 2022, the firm is owned by 192 partners, all fully active in the firm. Wellington Management is a professional investment counseling firm that provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 80 years. Wellington Management is owned by the partners of Wellington Management Group LLP, a Massachusetts limited liability partnership.
The Fund pays Wellington Management a base fee plus or minus a performance adjustment. The base fee, which is paid quarterly, is a percentage of average daily net assets under management during the most recent fiscal quarter. The base fee has breakpoints, which means that the percentage declines as assets go up. The performance adjustment, also paid quarterly, is based on the cumulative total return of the Fund relative to that of the Wellesley Income Composite Index over the preceding 36-month period. The Index is a composite benchmark weighted 65% in the Bloomberg U.S. Credit A or Better Bond Index and 35% in the FTSE High Dividend Yield Index.
During the fiscal years ended September 30, 2020, 2021, and 2022, the Fund incurred investment advisory fees of approximately $31,627,000 (before a performance-based increase of $5,268,000), $34,656,000 (before a performance-based increase of $5,924,000), and $34,450,000 (before a performance-based increase of $6,633,000), respectively.
1. Other Accounts Managed
The following table provides information relating to the other accounts managed by the portfolio managers of the Fund as of the fiscal year ended September 30, 2022 (unless otherwise noted):
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No. of accounts with
performance-based
fees |
Total assets in
accounts with
performance-based
fees |
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Registered investment companies1 |
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Other pooled investment vehicles |
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Registered investment companies1 |
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Other pooled investment vehicles |
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1
Includes Vanguard Wellesley Income Fund, which held assets of $55 billion as of September 30, 2022.
2
Mr. Hand began co-managing the equity portion of the Fund in 2021 and became the sole portfolio manager of the equity portion of the Fund in July 2022.
2. Material Conflicts of Interest
Individual investment professionals at Wellington Management manage multiple accounts for multiple clients. These accounts may include mutual funds, separate accounts (assets managed on behalf of institutions, such as pension funds, insurance companies, foundations, or separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. The Wellington Management Portfolio’s or Fund’s managers listed in a prospectus who are primarily responsible for the day-to-day management of the Wellington Management Portfolio or Fund (Portfolio Manager) generally manage accounts in several different investment styles. These accounts may have investment objectives, strategies, time horizons, tax considerations, and risk profiles that differ from those of the Wellington Management Portfolio or Fund. A Portfolio Manager makes investment decisions for each account, including the Wellington Management Portfolio or Fund, based on the investment objectives, policies, practices, benchmarks, cash flows, tax, and other relevant investment considerations applicable to that account. Consequently, a Portfolio Manager may purchase or sell securities, including initial public offerings (IPOs), for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. Alternatively, these accounts may be managed in a similar fashion to the Wellington Management Portfolio or Fund and thus the accounts may have similar—and in some cases nearly identical—objectives, strategies, and/or holdings to those of the Wellington Management Portfolio or Fund.
A Portfolio Manager or other investment professionals at Wellington Management may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of the Wellington Management Portfolio or Fund, or make investment decisions that are similar to those made for the Wellington Management Portfolio or Fund, both of which have the potential to adversely impact the Wellington Management Portfolio or Fund depending on market conditions. For example, an investment professional may purchase a security in one account while appropriately selling that same security in another account. Similarly, a Portfolio Manager may purchase the same security for a Wellington Management Portfolio or Fund and one or more other accounts at or about the same time. In those instances, the other accounts will have access to their respective holdings prior to the public disclosure of the Wellington Management Portfolio’s or Fund’s holdings. In addition, some of these accounts have fee structures, including performance fees, which are or have the potential to be higher, in some cases significantly higher, than the fees Wellington Management receives for managing the Wellington Management Portfolio or Fund. Mr. Hand and Ms. Moran also manage accounts that pay performance allocations to Wellington Management or its affiliates. Because incentive payments paid by Wellington Management to the Portfolio Managers are tied to revenues earned by Wellington Management and, where noted, to the performance achieved by the manager in each account, the incentives associated with any given account may be significantly higher or lower than those associated with other accounts managed by a given Portfolio Manager. Finally, the Portfolio Managers may hold shares or investments in the other pooled investment vehicles and/or other accounts identified above.
Wellington Management’s goal is to meet its fiduciary obligation to treat all clients fairly and provide high-quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firm’s Code of Ethics, and places additional investment restrictions on investment professionals who manage hedge funds and certain other accounts. Furthermore, senior investment and business personnel at Wellington Management
periodically review the performance of Wellington Management’s investment professionals. Although Wellington Management does not track the time an investment professional spends on a single account, Wellington Management does periodically assess whether an investment professional has adequate time and resources to effectively manage the investment professional’s various client mandates.
3. Description of Compensation
Wellington Management receives a fee based on the assets under management of the Wellington Management Portfolio or Fund as set forth in the Investment Advisory Agreement between Wellington Management and Vanguard Wellesley Income Fund. Wellington Management pays its investment professionals out of its total revenues, including the advisory fees earned with respect to the Wellington Management Portfolio or Fund. The following relates to the fiscal year ended September 30, 2022.
Wellington Management’s compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high-quality investment management services to its clients. Wellington Management’s compensation of the Wellington Management Portfolio’s or Fund’s managers listed in the prospectus who are primarily responsible for the day-to-day management of the Wellington Management Portfolio or Fund includes a base salary and incentive components. The base salary for each Portfolio Manager who is a partner (a “Partner”) of Wellington Management Group LLP, the ultimate holding company of Wellington Management, is generally a fixed amount that is determined by the managing partners of Wellington Management Group LLP. The base salary for the other Investment Professional is determined by the Investment Professional's experience and performance in his role as an Investment Professional. Base salaries for Wellington Management's employees are reviewed annually and may be adjusted based on the recommendation of an Investment Professional's manager, using guidelines established by Wellington Management's Compensation Committee, which has final oversight responsibility for base salaries of employees of the firm.
Each Portfolio Manager is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the Fund and generally each other account managed by such Portfolio Manager. Each Portfolio Manager's incentive payment relating to the Fund is linked to the net pre-tax performance of the portion of the Fund managed by the Investment Professional compared to the FTSE US High Dividend Yield Index over one-, three-, and five-year periods, with an emphasis on five-year results. Wellington Management applies similar incentive compensation structures (although the benchmarks or peer groups, time periods, and rates may differ) to other accounts managed by the Portfolio Managers, including accounts with performance fees. The incentive paid to the other Portfolio Managers, which has no performance-related component, is based on the revenues earned by Wellington Management.
Portfolio-based incentives across all accounts managed by an investment professional can, and typically do, represent a significant portion of an investment professional’s overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The Portfolio Managers may also be eligible for bonus payments based on their overall contribution to Wellington Management’s business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on other factors. Each Partner is eligible to participate in a Partner-funded tax-qualified retirement plan, the contributions to which are made pursuant to an actuarial formula. Ms. Moran and Mr. Hand are Partners.
4. Ownership of Securities
As of September 30, 2022, Ms. Moran and Mr. Hand each owned shares of the Fund within the $500,001–$1,000,000 range.
Duration and Termination of Investment Advisory Agreement
The Fund's current investment advisory agreement with Wellington Management is renewable for successive one-year periods, only if (1) each renewal is specifically approved by a vote of the Fund’s board of trustees, including the affirmative votes of a majority of the trustees who are not parties to the agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of considering such approval, or (2) each renewal is specifically approved by a vote of a majority of the Fund’s outstanding voting securities. An
agreement is automatically terminated if assigned and may be terminated without penalty at any time either (1) by vote of the board of trustees of the Fund upon thirty (30) days’ written notice to the advisor, (2) by a vote of a majority of the Fund’s outstanding voting securities upon 30 days’ written notice to the advisor, or (3) by the advisor upon ninety (90) days’ written notice to the Fund.
Securities Lending
The following table describes the securities lending activities of the Fund during the fiscal year ended September 30, 2022:
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Securities Lending Activities |
Vanguard Wellesley Income Fund |
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Gross income from securities lending activities |
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Fees paid to securities lending agent from a revenue split |
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Fees paid for any cash collateral management service (including fees deducted from a pooled cash
collateral reinvestment vehicle) that are not included in the revenue split |
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Administrative fees not included in revenue split |
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Indemnification fee not included in revenue split |
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Rebate (paid to borrower) |
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Other fees not included in revenue split (specify) |
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Aggregate fees/compensation for securities lending activities |
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Net income from securities lending activities |
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The services provided by Brown Brothers Harriman & Co. and Vanguard, each acting separately as securities lending agents for certain Vanguard funds, include coordinating the selection of securities to be loaned to approved borrowers; negotiating the terms of the loan; monitoring the value of the securities loaned and corresponding collateral, marking to market daily; coordinating the investment of cash collateral in the funds’ approved cash collateral reinvestment vehicle; monitoring dividends and coordinating material proxy votes relating to loaned securities; and transferring, recalling, and arranging the return of loaned securities to the funds upon termination of the loan.
Portfolio Transactions
The advisor decides which securities to buy and sell on behalf of the Fund and then selects the brokers or dealers that will execute the trades on an agency basis or the dealers with whom the trades will be effected on a principal basis. For each trade, the advisor must select a broker-dealer that it believes will provide “best execution.” Best execution does not necessarily mean paying the lowest spread or commission rate available. In seeking best execution, the SEC has said that an advisor should consider the full range of a broker-dealer’s services. The factors considered by the advisor in seeking best execution include, but are not limited to, the broker-dealer’s execution capability, clearance and settlement services, commission rate, trading expertise, willingness and ability to commit capital, ability to provide anonymity, financial responsibility, reputation and integrity, responsiveness, access to underwritten offerings and secondary markets, and access to company management, as well as the value of any research provided by the broker-dealer. In assessing which broker-dealer can provide best execution for a particular trade, the advisor also may consider the timing and size of the order and available liquidity and current market conditions. Subject to applicable legal requirements, the advisor may select a broker based partly on brokerage or research services provided to the advisor and its clients, including the Fund. The advisor may cause the Fund to pay a higher commission than other brokers would charge if the advisor determines in good faith that the amount of the commission is reasonable in relation to the value of services provided. The advisor also may receive brokerage or research services from broker-dealers that are provided at no charge in recognition of the volume of trades directed to the broker. To the extent research services or products may be a factor in selecting brokers, services and products may include written research reports analyzing performance or securities, discussions with research analysts, meetings with corporate executives to obtain oral reports on company performance, market data, and other products and services that will assist the advisor in its investment decision-making process. The research services provided by brokers through which the Fund effects securities transactions may be used by the advisor in servicing all of its accounts, and some of the services may not be used by the advisor in connection with the Fund.
The Fund's bond investments are generally purchased and sold through principal transactions, meaning that the Fund normally purchases bonds directly from the issuer or a primary market-maker acting as principal for the bonds on a net
basis. Explicit brokerage commissions are not paid on these transactions, although purchases of new issues from underwriters of bonds typically include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market-makers typically include a dealer’s markup (i.e., a spread between the bid and the asked prices).
As previously explained, the types of bonds that the Fund purchases do not normally involve the payment of explicit brokerage commissions. If any such brokerage commissions are paid, however, the advisor will evaluate their reasonableness by considering: (1) the historical commission rates; (2) the rates that other institutional investors are paying, based upon publicly available information; (3) the rates quoted by brokers and dealers; (4) the size of a particular transaction, in terms of the number of shares, the dollar amount, and the number of clients involved; (5) the complexity of a particular transaction in terms of both execution and settlement; (6) the level and type of business done with a particular firm over a period of time; and (7) the extent to which the broker or dealer has capital at risk in the transaction.
During the fiscal years ended September 30, 2020, 2021, and 2022, the Fund paid the following approximate amounts in brokerage commissions. Brokerage commissions paid by a fund may be substantially different from year to year for multiple reasons, such as cash flows or portfolio turnover.
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Vanguard Wellesley Income Fund |
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Some securities that are considered for investment by the Fund may also be appropriate for other Vanguard funds or for other clients served by the advisor. If such securities are compatible with the investment policies of a Fund and one or more of the advisor’s other clients, and are considered for purchase or sale at or about the same time, then transactions in such securities may be aggregated by the advisor, and the purchased securities or sale proceeds may be allocated among the participating Vanguard funds and the other participating clients of the advisor in a manner deemed equitable by the advisor. Although there may be no specified formula for allocating such transactions, the allocation methods used, and the results of such allocations, will be subject to periodic review by the Fund's board of trustees.
The ability of Vanguard and external advisors to purchase or dispose of certain fund investments, or to exercise rights on behalf of the Fund, is or may be restricted or impaired because of limitations imposed by law, regulation, or by certain regulators or issuers. As a result, Vanguard and external advisors, on behalf of certain Funds currently and other Funds potentially in the future, are required to limit purchases, sell existing investments, or otherwise limit the exercise of shareholder rights by the Fund, including voting rights. These ownership restrictions and limitations can impact a Fund's performance. For index funds, this impact generally takes the form of tracking error, which can arise when a fund is not able to acquire its desired amount of a security. For actively managed funds, this impact can result, for example, in missed investment opportunities otherwise desired by a fund's investment advisor. If the Fund is required to limit its investment in a particular issuer, then the Fund may seek to obtain regulatory or corporate consents or ownership waivers. Other options a Fund may pursue include seeking to obtain economic exposure to that issuer through alternative means, such as through a derivative, which may be more costly than owning securities of the issuer directly, or through investment in a wholly owned subsidiary. In the event a derivative, such as a swap, is used as an alternative means of exposure, Vanguard and external advisors on behalf of a Fund are not able to guarantee the availability of derivatives necessary to allow economic exposure to the security, sector, or industry. This limited availability may have additional impacts to Fund performance. Additionally, use of derivatives as an alternative means of exposure subjects a Fund to derivative-related risks.
As of September 30, 2022, the Fund held securities of its “regular brokers or dealers,” as that term is defined in Rule 10b-1 of the 1940 Act, as follows:
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Regular Broker or Dealer (or Parent) |
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Vanguard Wellesley Income Fund |
Deutsche Bank Securities Inc. |
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J.P. Morgan Securities LLC |
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Merrill Lynch, Pierce, Fenner & Smith Inc. |
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Natixis Securities Americas, LLC |
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Nomura International Trust Co. |
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Proxy Voting
I. Proxy Voting Policies
The Board of Trustees of the Fund has delegated the authority to vote proxies related to the portfolio securities held by the Fund to Wellington Management. Wellington Management will vote such proxies in accordance with its own proxy voting policies and procedures, which are summarized in Appendix A.
Vanguard has entered into agreements with various state, federal, and non-U.S. regulators and with certain issuers that limit the amount of shares that the funds may vote at their discretion for particular securities. For these securities, the funds are able to vote a limited portion of the shares at their discretion. Any additional shares generally are voted in the same proportion as votes cast by the issuer’s entire shareholder base (i.e., mirror voted), or the fund is not permitted to vote such shares. Further, the Board has adopted policies that will result in certain funds mirror voting a higher proportion of the shares they own in a regulated issuer in order to permit certain other funds (generally advised by managers not affiliated with Vanguard) to mirror vote none, or a lower proportion of, their shares in such regulated issuer.
II. Securities Lending
There may be occasions when Vanguard needs to restrict lending of and/or recall securities that are out on loan in order to vote the full position at a shareholder meeting. Vanguard has processes in place for advisors unaffiliated with Vanguard who have been delegated authority to vote proxies on behalf of certain Vanguard funds to inform Vanguard of an upcoming vote they deem to be material in accordance with such advisor’s proxy voting policies and procedures in order for Vanguard to instruct the recall of the security.
To obtain a free copy of a report that details how the Fund voted the proxies relating to the portfolio securities held by the Fund for the prior 12-month period ended on June 30, log on to vanguard.com or visit the SEC’s website at sec.gov.
Financial Statements
The Fund’s Financial Statements for the fiscal year ended September 30, 2022, appearing in the Fund's 2022 Annual Report to Shareholders, and the reports thereon of PricewaterhouseCoopers LLP, an independent registered public accounting firm, also appearing therein, are incorporated by reference into this Statement of Additional Information. For a more complete discussion of the Fund’s performance, please see the Fund's Annual and Semiannual Reports to Shareholders, which may be obtained without charge.
Description of Bond Ratings
Moody’s Rating Symbols
The following describe characteristics of the global long-term (original maturity of 1 year or more) bond ratings provided by Moody’s Investors Service, Inc. (Moody’s):
Aaa—Judged to be obligations of the highest quality, they are subject to the lowest level of credit risk.
Aa—Judged to be obligations of high quality, they are subject to very low credit risk. Together with the Aaa group, they make up what are generally known as high-grade bonds.
A—Judged to be upper-medium-grade obligations, they are subject to low credit risk.
Baa—Judged to be medium-grade obligations, subject to moderate credit risk, they may possess certain speculative characteristics.
Ba—Judged to be speculative obligations, they are subject to substantial credit risk.
B—Considered to be speculative obligations, they are subject to high credit risk.
Caa—Judged to be speculative obligations of poor standing, they are subject to very high credit risk.
Ca—Viewed as highly speculative obligations, they are likely in, or very near, default, with some prospect of recovery of principal and interest.
C—Viewed as the lowest rated obligations, they are typically in default, with little prospect for recovery of principal and interest.
Moody’s also supplies numerical indicators (1, 2, and 3) to rating categories. The modifier 1 indicates that the security is in the higher end of its rating category, the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a ranking toward the lower end of the category.
The following describe characteristics of the global short-term (original maturity of 13 months or less) bond ratings provided by Moody’s. This ratings scale also applies to U.S. municipal tax-exempt commercial paper.
Prime-1 (P-1)—Judged to have a superior ability to repay short-term debt obligations.
Prime-2 (P-2)—Judged to have a strong ability to repay short-term debt obligations.
Prime-3 (P-3)—Judged to have an acceptable ability to repay short-term debt obligations.
Not Prime (NP)—Cannot be judged to be in any of the prime rating categories.
The following describe characteristics of the U.S. municipal short-term bond ratings provided by Moody’s:
Moody’s ratings for state and municipal notes and other short-term (up to 3 years) obligations are designated Municipal Investment Grade (MIG).
MIG 1—Indicates superior quality, enjoying the excellent protection of established cash flows, liquidity support, and broad-based access to the market for refinancing.
MIG 2—Indicates strong credit quality with ample margins of protection, although not as large as in the preceding group.
MIG 3—Indicates acceptable credit quality, with narrow liquidity and cash-flow protection and less well-established market access for refinancing.
SG—Indicates speculative credit quality with questionable margins of protection.
Standard and Poor’s Rating Symbols
The following describe characteristics of the long-term (original maturity of 1 year or more) bond ratings provided by Standard and Poor’s:
AAA—These are the highest rated obligations. The capacity to pay interest and repay principal is extremely strong.
AA—These also qualify as high-grade obligations. They have a very strong capacity to pay interest and repay principal, and they differ from AAA issues only in small degree.
A—These are regarded as upper-medium-grade obligations. They have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB—These are regarded as having an adequate capacity to pay interest and repay principal. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity in this regard. This group is the lowest that qualifies for commercial bank investment.
BB, B, CCC, CC, and C—These obligations range from speculative to significantly speculative with respect to the capacity to pay interest and repay principal. BB indicates the lowest degree of speculation and C the highest.
D—These obligations are in default, and payment of principal and/or interest is likely in arrears.
The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories.
The following describe characteristics of short-term (original maturity of 365 days or less) bond and commercial paper ratings designations provided by Standard and Poor’s:
A-1—These are the highest rated obligations. The capacity of the obligor to pay interest and repay principal is strong. The addition of a plus sign (+) would indicate a very strong capacity.
A-2—These obligations are somewhat susceptible to changing economic conditions. The obligor has a satisfactory capacity to pay interest and repay principal.
A-3—These obligations are more susceptible to the adverse effects of changing economic conditions, which could lead to a weakened capacity to pay interest and repay principal.
B—These obligations are vulnerable to nonpayment and are significantly speculative, but the obligor currently has the capacity to meet its financial commitments.
C—These obligations are vulnerable to nonpayment, but the obligor must rely on favorable economic conditions to meet its financial commitment.
D—These obligations are in default, and payment of principal and/or interest is likely in arrears.
The following describe characteristics of U.S. municipal short-term (original maturity of 3 years or less) note ratings provided by Standard and Poor’s:
SP-1—This designation indicates a strong capacity to pay principal and interest.
SP-2—This designation indicates a satisfactory capacity to pay principal and interest.
SP-3—This designation indicates a speculative capacity to pay principal and interest.
Appendix A
Wellington Management Global Proxy Policy and Procedures
Wellington Management has adopted and implemented policies and procedures that it believes are reasonably designed to ensure that proxies are voted in the best interests of clients for whom it exercises proxy-voting discretion.
Wellington Management’s Proxy Voting Guidelines (the “Guidelines”) set forth broad guidelines and positions on common proxy issues that Wellington Management uses in voting on proxies. In addition, Wellington Management also considers each proposal in the context of the issuer, industry and country or countries in which the issuer’s business is conducted. The Guidelines are not rigid rules and the merits of a particular proposal may cause Wellington Management to enter a vote that differs from the Guidelines. Wellington Management seeks to vote all proxies with the goal of increasing long-term client value and, while client investment strategies may differ, applying this common set of guidelines is consistent with the investment objective of achieving positive long-term investment performance for each client.
Statement of Policy
Wellington Management:
1) Votes client proxies for which clients have affirmatively delegated proxy-voting authority, in writing, unless it has arranged in advance with the client to limit the circumstances in which it would exercise voting authority or determines that it is in the best interest of one or more clients to refrain from voting a given proxy.
2) Votes all proxies in the best interests of the client for whom it is voting.
3) Identifies and resolves all material proxy-related conflicts of interest between the firm and its clients in the best interests of the client.
Responsibility and Oversight
The Investment Research Group (“Investment Research”) monitors regulatory requirements with respect to proxy voting and works with the firm’s Legal and Compliance Group and the Investment Stewardship Committee to develop practices that implement those requirements. Investment Research also acts as a resource for portfolio managers and research analysts on proxy matters as needed. Day-to-day administration of the proxy voting process is the responsibility of Investment Research. The Investment Stewardship Committee is responsible for oversight of the implementation of the Global Proxy Policy and Procedures, review and approval of the Guidelines, identification and resolution of conflicts of interest, and for providing advice and guidance on specific proxy votes for individual issuers. The Investment Stewardship Committee reviews the Global Proxy Policy and Procedures annually.
Procedures
Use of Third-Party Voting Agent
Wellington Management uses the services of a third-party voting agent for research, voting recommendations, and to manage the administrative aspects of proxy voting. The voting agent processes proxies for client accounts, casts votes based on the Guidelines and maintains records of proxies voted. Wellington Management complements the research received by its primary voting agent with research from another voting agent.
Receipt of Proxy
If a client requests that Wellington Management votes proxies on its behalf, the client must instruct its custodian bank to deliver all relevant voting material to Wellington Management or its voting agent.
Reconciliation
Each public security proxy received by electronic means is matched to the securities eligible to be voted and a reminder is sent to any custodian or trustee that has not forwarded the proxies as due. This reconciliation is performed at the ballot level. Although proxies received for private securities, as well as those received in non- electronic format, are voted as received, Wellington Management is not able to reconcile these ballots, nor does it notify custodians of non-receipt.
Research
In addition to proprietary investment research undertaken by Wellington Management investment professionals, Investment Research conducts proxy research internally, and uses the resources of a number of external sources including third-party voting agents to keep abreast of developments in corporate governance and of current practices of specific companies.
Proxy Voting
Following the reconciliation process, each proxy is compared against the Guidelines, and handled as follows:
◾ Generally, issues for which explicit proxy voting guidance is provided in the Guidelines (i.e., “For”, “Against”, “Abstain”) are voted in accordance with the Guidelines.
◾ Issues identified as “case-by-case” in the Guidelines are further reviewed by Investment Research. In certain circumstances, further input is needed, so the issues are forwarded to the relevant research analyst and/or portfolio manager(s) for their input.
◾ Absent a material conflict of interest, the portfolio manager has the authority to decide the final vote. Different portfolio managers holding the same securities may arrive at different voting conclusions for their clients' proxies.
Wellington Management reviews a subset of the voting record to ensure that proxies are voted in accordance with these Global Proxy Policy and Procedures and the Guidelines; and ensures that documentation and reports, for clients and for internal purposes, relating to the voting of proxies are promptly and properly prepared and disseminated.
Material Conflict of Interest Identification and Resolution Processes
Wellington Management’s broadly diversified client base and functional lines of responsibility serve to minimize the number of, but not prevent, material conflicts of interest it faces in voting proxies. Annually, the Investment Stewardship Committee sets standards for identifying material conflicts based on client, vendor, and lender relationships, and publishes those standards to individuals involved in the proxy voting process. In addition, the Investment Stewardship Committee encourages all personnel to contact Investment Research about apparent conflicts of interest, even if the apparent conflict does not meet the published materiality criteria. Apparent conflicts are reviewed by designated members of the Investment Stewardship Committee to determine if there is a conflict and if so whether the conflict is material.
If a proxy is identified as presenting a material conflict of interest, the matter must be reviewed by designated members of the Investment Stewardship Committee, who will resolve the conflict and direct the vote. In certain circumstances, the designated members may determine that the full Investment Stewardship Committee should convene.
Other Considerations
In certain instances, Wellington Management may be unable to vote or may determine not to vote a proxy on behalf of one or more clients. While not exhaustive, the following are potential instances in which a proxy vote might not be entered.
Securities Lending
In general, Wellington Management does not know when securities have been lent out pursuant to a client’s securities lending program and are therefore unavailable to be voted. Efforts to recall loaned securities are not always effective, but, in rare circumstances, Wellington Management may determine voting would outweigh the benefit to the client resulting from use of securities for lending and recommend that a client attempt to have its custodian recall the security to permit voting of related proxies.
Share Blocking and Re-registration
Certain countries impose trading restrictions or requirements regarding re-registration of securities held in omnibus accounts in order for shareholders to vote a proxy. The potential impact of such requirements is evaluated when determining whether to vote such proxies.
Lack of Adequate Information, Untimely Receipt of Proxy Materials, or Excessive Costs
Wellington Management may abstain from voting a proxy when the proxy statement or other available information is inadequate to allow for an informed vote, when the proxy materials are not delivered in a timely fashion or when, in Wellington Management's judgment, the costs exceed the expected benefits to clients (such as when powers of attorney or consularization are required).
Additional Information
Wellington Management maintains records related to proxies pursuant to Rule 204-2 of the Investment Advisers Act of 1940 (the “Advisers Act”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and other applicable laws. In addition, Wellington Management discloses annually how it has exercised its voting rights for significant votes, as required by the EU Shareholder Rights Directive II (“SRD II”).
Wellington Management provides clients with a copy of its Global Proxy Policy and Procedures, including the Guidelines, upon written request. In addition, Wellington Management will provide specific client information relating to proxy voting to a client upon written request.
PART C
VANGUARD WELLESLEY INCOME FUND
OTHER INFORMATION
Item 28. Exhibits
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Amendment No. 63 dated January 28, 2009, is hereby incorporated by reference. |
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hereby incorporated by reference. |
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Instruments Defining Rights of Security Holders, reference is made to Articles III and V of the Registrant’s
Amended and Restated Agreement and Declaration of Trust, refer to Exhibit (a) above. |
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No. 74 dated January 26, 2015, is hereby incorporated by reference. |
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Underwriting Contracts, not applicable. |
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Bonus or Profit Sharing Contracts, reference is made to the section entitled “Management of the Funds” in Part B
of this Registration Statement. |
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Amendment No. 88 dated January 31, 2021, is hereby incorporated by reference. |
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Legal Opinion, not applicable. |
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Omitted Financial Statements, not applicable. |
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Initial Capital Agreements, not applicable. |
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Rule 12b-1 Plan, not applicable. |
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Item 29. Persons Controlled by or under Common Control with Registrant
None.
Item 30. Indemnification
The Registrant’s organizational documents contain provisions indemnifying Trustees and officers against liability incurred in their official capacities. Article VII, Section 2 of the Amended and Restated Agreement and Declaration of Trust provides that the Registrant may indemnify and hold harmless each and every Trustee and officer from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to the performance of his or her duties as a Trustee or officer. Article VI of the By-Laws generally provides that the Registrant shall indemnify its Trustees and officers from any liability arising out of their past or present service in that capacity. Among other things, this provision excludes any liability arising by reason of willful misfeasance, bad faith, gross negligence, or the reckless disregard of the duties involved in the conduct of the Trustee’s or officer’s office with the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the Securities Act) may be permitted for directors, officers, or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Item 31. Business and Other Connections of Investment Advisers
Wellington Management Company LLP (Wellington Management) is an investment adviser registered under the Advisers Act. The list required by this Item 31 of officers and partners of Wellington Management, together with any information as to any business, profession, vocation, or employment of a substantial nature engaged in by such officers and partners during the past two years, is incorporated herein by reference from Form ADV filed by Wellington Management pursuant to the Advisers Act (SEC File No. 801-15908).
Item 32. Principal Underwriters
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Vanguard Marketing Corporation, a wholly owned subsidiary of The Vanguard Group, Inc., is the principal underwriter
of each fund within the Vanguard group of investment companies, a family of over 200 funds. |
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The principal business address of each named director and officer of Vanguard Marketing Corporation is 100
Vanguard Boulevard, Malvern, PA 19355. |
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Positions and Office with Underwriter |
Positions and Office with Funds |
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Vice President and Chief Executive Officer
Designee |
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General Counsel and Vice President |
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Vice President and Assistant Secretary |
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Chief Executive Officer and President |
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Anti-Money Laundering Officer |
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Chief Information Officer |
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Chief Information Security Officer |
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Principal Financial Officer and Treasurer |
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Principal Operations Officer |
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Annuity and Insurance Officer |
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Annuity and Insurance Officer |
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Positions and Office with Underwriter |
Positions and Office with Funds |
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Item 33. Location of Accounts and Records
The books, accounts, and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder will be maintained at the offices of the Registrant, 100 Vanguard Boulevard, Malvern, Pennsylvania 19355; the Registrant’s Transfer Agent, The Vanguard Group, Inc., 100 Vanguard Boulevard, Malvern, Pennsylvania 19355; the Registrant’s Custodian, JPMorgan Chase Bank, 383 Madison Avenue, New York, NY 10179; and the Registrant’s investment advisor at its location identified in this Registration Statement.
Item 34. Management Services
Other than as set forth in the section entitled “Management of the Funds” in Part B of this Registration Statement, the Registrant is not a party to any management-related service contract.
Item 35. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant hereby certifies that it meets all requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Valley Forge and the Commonwealth of Pennsylvania, on the 30th day of January, 2023.
VANGUARD WELLESLEY INCOME FUND
BY:
/s/ Mortimer J. Buckley*
Mortimer J. Buckley
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
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/s/ Mortimer J. Buckley*
Mortimer J. Buckley |
Chairman and Chief Executive Officer |
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/s/ Tara Bunch*
Tara Bunch |
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/s/ Emerson U. Fullwood*
Emerson U. Fullwood |
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/s/ F. Joseph Loughrey*
F. Joseph Loughrey |
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/s/ Mark Loughridge*
Mark Loughridge |
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/s/ Scott C. Malpass*
Scott C. Malpass |
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/s/ Deanna Mulligan*
Deanna Mulligan |
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/s/ André F. Perold*
André F. Perold |
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/s/ Sarah Bloom Raskin*
Sarah Bloom Raskin |
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/s/ David Thomas*
David Thomas |
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/s/ Peter F. Volanakis*
Peter F. Volanakis |
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/s/ Christine Buchanan*
Christine Buchanan |
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*By: /s/ Anne E. Robinson
Anne E. Robinson, pursuant to a Power of Attorney filed on October 11, 2022 (see File Number 333-11763), Incorporated by Reference.
AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
This Amended and Restated Agreement, dated August 14, 2017, is between JPMorgan Chase Bank, N.A. ("Bank"), a national banking association with a place of business at 383 Madison Avenue, New York, NY 10179; and each of the open-end management investment companies listed on Exhibit 1 of this Agreement, registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"), organized as Delaware statutory trusts (each a "Trust"), severally and for and on behalf of certain of their respective portfolios listed on Exhibit 1 (each a "Fund"), each Trust and their respective Funds with a place of business at P.O. Box 2600 Valley Forge, PA 19482. Each Trust for which Bank serves as custodian under this Agreement, shall individually be referred to as "Customer."
1.INTENTION OF THE PARTIES; DEFINITIONS
1.1INTENTION OF THE PARTIES.
(a)This Agreement sets out the terms governing custodial, settlement and certain other associated services offered by Bank to Customer. Bank shall be responsible for the performance of only those duties that are set forth in this Agreement or expressly contained in Instructions that are consistent with the provisions of this Agreement and with Bank's operations and procedures. Customer acknowledges that Bank is not providing any legal, tax or investment advice in providing the services hereunder.
(b)Investing in foreign markets may be a risky enterprise. The holding of Global Assets and cash in foreign jurisdictions may involve risks of loss or other special features. Bank shall not be liable for any loss that results from the general risks of investing or Country Risk.
1.2DEFINITIONS.
(a)As used herein, the following terms have the meaning hereinafter stated.
"ACCOUNT" has the meaning set forth in Section 2.1 of this Agreement.
"AFFILIATE" means an entity controlling, controlled by, or under common control with, Bank.
"AFFILIATED SUBCUSTODIAN" means a Subcustodian that is an Affiliate.
"APPLICABLE LAW" means any statute, whether national, state or local, applicable in the United States or any other country, the rules of the treaty establishing the European Community, other applicable treaties, any other law, rule, regulation or interpretation of any governmental entity, any applicable common law, and any decree, injunction, judgment, order, ruling, or writ of any governmental entity.
"AUTHORIZED PERSON" means any person (including an investment manager or other agent) who has been designated by written notice from Customer or its designated agent to act on behalf of Customer hereunder. Such persons shall continue to be Authorized Persons until such time as Bank receives Instructions from Customer or its designated agent that any such person is no longer an Authorized Person.
"BANK INDEMNITEES" means Bank, its Subcustodians, and their respective nominees, directors, officers and employees.
"BANK'S LONDON BRANCH" means the London branch office of Bank.
"CASH ACCOUNT" has the meaning set forth in Section 2.1(a)(ii).
"CORPORATE ACTION" means any subscription right, bonus issue, stock repurchase plan, redemption, exchange, calls, redemptions, tender offer, recapitalization, reorganization, conversions, consolidation, subdivision, takeover offer or similar matter with respect to a Financial Asset in the Securities Account that requires discretionary action by the holder, but does not include proxy voting.
"COUNTRY RISK" means the risk of investing or holding assets in a particular country or market, including, but not limited to, risks arising from: nationalization, expropriation or other governmental actions; the country's financial infrastructure, including prevailing custody and settlement practices; laws applicable to the safekeeping and recovery of Financial Assets and cash held in custody; the regulation of the banking and securities industries, including changes in market rules; currency restrictions, devaluations or fluctuations; and market conditions affecting the orderly execution of securities transactions or the value of assets.
"CUSTOMER" means individually each Trust and their respective Funds as listed on Exhibit 1 hereto.
"ENTITLEMENT HOLDER" means the person named on the records of a Securities Intermediary as the person having a Securities Entitlement against the Securities Intermediary.
"FINANCIAL ASSET" means, as the context requires, either the asset itself or the means by which a person's claim to it is evidenced, including a Security, a security certificate, or a Securities Entitlement. "Financial Asset" includes any Global Assets but does not include cash.
"FUND" means each portfolio of each Trust and listed on Exhibit 1 hereto.
"GLOBAL ASSET" means any "Financial Asset" (a) for which the principal trading market is located outside of the United States; (b) for which presentment for payment is to be made outside of the United States; or (c) which is acquired outside of the United States.
"INSTRUCTIONS" has the meaning set forth in Section 3.1 of this Agreement.
"LIABILITIES" means any liabilities, losses, claims, costs, damages, penalties, fines, obligations, or expenses of any kind whatsoever (including, without limitation, reasonable attorneys', accountants', consultants' or experts' fees and disbursements).
"SECURITIES" means stocks, bonds, rights, warrants and other negotiable and non-negotiable instruments, whether issued in certificated or uncertificated form, that are commonly traded or dealt in on securities exchanges or financial markets. "Securities" also means other obligations of an issuer, or shares, participations and interests in an issuer recognized in the country in which it is issued or dealt in as a medium for investment and any other property as may be acceptable to Bank for the Securities Account.
"SECURITIES ACCOUNT" means each Securities custody account on Bank's records to which Financial Assets are or may be credited pursuant hereto.
"SECURITIES DEPOSITORY" has the meaning set forth in Section 5.1 of this Agreement.
"SECURITIES ENTITLEMENT" means the rights and property interest of an Entitlement Holder with respect to a Financial Asset as set forth in Part 5 of Article 8 of the Uniform Commercial Code of the State of New York, as the same may be amended from time to time.
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"SECURITIES INTERMEDIARY" means Bank, a Subcustodian, a Securities Depository, and any other financial institution which in the ordinary course of business maintains custody accounts for others and acts in that capacity.
"SUBCUSTODIAN" has the meaning set forth in Section 5.1 and includes Affiliated Subcustodians.
"TRUST" means each open-end investment company organized as a Delaware business trust and listed on Exhibit 1 hereto.
(b)All terms in the singular shall have the same meaning in the plural unless the context otherwise provides and vice versa.
2.WHAT BANK IS REQUIRED TO DO
2.1Set Up Accounts.
(a)Bank shall establish and maintain the following accounts ("Accounts"):
(i)a Securities Account in the name of Customer on behalf of each Fund for Financial Assets, which may be received by Bank or its Subcustodian for the account of Customer, including as an Entitlement Holder; and
(ii)an account in the name of Customer ("Cash Account") for any and all cash in any currency received by Bank or its Subcustodian for the account of Customer.
Notwithstanding paragraph (ii), cash held in respect of those markets where Customer is required to have a cash account in its own name held directly with the relevant Subcustodian shall be held in that manner and shall not be part of the Cash Account. Bank shall notify Customer prior to the establishment of such an account.
(b)At the request of Customer, additional Accounts may be opened in the future, which shall be subject to the terms of this Agreement.
(c)Except as precluded by Section 8-501(d) of the Uniform Commercial Code ("UCC"), Bank shall hold all Securities and other Financial Assets, other than cash, of a Fund that are delivered to it in a "securities account" with Bank for and in the name of such Fund and shall treat all such assets other than cash as "financial assets" as those terms are used in the UCC.
2.2Cash Account.
Except as otherwise provided in Instructions acceptable to Bank, all cash held in the Cash Account shall be deposited during the period it is credited to the Account in one or more deposit accounts at Bank or at Bank's London Branch. Any cash so deposited with Bank's London Branch shall be payable exclusively by Bank's London Branch in the applicable currency, subject to compliance with any Applicable Law, including, without limitation, any restrictions on transactions in the applicable currency imposed by the country of the applicable currency.
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2.3Segregation of Assets; Nominee Name.
(a)Bank shall identify in its records that Financial Assets credited to Customer's Securities Account belong to Customer on behalf of the relevant Fund (except as otherwise may be agreed by Bank and Customer).
(b)To the extent permitted by Applicable Law or market practice, Bank shall require each Subcustodian to identify in its own records that Financial Assets credited to Customer's Securities Account belong to customers of Bank, such that it is readily apparent that the Financial Assets do not belong to Bank or the Subcustodian.
(c)Bank is authorized, in its discretion, to hold in bearer form, such Financial Assets as are customarily held in bearer form or are delivered to Bank or its Subcustodian in bearer form; and to register in the name of the Customer, Bank, a Subcustodian, a Securities Depository, or their respective nominees, such Financial Assets as are customarily held in registered form. Customer authorizes Bank or its Subcustodian to hold Financial Assets in omnibus accounts and shall accept delivery of Financial Assets of the same class and denomination as those deposited with Bank or its Subcustodian.
(d)Upon receipt of Instruction, Bank shall establish and maintain a segregated account or accounts for and on behalf of each Fund for purposes of segregating cash, government securities, and other assets in connection with derivative transactions entered into by a Fund or options purchased, sold or written by the Fund.
2.4Settlement of Trades.
When Bank receives an Instruction directing settlement of a trade in Financial Assets that includes all information required by Bank, Bank shall use reasonable care to effect such settlement as instructed. Settlement of purchases and sales of Financial Assets shall be conducted in accordance with prevailing standards of the market in which the transaction occurs. The risk of loss shall be Customer's whenever Bank delivers Financial Assets or payment in accordance with applicable market practice in advance of receipt or settlement of the expected consideration. In the case of the failure of Customer's counterparty to deliver the expected consideration as agreed, Bank shall contact the counterparty to seek settlement and, if the settlement is not received, notify Customer, but Bank shall not be obligated to institute legal proceedings, file proof of claim in any insolvency proceeding, or take any similar action.
2.5Contractual Settlement Date Accounting.
(a)Bank shall effect book entries on a "contractual settlement date accounting" basis as described below with respect to the settlement of trades in those markets where Bank generally offers contractual settlement day accounting and shall notify Customer of these markets from time to time.
(i)Sales: On the settlement date for a sale, Bank shall credit the Cash Account with the sale proceeds of the sale and transfer the relevant Financial Assets to an account pending settlement of the trade if not already delivered.
(ii)Purchases: On the settlement date for the purchase (or earlier, if market practice requires delivery of the purchase price before the settlement date), Bank shall debit the Cash Account with the settlement monies and credit a separate account. Bank then shall post the Securities Account as awaiting receipt of the expected Financial Assets. Customer shall not be entitled to the delivery of Financial Assets that are awaiting receipt until Bank or a Subcustodian actually receives them.
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Bank reserves the right to restrict in good faith the availability of contractual day settlement accounting for credit reasons. Bank, whenever reasonably possible, will notify Customer prior to imposing such restrictions.
(b)Bank may (in its discretion) upon at least 48 hours prior oral or written notification to Customer, reverse any debit or credit made pursuant to Section 2.5(a) prior to a transaction's actual settlement, and Customer shall be responsible for any costs or liabilities resulting from such reversal. Customer acknowledges that the procedures described in this sub-section are of an administrative nature, and Bank does not undertake to make loans and/or Financial Assets available to Customer.
2.6Actual Settlement Date Accounting.
With respect to any sale or purchase transaction that is not posted to the Account on the contractual settlement date as referred to in Section 2.5, Bank shall post the transaction on the date on which the cash or Financial Assets received as consideration for the transaction is actually received by Bank.
2.7Income Collection; Autocredit.
(a)Bank shall credit the Cash Account with income and redemption proceeds on Financial Assets in accordance with the times notified by Bank from time to time on or after the anticipated payment date, net of any taxes that are withheld by Bank or any third party. Where no time is specified for a particular market, income and redemption proceeds from Financial Assets shall be credited only after actual receipt and reconciliation. Bank may reverse such credits upon at least 48 hours prior oral or written notification to Customer when Bank believes that the corresponding payment shall not be received by Bank within a reasonable period or such credit was incorrect.
(b)Bank shall make reasonable endeavors in its discretion to contact appropriate parties to collect unpaid interest, dividends or redemption proceeds, but neither Bank nor its Subcustodians shall be obliged to file any formal notice of default, institute legal proceedings, file proof of claim in any insolvency proceeding, or take any similar action.
2.8Fractions / Redemptions by Lot.
In the event that, as a result of holding Financial Assets in an omnibus account, the Customer receives fractional interests in Financial Assets arising out of a corporate action or class action litigation, Bank will credit the Customer with the amount of cash the Customer would have received, as reasonably determined by Bank, had the Financial Assets not been held in an omnibus account, and the Customer shall relinquish to Bank its interest in such fractional interests. If some, but not all, of an outstanding class of Financial Asset is called for redemption, Bank may allot the amount redeemed among the respective beneficial holders of such class of Financial Asset in any manner Bank reasonably deems to be fair and equitable. Bank will promptly notify Customer of any action taken pursuant to this section.
2.9Presentation of Coupons; Certain Other Ministerial Acts. Until Bank receives Instructions to the contrary, Bank shall:
(a)present all Financial Assets for which Bank has received notice of a call for redemption or that have otherwise matured, and all income and interest coupons and other income items that call for payment upon presentation;
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(b)execute in the name of Customer such certificates as may be required to obtain payment in respect of Financial Assets; and
(c)exchange interim or temporary documents of title held in the Securities Account for definitive documents of title.
2.10Corporate Actions; Class Action Litigation.
(a)Bank will follow Corporate Actions through receipt of notices from issuers, from Subcustodians, Securities Depositories and notices published in industry publications and reported in reporting services. Bank will promptly notify Customer of any Corporate Action of which information is either (i) received by it or by a Subcustodian to the extent that Bank's central corporate actions department has actual knowledge of the Corporate Action in time to notify its customers in a timely manner; or (ii) published via a formal notice in publications and reporting services routinely used by Bank for this purpose in time for Bank to notify its customers in a timely manner. Any notices received by Bank's corporate actions department about U.S. settled securities class action litigation that requires action by affected owners of the underlying Financial Assets will be promptly provided to Customer if Bank, using reasonable care and diligence in the circumstances, identifies that Customer was a shareholder and held the relevant Financial Assets in custody with Bank at the relevant time. Bank will not make filings in the name of Customer in respect to such notifications except as otherwise agreed in writing between Customer and Bank.
(b)If an Authorized Person fails to provide Bank with timely Instructions with respect to any Corporate Action or class action, neither Bank nor its Subcustodians or their respective nominees will take any action in relation to that Corporate Action or class action, except as otherwise agreed in writing by Bank and Customer or as may be set forth by Bank as a default action in the notification it provides under Section 2.10(a) with respect to that Corporate Action or class action. If Customer provides Bank with Instructions with respect to any Corporate Action after the deadline set by Bank but before the deadline set by a Securities Depository, Bank shall use commercially reasonable efforts to act on such Instructions. If Bank fails to act on Instructions provided by Customer prior to the deadline set by Bank with respect to any Corporate Action, Bank will be liable for direct losses incurred by Customer.
2.11Proxy Voting.
(a)Bank shall provide Customer or its agent with details of Securities in the Account on a daily basis ("Daily Holdings Data"), and Bank or its agent shall act in accordance with Instructions from an Authorized Person in relation to matters Customer or its agent determine in their absolute discretion are to be voted upon at meetings of holders of Financial Assets, based upon such Daily Holdings Data ("the proxy voting service"). Neither Bank nor its agent shall be under any duty to provide Customer or its agent with information which it or they receive on matters to be voted upon at meetings of holders of Financial Assets.
(b)Bank or its agent shall act upon Instructions to vote, provided Instructions are received by Bank or its agent at its proxy voting department by the relevant deadline for such Instructions as determined by Bank or its agent. If Instructions are not received in a timely manner, neither Bank nor its agent shall be obligated to provide further notice to Customer.
(c)In markets where the proxy voting service is not available or where Bank has not received a duly completed enrollment form or other relevant documentation, Bank or its agent shall endeavor to act upon Instructions to vote on matters before meetings of holders of Financial Assets where it is reasonably
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practicable for Bank or its agent (or its Subcustodians or nominees as the case may be) to do so and where such Instructions are received in time for Bank or its agent to take timely action.
(d)Customer acknowledges that the provision of the proxy voting service may be precluded or restricted under a variety of circumstances. These circumstances include, but are not limited to: (i) the Financial Assets being on loan or out for registration, (ii) the pendency of conversion or another corporate action, or (iii) Financial Assets being held at Customer's request in a name not subject to the control of Bank or its Subcustodian, in a margin or collateral account at Bank or another bank or broker, or otherwise in a manner which affects voting, local market regulations or practices, or restrictions by the issuer. Additionally, in some markets, Bank may be required to vote all shares held for a particular issue for all of Bank's customers in the same way. Bank or its agent shall inform Customer or its agent where this is the case.
(e)Notwithstanding the fact that Bank may act in a fiduciary capacity with respect to Customer under other agreements or otherwise hereunder, in performing the proxy voting service Bank shall be acting solely as the agent of Customer, and shall not exercise any discretion with regard to such proxy voting service or vote any proxy except when directed by an Authorized Person.
2.12Statements and Information Available On-Line.
(a)Bank will send, or make available on-line, to Customer, at times mutually agreed, a statement of account in Bank's standard format for each Account maintained by Customer with Bank, identifying the Financial Assets and cash held in each Account. Bank also will provide to Customer, upon request, the capability to reformat the information contained in each statement of account. In addition, Bank will send, or make available on-line, to Customer an advice or notification of any transfers of cash or Financial Assets with respect to each Account. Bank will not be liable with respect to any matter set forth in those portions of any such statement of account or advice (or reasonably implied therefrom) to which Customer has not given Bank a written exception or objection within ninety days of receipt of such statement, provided such matter is not the result of Bank's willful misconduct or bad faith.
(b)Prices and other information obtained from third parties which may be contained in any statement sent to Customer have been obtained from sources Bank believes to be reliable. Bank does not, however, make any representation as to the accuracy of such information or that the prices specified necessarily reflect the proceeds that would be received on a disposal of the relevant Financial Assets.
(c)Customer understands that records and reports, other than statements of account, that are available to it on-line on a real-time basis may not be accurate due to mis-postings, delays in updating Account records, and other causes. Bank will not be liable for any loss or damage arising out of the inaccuracy of any such records or reports that are accessed on-line on a real-time basis.
2.13Access to Bank's Records.
(a)Bank shall create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of Customer under the 1940 Act, with particular attention to Section 31 thereof and rules 31a-1 and 31a-2 thereunder. All such records shall be property of Customer. Bank will allow Customer's duly authorized officers, employees, and agents, including Customer's independent public accountants, and the employees and agents of the SEC access at all times during the regular business hours of Bank to such records. Except, in the case of access by the SEC as otherwise required by the SEC, such access will be subject to reasonable notice to Bank. Subject to restrictions under Applicable Law, Bank also will obtain an undertaking to permit Customer's independent
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public accountants reasonable access to the records of any Subcustodian of Securities held in the Securities Account as may be required in connection with such examination.
(b)In addition, Bank shall cooperate with and supply necessary information to any entity or entities appointed by the Customer to keep its books of account and/or compute its net asset value. Bank shall provide reports and other data as Customer may from time to time reasonably request to enable Customer to obtain, from year to year, favorable opinions from Customer's independent accountants with respect to Bank's activities hereunder in connection with (i) the preparation of any registration statement of Customer and any other reports required by a governmental agency or regulatory authority with jurisdiction over the Fund, and (ii) the fulfillment by Customer of any other requirements of a governmental agency or regulatory authority with jurisdiction over the Fund.
(c)Upon reasonable request of Customer, Bank shall provide Customer with a copy of Bank's Service Organizational Control (SOC) 1 reports (or any successor reports) prepared in accordance with the requirements of AT-C section 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting (or any successor attestation standard). In addition, from time to time as requested, Bank will furnish Customer a "gap" or "bridge" letter that will address any material changes that might have occurred in Customer's controls covered in the SOC Report from the end of the SOC Report period through a specified requested date. Bank shall use commercially reasonable efforts to provide Customer with such reports as Customer may reasonably request or otherwise reasonably require to fulfill its duties under Rule 38a-l of the 1940 Act or similar legal and regulatory requirements. Upon reasonable request by Customer, Bank shall also provide to Customer customary sub- certifications in connection with Sarbanes-Oxley Act of 2002 certification requirements. Upon written request, Bank shall provide Customer with information about Bank's processes for the management and monitoring of Subcustodians for safeguarding Financial Assets.
2.14Maintenance of Financial Assets at Bank and at Subcustodian Locations.
(a)Unless Instructions require another location acceptable to Bank, Global Assets shall be held in the country or jurisdiction in which their principal trading market is located, where such Global Assets may be presented for payment, where such Financial Assets were acquired, or where such Financial Assets are held. Bank reserves the right to refuse to accept delivery of Global Assets or cash in countries and jurisdictions other than those referred to in Schedule 1 to this Agreement, as in effect from time to time.
(b)Bank shall not be obliged to follow an Instruction to hold Financial Assets with, or have them registered or recorded in the name of, any person not chosen by Bank. However, if Customer does instruct Bank to hold Securities with or register or record Securities in the name of a person not chosen by Bank, the consequences of doing so are at Customer's own risk and Bank shall not be liable therefor.
2.15Tax Reclaims.
Bank shall provide tax reclamation services as provided in Section 8.2.
2.16Foreign Exchange Transactions.
To facilitate the administration of Customer's trading and investment activity, Bank may, but shall not be obliged to, enter into spot or forward foreign exchange contracts with Customer, or an Authorized Person, and may also provide foreign exchange contracts and facilities through its Affiliates or Subcustodians. Instructions, including standing instructions, may be issued with respect to such contracts, but Bank may establish rules or limitations concerning any foreign exchange facility made available. In all cases where Bank, its Affiliates or Subcustodians enter into a master foreign exchange contract that covers foreign
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exchange transactions for the Accounts, the terms and conditions of that foreign exchange contract and, to the extent not inconsistent, this Agreement, shall apply to such transactions.
2.17Compliance with Securities and Exchange Commission ("SEC") rule 17f-5 ("rule 17f-5").
(a)Customer's board of directors (or equivalent body) (hereinafter 'Board') hereby delegates to Bank, and, except as to the country or countries as to which Bank may, from time to time, advise Customer that it does not accept such delegation, Bank hereby accepts the delegation to it, of the obligation to perform as Customer's 'Foreign Custody Manager' (as that term is defined in rule 17f-5(a)(3) as promulgated under the 1940 Act), including for the purposes of: (i) selecting Eligible Foreign Custodians (as that term is defined in rule 17f-5(a)(1), and as the same may be amended from time to time, or that have otherwise been exempted pursuant to an SEC exemptive order) to hold foreign Financial Assets and cash, (ii) evaluating the contractual arrangements with such Eligible Foreign Custodians (as set forth in rule 17f- 5(c)(2)), and (iii) monitoring such foreign custody arrangements (as set forth in rule 17f-5(c)(3)).
(b)In connection with the foregoing, Bank shall:
(i)provide written reports notifying Customer's Board of the placement of Financial Assets and cash with particular Eligible Foreign Custodians and of any material change in the arrangements with such Eligible Foreign Custodians, with such reports to be provided to Customer's Board at such times as the Board deems reasonable and appropriate based on the circumstances of Customer's foreign custody arrangements (and until further notice from Customer such reports shall be provided not less than quarterly with respect to the placement of Financial Assets and cash with particular Eligible Foreign Custodians and with reasonable promptness upon the occurrence of any material change in the arrangements with such Eligible Foreign Custodians);
(ii)exercise such reasonable care, prudence and diligence in performing as Customer's Foreign Custody Manager as a person having responsibility for the safekeeping of foreign Financial Assets and cash would exercise;
(iii)in selecting an Eligible Foreign Custodian, first have determined that foreign Financial Assets and cash placed and maintained in the safekeeping of such Eligible Foreign Custodian shall be subject to reasonable care, based on the standards applicable to custodians in the relevant market, after having considered all factors relevant to the safekeeping of such foreign Financial Assets and cash, including, without limitation, those factors set forth in rule 17f- 5(c)(1)(i)-(iv);
(iv)determine that the written contract with an Eligible Foreign Custodian requires that the Eligible Foreign Custodian shall provide reasonable care for foreign Financial Assets and cash based on the standards applicable to custodians in the relevant market, including, without limitation, those factors set forth in rule 17f-5(c)(2).
(v)have established a system to monitor the continued appropriateness of maintaining foreign Financial Assets and cash with particular Eligible Foreign Custodians and of the governing contractual arrangements; it being understood, however, that in the event that Bank shall have determined that the existing Eligible Foreign Custodian in a given country would no longer afford foreign Financial Assets and cash reasonable care and that no other Eligible Foreign Custodian in that country would afford reasonable care, Bank shall promptly so advise Customer and shall then act in accordance with the Instructions of Customer with respect to the disposition of the affected foreign Financial Assets and cash.
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(c)Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain foreign Financial Assets and cash on behalf of Customer with Eligible Foreign Custodians pursuant to a written contract deemed appropriate by Bank. Each such contract shall, except as set forth in the last paragraph of this subsection (c), include provisions that provide:
(i)For indemnification or insurance arrangements (or any combination of the foregoing) that will adequately protect Customer against the risk of loss of Financial Assets and cash held in accordance with such contract;
(ii)That Customer's Financial Assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the Eligible Foreign Custodian or its creditors, except a claim of payment for their safe custody or administration or, in the case of cash, liens or rights in favor of creditors of such Eligible Foreign Custodian arising under bankruptcy, insolvency or similar laws;
(iii)That beneficial ownership of Customer's Assets will be freely transferable without the payment of money or value other than for safe custody or administration;
(iv)That adequate records will be maintained identifying Customer's Assets as belonging to Customer or as being held by a third party for the benefit of Customer;
(v)That Customer's independent public accountants will be given access to those records described in (iv) above or confirmation of the contents of those records; and
(vi)That Customer will receive sufficient and timely periodic reports with respect to the safekeeping of Customer's Assets, including, but not limited to, notification of any transfer to or from Customer's account or a third party account containing Assets held for the benefit of Customer.
Such contract may contain, in lieu of any or all of the provisions specified in this subsection (c), such other provisions that Bank determines will provide, in their entirety, the same or a greater level of care and protection for Customer's Assets as the specified provisions, in their entirety.
(d)Except as expressly provided herein, Customer shall be solely responsible to assure that the maintenance of foreign Financial Assets and cash hereunder complies with the rules, regulations, interpretations and exemptive orders as promulgated by or under the authority of the SEC.
(e)Bank represents to Customer that it is a U.S. Bank as defined in rule 17f-5(a)(7). Customer represents to Bank that: (1) the foreign Financial Assets and cash being placed and maintained in Bank's custody are subject to the 1940 Act, as the same may be amended from time to time; (2) its Board has determined that it is reasonable to rely on Bank to perform as Customer's Foreign Custody Manager; and
(3)its Board or its investment adviser shall have determined that Customer may maintain foreign Financial Assets and cash in each country in which Customer's Financial Assets and cash shall be held hereunder and determined to accept Country Risk. Nothing contained herein shall require Bank to make any selection or to engage in any monitoring on behalf of Customer that would entail consideration of Country Risk.
(f)Bank shall provide to Customer such information relating to Country Risk as is specified in Appendix 1 hereto. Customer hereby acknowledges that: (i) such information is solely designed to inform Customer of market conditions and procedures and is not intended as a recommendation to invest or not invest in particular markets; and (ii) Bank has gathered the information from sources it considers reliable,
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but that Bank shall have no responsibility for inaccuracies or incomplete information, provided that Bank transmits the information using reasonable care.
2.18Compliance with SEC rule 17f-7 ("rule 17f-7").
(a)Bank shall, for consideration by Customer, provide an analysis of the custody risks associated with maintaining Customer's foreign Financial Assets with each Eligible Securities Depository used by Bank as of the date hereof (or, in the case of an Eligible Securities Depository not used by Bank as of the date hereof, prior to the initial placement of Customer's foreign Financial Assets at such Depository) and at which any foreign Financial Assets of Customer are held or are expected to be held. The foregoing analysis will be provided to Customer at Bank's Website. In connection with the foregoing, Customer shall notify Bank of any Eligible Securities Depositories at which it does not choose to have its foreign Financial Assets held. Bank shall monitor the custody risks associated with maintaining Customer's Financial Assets at each such Eligible Securities Depository on a continuing basis and shall promptly notify Customer or its investment adviser of any material changes in such risks.
(b)Bank shall exercise reasonable care, prudence and diligence in performing the requirements set forth in Section 2.18(a) above.
(c)Based on the information available to it in the exercise of diligence, Bank shall determine the eligibility under rule 17f-7 of each depository before including it on Schedule 3 hereto and shall promptly advise Customer if any Eligible Securities Depository ceases to be eligible. (Eligible Securities Depositories used by Bank as of the date hereof are set forth in Schedule 3 hereto, and as the same may be amended on notice to Customer from time to time.)
2.19Service Level Agreement.
Subject to the terms and conditions of this Agreement, Bank agrees to perform the custody services provided for under this Agreement in a manner that meets or exceeds any service levels as may be agreed upon by the parties from time to time in a written document that is executed by both parties on or after the date of this Agreement, unless that written document specifically states that it is not contractually binding. For the avoidance of doubt, Bank's Service Directory shall not be deemed to be such a written document.
3.INSTRUCTIONS
3.1Acting on Instructions; Unclear Instructions.
(a)Bank is authorized to act under this Agreement (or to refrain from taking action) in accordance with the instructions received by Bank, via telephone, telex, facsimile transmission, or other teleprocess or electronic instruction or trade information system acceptable to Bank ("Instructions"). Bank shall have no responsibility for the authenticity or propriety of any Instructions that Bank believes in good faith to have been given by Authorized Persons or which are transmitted with proper testing or authentication pursuant to terms and conditions that Bank may specify. Customer authorizes Bank to accept and act upon any Instructions received by it without inquiry. Customer shall indemnify the Bank Indemnitees against, and hold each of them harmless from, any Liabilities that may be imposed on, incurred by, or asserted against the Bank Indemnitees as a result of any action or omission taken in accordance with any Instructions or other directions upon which Bank is authorized to rely under the terms of this Agreement, provided that Bank shall not be indemnified against or held harmless from any Liabilities arising out of Bank's negligence, bad faith, fraud, or willful misconduct.
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(b)Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded.
(c)Bank may (in its sole discretion and without affecting any part of this Section 3.1) seek clarification or confirmation of an Instruction from an Authorized Person and may decline to act upon an Instruction if it does not receive clarification or confirmation satisfactory to it. Bank shall not, except as provided in Section 7.1 hereof, be liable for any loss arising from any delay while it seeks such clarification or confirmation.
(d)In executing or paying a payment order Bank may rely upon the identifying number (e.g. Fedwire routing number or account) of any party as instructed in the payment order. Customer assumes full responsibility for any inconsistency within an Instruction between the name and identifying number of any party in payment orders issued to Bank in Customer's name.
3.2Security Devices.
Either party may record any of their telephonic communications. Customer shall comply with any security procedures reasonably required by Bank from time to time with respect to verification of Instructions. Customer shall be responsible for safeguarding any test keys, identification codes or other security devices that Bank shall make available to Customer or any Authorized Person.
3.3Instructions; Contrary to Law/Market Practice.
Bank need not act upon Instructions which it reasonably believes to be contrary to law, regulation or market practice but shall be under no duty to investigate whether any Instructions comply with Applicable Law or market practice. Bank shall notify Customer as soon as reasonably practicable if it does not act upon Instructions under this Section.
3.4Cut-off Times.
Bank has established cut-off times for receipt of some categories of Instruction, which shall be made available to Customer. If Bank receives an Instruction after its established cut-off time, it shall attempt to act upon the Instruction on the day requested if Bank deems it practicable to do so or otherwise as soon as practicable on the next business day.
3.5Electronic Access.
Access by the Customer to certain systems, applications or products of Bank shall be governed by this Agreement and the terms and conditions set forth in Annex A Electronic Access.
4.FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1Fees and Expenses.
Customer shall pay Bank for its services hereunder the fees set forth in Schedule 2 hereto or such other amounts as may be agreed upon in writing from time to time.
4.2Overdrafts.
If a debit to any currency in the Cash Account results in a debit balance in that currency then Bank may, in its discretion, advance an amount equal to the overdraft and such an advance shall be deemed a loan to
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Customer, payable on demand, bearing interest at the rate agreed by Customer and Bank for the Accounts from time to time, or, in the absence of such an agreement, at the rate charged by Bank from time to time, for overdrafts incurred by customers similar to Customer, from the date of such advance to the date of payment (both after as well as before judgment) and otherwise on the terms on which Bank makes similar advances available from time to time. Bank shall promptly notify Customer of such an advance. No prior action or course of dealing on Bank's part with respect to the settlement of transactions on Customer's behalf shall be asserted by Customer against Bank for Bank's refusal to make advances to the Cash Account or to settle any transaction for which Customer does not have sufficient available funds in the applicable currency in the Account.
4.3Bank's Right Over Securities; Set-off.
(a)Customer grants Bank a security interest in and a lien on the Financial Assets held in the Securities Account of a particular Fund as shall have a fair market value equal to the aggregate amount of all overdrafts of such Fund, together with accrued interest, as security for any and all amounts which are now or become owing to Bank with respect to that Fund under any provision of this Agreement, whether or not matured or contingent ("Indebtedness"). Such lien and security interest shall be effective only so long as such advance, overdraft, or accrued interest thereon remains outstanding and Bank shall have all the rights and remedies of a secured party under the New York Uniform Commercial Code in respect of the repayment of the advance, overdraft or accrued interest. In this regard, Bank shall be entitled to (i) without notice to Customer, withhold delivery of such Financial Assets, and (ii) with two business days' prior notice to the Customer and an opportunity for the Customer to satisfy such Indebtedness to Bank, sell or otherwise realize any of such Financial Assets and to apply the proceeds and any other monies credited to the Cash Account in satisfaction of such Indebtedness solely to the extent of such Indebtedness, provided, however, that Bank shall only be obligated to provide the Customer with same-day prior notice if Bank, in its reasonable business judgment, determines that, due to market conditions or other special circumstances, a delay would be likely to materially prejudice its ability to recover the Indebtedness. During any such notice period, Bank will, at Customer's request, consult with Customer regarding the selection of Financial Assets to be sold by Bank to satisfy the Indebtedness. For the avoidance of doubt, only advances made by Bank under Section 4.2 are "Indebtedness" subject to this Section 4.3. No other outstanding amounts payable by Customer to Bank (including, without limitation, amounts payable by Customer under Section 4.1) are "Indebtedness" subject to this Section 4.3.
(b)Bank shall be further entitled to set any such Indebtedness off against any cash or deposit account of the Fund that incurred the Indebtedness with Bank or any of its Affiliates of which the Fund is the beneficial owner, regardless of the currency involved; Bank shall provide prior notice to Customer of its intent to exercise its set off rights against any cash or deposit account of the Fund, which notice shall be provided at least on the same day as the set off is effected, provided however that no prior notice is required in cases where Bank, in its reasonable business judgment, determines that, due to market conditions or other special circumstances, the delay required in order to provide prior notice would be likely to materially prejudice its ability to recover the Indebtedness.
5.SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS
5.1Appointment of Subcustodians; Use of Securities Depositories.
(a)Bank is authorized under this Agreement to act through and hold Customer's Global Assets with subcustodians, being at the date of this Agreement the entities listed in Schedule 1 and/or such other entities as Bank may appoint as subcustodians ("Subcustodians"). At the request of Customer, Bank may, but need not, add to Schedule 1 an Eligible Foreign Custodian where Bank has not acted as Foreign Custody Manager with respect to the selection thereof. Bank shall notify Customer in the event that it elects to add
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any such entity. Bank shall use reasonable care, prudence and diligence in the selection and continued appointment of such Subcustodians. In addition, Bank and each Subcustodian may deposit Global Assets with, and hold Global Assets in, any securities depository, settlement system, dematerialized book entry system or similar system (together a "Securities Depository") on such terms as such systems customarily operate and Customer shall provide Bank with such documentation or acknowledgements that Bank may require to hold the Global Assets in such systems.
(b)Any agreement Bank enters into with a Subcustodian for holding Bank's customers' assets shall provide that: (i) such assets shall not be subject to any right, charge, security interest, lien or claim of any kind in favor of such Subcustodian or its creditors, except a claim of payment for their safe custody or administration or, in the case of cash deposits, except for liens or rights in favor of creditors of the Subcustodian arising under bankruptcy, insolvency or similar laws; (ii) beneficial ownership of such assets shall be freely transferable without the payment of money or value other than for safe custody or administration; (iii) adequate records will be maintained identifying the assets as belonging to Customer or as being held by a third party for the benefit of Customer; (iv) Customer and Customer's independent public accountants will be given reasonable access to those records or confirmation of the contents of those records; and (v) Customer will receive periodic reports with respect to the safekeeping of Customer's assets, including, but not limited to, notification of any transfer to or from Customer's account or a third party account containing assets held for the benefit of Customer. Where a Subcustodian deposits Securities with a Securities Depository, Bank shall cause the Subcustodian to identify on its records as belonging to Bank, as agent, the Securities shown on the Subcustodian's account at such Securities Depository. The foregoing shall not apply to the extent of any special agreement or arrangement made by Customer with any particular Subcustodian.
(c)Bank shall have no responsibility for any act or omission by (or the insolvency of) any Securities Depository. In the event Customer incurs a loss due to the negligence, bad faith, willful misconduct, or insolvency of a Securities Depository, Bank shall make reasonable endeavors to seek recovery from the Securities Depository.
(d)The term Subcustodian as used herein shall mean the following:
(i)a "U.S. Bank" as such term is defined in rule 17f-5; and
(ii)an "Eligible Foreign Custodian" as such term is defined in rule 17f-5 and any other entity that shall have been so qualified by exemptive order, rule or other appropriate action of the SEC.
(iii)For purposes of clarity, it is agreed that as used in Section 5.2(a), the term Subcustodian shall not include any Eligible Foreign Custodian as to which Bank has not acted as Foreign Custody Manager.
(e)The term 'securities depository' as used herein when referring to a securities depository located outside the U.S. shall mean an "Eligible Securities Depository" as defined in rule 17f-7, or that has otherwise been made exempt pursuant to an SEC exemptive order.
(f)The term 'securities depository' as used herein when referring to a securities depository located in the U.S. shall mean a "Securities Depository" as defined in rule 17f-4.
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5.2Liability for Subcustodians.
(a)Subject to the exculpation from consequential damages set forth in Section 7.1(b), Bank shall be liable for direct Liabilities incurred by Customer that result from: (i) the acts or omissions of any Subcustodian selected by Bank, whether domestic or foreign, to the same extent as if such act or omission was performed by Bank itself, taking into account the standards and market practice prevailing in the relevant market; or (ii) the insolvency of any Affiliated Subcustodian. Subject to the terms and conditions of this Agreement, including the exculpation from consequential damages set forth in Section 7.1(b), Bank shall take full responsibility for any Liabilities that result from or that are caused by the fraud, willful misconduct, or negligence of its Subcustodians or the insolvency of an Affiliated Subcustodian. In the event of any Liabilities suffered or incurred by Customer caused by or resulting from the acts or omissions of any Subcustodian for which Bank would otherwise be liable, Bank shall promptly reimburse Customer in the amount of any such Liabilities.
(b)Subject to Section 7.1(a) and Bank's duty to use reasonable care, prudence and diligence in the monitoring of a Subcustodian's financial condition as reflected in its published financial statements and other publicly available financial information concerning it, Bank shall not be responsible for the insolvency of any Subcustodian which is not a branch or an Affiliated Subcustodian.
(c)Bank reserves the right to add, replace or remove Subcustodians. Bank shall give Customer prompt notice of any such action, which shall be advance notice if practicable. Upon request by Customer, Bank shall identify the name, address and principal place of business of any Subcustodian and the name and address of the governmental agency or other regulatory authority that supervises or regulates such Subcustodian.
5.3Use of Agents.
(a)Bank may provide certain services under this Agreement through third parties. These third parties may be Affiliates. Except to the extent provided in Section 5.2 with respect to Subcustodians, Bank shall not be responsible for any loss as a result of a failure by any broker or any other third party that it selects and retains using reasonable care and without negligence to provide ancillary services, such as pricing, proxy voting, and corporate action services, that it does not customarily provide itself. Nevertheless, Bank shall be liable for the performance of any such service provider selected by Bank that is an Affiliate to the same extent as Bank would have been liable if it performed such services itself.
(b)Bank shall execute transactions involving Financial Assets of United States origin through a broker which is an Affiliate (i) in the case of the sale under Section 2.8 of a fractional interest or (ii) if an Authorized Person directs Bank to use the affiliated broker or otherwise requests that Bank select a broker for that transaction, unless, in either case, the Affiliate does not execute similar transactions in such Financial Assets. The affiliated broker may charge its customary commission (or retain its customary spread) with respect to either such transaction.
6.ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1Representations of Customer and Bank.
(a)Customer represents and warrants to Bank that: (i) it has full authority and power, and has obtained all necessary authorizations and consents, to deposit and control the Financial Assets and cash in the Accounts, to use Bank as its custodian in accordance with the terms of this Agreement and to incur indebtedness, pledge Financial Assets as contemplated by Section 4.3, and enter into foreign exchange transactions; and (ii) this Agreement is its legal, valid and binding obligation, enforceable in accordance
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with its terms and it has full power and authority to enter into and has taken all necessary corporate action to authorize the execution of this Agreement. Bank may rely upon the above or the certification of such other facts as may be required to administer Bank's obligations hereunder.
(b)Bank represents and warrants to Customer that this Agreement is its legal, valid and binding obligation, enforceable in accordance with its terms and it has full power and authority to enter into and has taken all necessary corporate action to authorize the execution of this Agreement. Customer may rely upon the above or the certification of such other facts as may be required to administer Customer's obligations hereunder.
6.2Customer to Provide Certain Information to Bank.
Upon request, Customer shall promptly provide to Bank such information about itself and its financial status as Bank may reasonably request, including Customer's organizational documents and its current audited and unaudited financial statements.
6.3Customer is Liable to Bank Even if it is Acting for Another Person.
If Customer is acting as an agent for a disclosed or undisclosed principal in respect of any transaction, cash, or Financial Asset, Bank nevertheless shall treat Customer as its principal for all purposes under this Agreement. In this regard, Customer shall be liable to Bank as a principal in respect of any transactions relating to the Account. The foregoing shall not affect any rights Bank might have against Customer's principal.
6.4Several Obligations of the Trusts and the Funds.
This Agreement is executed on behalf of the Board of Trustees of each Fund as Trustees and not individually and the obligations of this Agreement are not binding upon any of the Trustees or shareholders individually but are binding only upon the assets and property of each Fund severally and not jointly. With respect to any obligations of Customer arising out of this Agreement, Bank shall look for payment or satisfaction of any obligation solely to the assets of the Fund to which such obligation relates as though Bank had separately contracted by separate written instrument with respect to the Fund.
7.WHEN BANK IS LIABLE TO CUSTOMER
7.1Standard of Care; Liability.
(a)Notwithstanding any other provision of this Agreement, Bank shall exercise reasonable care, prudence and diligence in carrying out all of its duties and obligations under this Agreement (except to the extent Applicable Law provides for a higher standard of care, in which case such higher standard shall apply), and shall be liable to Customer for any and all Liabilities suffered or incurred by Customer resulting from the failure of Bank to exercise such reasonable care, prudence and diligence or resulting from Bank's negligence, willful misconduct, or fraud and to the extent provided in Section 5.2(a). Unless otherwise specified or required by Applicable Law, Bank shall not be in violation of this Agreement with respect to any matter as to which it has satisfied the standard of care under this Agreement.
(b)Bank shall not be liable under any circumstances for any indirect, incidental, consequential or special damages (including, without limitation, lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the type of action in which such a claim may be brought, with respect to the Accounts or Bank's performance hereunder or Bank's role as custodian.
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(c)Subject to the limitations set forth in this Agreement, each Customer severally and not jointly shall indemnify the Bank Indemnitees against, and hold them harmless from, any Liabilities that may be imposed on, incurred by or asserted against any of the Bank Indemnitees in connection with or arising out of Bank's performance under this Agreement, provided the Bank Indemnitees have not acted with negligence or bad faith or engaged in fraud or willful misconduct in connection with the Liabilities in question. Nevertheless, Customer shall not be obligated to indemnify any Bank Indemnitee under the preceding sentence with respect to any Liability for which Bank is liable under Section 5.2 of this Agreement. Bank shall use all commercially reasonable efforts to mitigate any Liability for which indemnity is sought hereunder (provided, however, that reasonable expenses incurred with respect to such mitigation shall be Liabilities subject to indemnification hereunder).
(d)Subject to any obligation Customer may have to indemnify Bank with respect to amounts claimed by third parties, Customer shall have no liability whatsoever for any consequential, special, indirect or speculative loss or damages (including, but not limited to, lost profits) suffered by Bank Indemnitees in connection with the transactions and services contemplated hereby and the relationship established hereby even if Customer has been advised as to the possibility of the same and regardless of the form of action.
(e)Without limiting Subsections 7.1 (a) or (b), Bank shall have no duty or responsibility to:
(i)question Instructions or make any suggestions to Customer or an Authorized Person regarding such Instructions, provided that Bank believes in good faith that such Instructions have been given by Authorized Persons or which are transmitted with proper testing or authentication pursuant to terms and conditions that Bank may specify; (ii) supervise or make recommendations with respect to investments or the retention of Financial Assets; (iii) advise Customer or an Authorized Person regarding any default in the payment of principal or income of any security other than as provided in Section 2.7(b) of this Agreement; (iv) except as otherwise expressly required herein, evaluate or report to Customer or an Authorized Person regarding the financial condition of any broker, agent or other party to which Bank is instructed to deliver Financial Assets or cash; or (v) except for trades settled at DTC where the broker provides DTC trade confirmation and Customer provides for Bank to receive the trade instruction, review or reconcile trade confirmations received from brokers (and Customer or its Authorized Persons issuing Instructions shall bear any responsibility to review such confirmations against Instructions issued to and statements issued by Bank).
(f)Bank shall indemnify the Customer from and against any and all Liabilities which may be imposed on, incurred by, or asserted against the Customer resulting directly either from Bank's negligence, bad faith, fraud or willful misconduct in the performance of its obligations or duties hereunder, or from any act or omission by a Subcustodian in the performance of its subcustodial obligations or duties hereunder for which Bank is expressly liable under Section 5.2, taking into account the standards and market practice prevailing in the relevant market, provided that (i) in no event shall the Bank be obliged to indemnify Customer from against any Liability (or any claim for a Liability) to the extent such Liability is described in clause 7.1(b) this Agreement and (ii) the Customer shall use all commercially reasonable efforts to mitigate any Liability for which indemnity is sought hereunder (provided, however, that reasonable expenses incurred with respect to such mitigation shall be Liabilities subject to indemnification hereunder).
7.2Force Majeure.
So long as Bank maintains and updates its business continuation and disaster recovery procedures as set forth in Section 10.8, Bank shall have no liability for any damage, loss or expense of any nature that Customer may suffer or incur, caused by an act of God, fire, flood, civil or labor disturbance, war, act of any governmental authority or other act or threat of any authority (de jure or de facto), legal constraint, fraud or forgery (except by Bank or Bank Indemnitees), malfunction of equipment or software (except to the extent such malfunction is primarily attributable to Bank's negligence, or willful misconduct in maintaining the equipment or software), failure of or the effect of rules or operations of any external funds
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transfer system, inability to obtain or interruption of external communications facilities, or any cause beyond the reasonable control of Bank (including without limitation, the non-availability of appropriate foreign exchange). Bank shall endeavor to promptly notify Customer when it becomes aware of any situation outlined above, but shall not be liable for failure to do so. If Bank is prevented from carrying out its obligations under this Agreement for a period of thirty days, Customer may terminate the Agreement by giving Bank not less than thirty days' notice, without prejudice to any of the rights of any party accrued prior to the date of termination.
7.3Bank May Consult With Counsel.
Bank shall be entitled to rely on, and may act upon the advice of professional advisers in relation to matters of law, regulation or market practice (which may be the professional advisers of Customer), and shall not be liable to Customer for any action reasonably taken or omitted pursuant to such advice; provided that Bank has selected and retained such professional advisers using reasonable care and acts reasonably in reliance on the advice.
7.4Bank Provides Diverse Financial Services and May Generate Profits as a Result.
Customer acknowledges that Bank or its Affiliates may have a material interest in transactions entered into by Customer with respect to the Account or that circumstances are such that Bank may have a potential conflict of duty or interest. For example, Bank or its Affiliates may act as a market maker in the Financial Assets to which Instructions relate, provide brokerage services to other customers, act as financial adviser to the issuer of such Financial Assets, act in the same transaction as agent for more than one customer, have a material interest in the issue of the Financial Assets, or earn profits from any of these activities. Customer acknowledges that Bank or its Affiliates may be in possession of information tending to show that the Instructions received may not be in the best interests of Customer. Bank is not under any duty to disclose any such information.
8.TAXATION
8.1Tax Obligations.
(a)Customer confirms that Bank is authorized to deduct from any cash received or credited to the Cash Account any taxes or levies required by any revenue or Governmental authority for whatever reason in respect of Customer's Accounts.
(b)If Bank does not receive appropriate declarations, documentation and information then additional United Kingdom taxation shall be deducted from all income received in respect of the Financial Assets issued outside the United Kingdom (which shall for this purpose include United Kingdom Eurobonds) and any applicable United States tax (including, but not limited to, non-resident alien tax) shall be deducted from United States source income. Customer shall provide to Bank such certifications, documentation, and information as it may require in connection with taxation, and warrants that, when given, this information is true and correct in every respect, not misleading in any way, and contains all material information. Customer undertakes to notify Bank immediately if any information requires updating or correcting.
(c)Customer shall be responsible for the payment of all taxes relating to the Financial Assets in the Securities Account, and Customer shall pay, indemnify and hold Bank harmless from and against any and all liabilities, penalties, interest or additions to tax with respect to or resulting from, any delay in, or failure by, Bank (1) to pay, withhold or report any U.S. federal, state or local taxes or foreign taxes imposed on, or (2) to report interest, dividend or other income paid or credited to the Cash Account, whether
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such failure or delay by Bank to pay, withhold or report tax or income is the result of (x) Customer's failure to comply with the terms of this paragraph, or (y) Bank's own acts or omissions; provided however, Customer shall not be liable to Bank for any penalty or additions to tax due as a result of Bank's failure to pay or withhold tax or to report interest, dividend or other income paid or credited to the Cash Account solely as a result of Bank's negligent acts or omissions.
8.2Tax Reclaims.
(a)Subject to the provisions of this Section, Bank shall apply for a reduction of withholding tax and any refund of any tax paid or tax credits in respect of income payments on Financial Assets credited to the Securities Account that Bank believes may be available.
(b)The provision of a tax reclamation service by Bank is conditional upon Bank receiving from Customer (i) a declaration of its identity and place of residence and (ii) certain other documentation (pro forma copies of which are available from Bank). If Financial Assets credited to the Account are beneficially owned by someone other than Customer, this information shall be necessary with respect to the beneficial owner. Customer acknowledges that Bank shall be unable to perform tax reclamation services unless it receives this information.
(c)Bank shall perform tax reclamation services only with respect to taxation levied by the revenue authorities of the countries advised to Customer from time to time and Bank may, by notification in writing, in its absolute discretion, supplement or amend the countries in which the tax reclamation services are offered. Other than as expressly provided in this Section 8.2, Bank shall have no responsibility with regard to Customer's tax position or status in any jurisdiction.
(d)Customer confirms that Bank is authorized to disclose any information requested by any revenue authority or any governmental body in relation to the processing of any tax reclaim.
9.TERMINATION
(a)Either party may terminate this Agreement by an instrument in writing delivered or mailed, postage prepaid, to the other party, such termination to take effect not sooner than sixty days after the date of such delivery or mailing if termination is being sought by Customer, for itself or on behalf of a Fund, and not sooner than one hundred twenty days after the date of such delivery or mailing if termination is being sought by Bank. Termination of this Agreement with respect to any one particular Fund shall in no way affect the rights and duties under this Agreement with respect to any other Fund. If Customer gives notice of termination, it must provide full details of the persons to whom Bank must deliver Financial Assets and cash. If Bank gives notice of termination, then Customer must, within one hundred twenty days following receipt of the notice, notify Bank of details of its new custodian, failing which Bank may elect (at any time after one hundred twenty days following Customer's receipt of the notice) either to retain the Financial Assets and cash until such details are given, continuing to charge fees due (in which case Bank's sole obligation shall be for the safekeeping of the Financial Assets and cash), or deliver the Financial Assets and cash to Customer. Bank shall in any event be entitled to deduct any uncontested amounts owing to it prior to delivery of the Financial Assets and cash (and, accordingly, Bank shall be entitled to deduct cash from the Cash Account in satisfaction of uncontested amounts owing to it); provided, however, that Bank shall first provide Customer with a statement setting forth such amounts owing to it and provide Customer two days' advance notice before effecting any such deduction, during which time Customer shall be entitled to determine the priority order in which such Financial Assets and cash are to be used to satisfy the outstanding uncontested amounts. Customer shall reimburse Bank promptly for all reasonable out-of- pocket expenses it incurs in delivering Financial Assets upon termination by Customer. Termination
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pursuant to this Section shall not affect any of the liabilities either party owes to the other arising under this Agreement prior to such termination.
(b)In the event of any termination of the Agreement for any reason whatsoever, Bank shall, for a period of up to one hundred twenty days after termination of the Agreement, (i) continue to provide all or part of the services under the Agreement if requested by Customer, which services shall be subject to the terms and conditions of the Agreement during the transition period unless otherwise agreed to by the parties; (ii) provide to Customer or any successor custodian all assistance reasonably requested to enable Customer or the successor custodian to commence providing services similar to those under the Agreement; and (iii) subject to the same limitations in place during the term of the Agreement, provide Customer with access to all records in the possession of Bank relating to Customer. In connection with any termination of the Agreement for any reason whatsoever, the parties shall also promptly develop a transition plan setting forth a reasonable timetable for the transition of Financial Assets and cash to Customer or any successor custodian and describing the parties' respective responsibilities for transitioning the services back to Customer or any successor custodian in an orderly and uninterrupted fashion. Customer will use all reasonable efforts to transition to a successor custodian as soon as possible following the effective date of termination.
10.MISCELLANEOUS
10.1Notices.
Notices (other than Instructions) shall be served by registered mail or hand delivery to the address of the respective parties as set out on the first page of this Agreement, unless notice of a new address is given to the other party in writing. Notice shall not be deemed to be given unless it has been received.
10.2Successors and Assigns.
This Agreement shall be binding on each of the parties' successors and assigns, but the parties agree that neither party can assign its rights and obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld.
10.3Interpretation.
Headings are for convenience only and are not intended to affect interpretation. References to sections are to sections of this Agreement and references to sub-sections and paragraphs are to sub-sections of the sections and paragraphs of the sub-sections in which they appear.
10.4Entire Agreement.
This Agreement amends and restates the Amended and Restated Global Custody Agreement dated as of June 25, 2001 between Customer and Bank (the "Prior Agreement"), and the terms of this Agreement replace the terms of the Prior Agreement effective as of the date of this Agreement. This Agreement, including any Schedules, Appendices, Annexes, Exhibits, and Riders (and any separate agreement which Bank and Customer may enter into with respect to the services provided under this Agreement), sets out the entire Agreement between the parties in connection with the subject matter, and, unless otherwise agreed to by the parties, this Agreement supersedes any other agreement, statement, or representation relating to the services provided under this Agreement, whether oral or written. Amendments must be in writing and signed by both parties. For clarity, however, the continuation of any other agreements that reference the Prior Agreement is not intended to be affected by the fact of the amendment and restatement of the Prior Agreement by this Agreement, and reference in such agreements to the Prior Agreement shall be considered
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to be a reference to this Agreement effective as of the date of this Agreement (provided that matters relating to the time period prior to the date of this Agreement are governed by the terms of the Prior Agreement).
10.5Information Concerning Deposits at Bank.
(a)Under U.S. federal law, deposit accounts that the Customer maintains in Bank's foreign branches (outside of the U.S.) are not insured by the Federal Deposit Insurance Corporation. In the event of Bank's liquidation, foreign branch deposits have a lesser preference than U.S. deposits, and such foreign deposits are subject to cross-border risks.
(b)Bank's London Branch is a participant in the UK Financial Services Compensation Scheme (the "FSCS"), and the following terms apply to the extent any amount standing to the credit of the Cash Account is deposited in one or more deposit accounts at Bank's London Branch. The terms of the FSCS offer protection in connection with deposits to certain types of claimants to whom Bank's London Branch provides services in the event that they suffer a financial loss as a direct consequence of Bank's London Branch being unable to meet any of its obligations and, subject to the FSCS rules regarding eligible deposits, the Customer may have a right to claim compensation from the FSCS. Subject to the FSCS rules, the maximum compensation payable by the FSCS, as at the date of this Agreement, in relation to eligible deposits is £85,000.
(c)In the event that Bank incurs a loss attributable to Country Risk with respect to any cash balance it maintains on deposit at a Subcustodian or other correspondent bank in regard to its global custody or trust businesses in the country where the Subcustodian or other correspondent bank is located, Bank may set such loss off against Customer's Cash Account to the extent that such loss is directly attributable to Customer's investments in that market.
10.6Confidentiality.
The parties hereto agree that each shall treat confidentially the terms and conditions of this Agreement and all information provided by each party to the other regarding its business and operations. All confidential information provided by a party shall be used by the other party solely for the purpose of rendering or obtaining services pursuant to this Agreement, and except as may be required in carrying out this Agreement, shall not be disclosed to any third party without the prior consent of such providing party. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this provision, or that is required to be disclosed by or to any regulatory authority, any external or internal accountant, auditor or counsels of the parties, by judicial or administrative process or otherwise by Applicable Law, or to any disclosure made by a party if such party's counsel has advised that such party could be liable under any Applicable Law or any judicial or administrative order or process for failure to make such disclosure.
10.7Data Privacy and Security.
Bank will implement and maintain a written information security program, in compliance with all federal, state and local laws and regulations (including any similar international laws) applicable to Bank, that contains reasonable and appropriate security measures designed to safeguard the personal information of the Funds' shareholders, employees, trustees and/or officers that Bank or any Subcustodian receives, stores, maintains, processes, transmits or otherwise accesses in connection with the provision of services hereunder. In this regard, Bank will establish and maintain policies, procedures, and technical, physical, and administrative safeguards, designed to (i) ensure the security and confidentiality of all personal information and any other confidential information that Bank receives, stores, maintains, processes or otherwise accesses in connection with the provision of services hereunder, (ii) protect against any
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reasonably foreseeable threats or hazards to the security or integrity of personal information or other confidential information, (iii) protect against unauthorized access to or use of personal information or other confidential information, (iv) maintain reasonable procedures to detect and respond to any internal or external security breaches, and (v) ensure appropriate disposal of personal information or other confidential information.
Bank will monitor and review its information security program and revise it, as necessary and in its sole discretion, to ensure it appropriately addresses any applicable legal and regulatory requirements. Bank shall periodically test and review its information security program.
Bank shall respond to Customer's reasonable requests for information concerning Bank's information security program and, upon request, Bank will provide a copy of its applicable policies and procedures, or in Bank's discretion, summaries thereof, to Customer, to the extent Bank is able to do so without divulging information Bank reasonably believes to be proprietary or Bank confidential information. Upon reasonable request, Bank shall discuss with Customer the information security program of Bank. Bank also agrees, upon reasonable request, to complete any security questionnaire provided by Customer to the extent Bank is able to do so without divulging sensitive, proprietary, or Bank confidential information and return it in a commercially reasonable period of time (or provide an alternative response that reasonably addresses the points included in the questionnaire). Customer acknowledges that certain information provided by Bank, including internal policies and procedures, may be proprietary to Bank, and agrees to protect the confidentiality of all such materials it receives from Bank.
Bank agrees to resolve promptly any applicable control deficiencies that come to its attention that do not meet the standards established by federal and state privacy and data security laws, rules, regulations, and/or generally accepted industry standards related to Bank's information security program.
Bank shall: (i) promptly notify Customer of any confirmed unauthorized access to personal information or other confidential information of Customer ("Breach of Security"); (ii) promptly furnish to Customer appropriate details of such Breach of Security and assist Customer in assessing the Breach of Security to the extent it is not privileged information or part of an investigation; (iii) reasonably cooperate with Customer in any litigation and investigation of third parties reasonably deemed necessary by Customer to protect its proprietary and other rights; (iv) use reasonable precautions to prevent a recurrence of a Breach of Security; and (v) take all reasonable and appropriate action to mitigate any potential harm related to a Breach of Security, including any reasonable steps requested by Customer that are practicable for Bank to implement. Nothing in the immediately preceding sentence shall obligate Bank to provide Customer with information regarding any of Bank's other customers or clients that are affected by a Breach of Security, nor shall the immediately preceding sentence limit Bank's ability to take any actions that Bank believes are appropriate to remediate any Breach of Security unless such actions would prejudice or otherwise limit Customer's ability to bring its own claims or actions against third parties related to the Breach of Security. If Bank discovers or becomes aware of a suspected data or security breach that may involve an improper access, use, disclosure, or alteration of personal information or other confidential information of Customer, Bank shall, except to the extent prohibited by Applicable Law or directed otherwise by a governmental authority not to do so, promptly notify Customer that it is investigating a potential breach and keep Customer informed as reasonably practicable of material developments relating to the investigation until Bank either confirms that such a breach has occurred (in which case the first sentence of this paragraph will apply) or confirms that no data or security breach involving personal information or other confidential information of Customer has occurred.
For these purposes, "personal information" shall mean (i) an individual's name (first initial and last name or first name and last name), address or telephone number plus (a) social security number, (b) driver's license number, (c) state identification card number, (d) debit or credit card number, (e) financial account
22
number, (f) passport number, or (g) personal identification number or password that would permit access to a person's account or (ii) any combination of the foregoing that would allow a person to log onto or access an individual's account. This provision will survive termination or expiration of the Agreement for so long as Bank or any Subcustodian continues to possess or have access to personal information related to Customer. Notwithstanding the foregoing "personal information" shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public.
10.8Business Continuity and Disaster Recovery.
Bank shall maintain and update from time to time business continuation and disaster recovery procedures with respect to its global custody business, which are designed, in the event of a significant business disruption affecting Bank, to be sufficient to enable Bank to resume and continue to perform its duties and obligations under this Agreement without undue delay or disruption. Bank shall test the operability of such procedures at least annually. Bank shall enter into and shall maintain in effect at all times during the term of this Agreement reasonable provision for (i) periodic back-up of the computer files and data with respect to Customer and (ii) use of alternative electronic data processing equipment to provide services under this Agreement. Upon reasonable request, Bank shall discuss with Customer any business continuation and disaster recovery procedures of Bank. Bank represents that its business continuation and disaster recovery procedures are appropriate for its business as a global custodian to investment companies registered under the 1940 Act.
10.9Insurance.
Bank shall not be required to maintain any insurance coverage for the benefit of Customer.
10.10Governing Law and Jurisdiction, Certification of Residency.
This Agreement shall be construed, regulated, and administered under the laws of the United States or State of New York, as applicable, without regard to New York's principles regarding conflict of laws. The United States District Court for the Southern District of New York shall have the sole and exclusive jurisdiction over any lawsuit or other judicial proceeding relating to or arising from this Agreement. If that court lacks federal subject matter jurisdiction, the Supreme Court of the State of New York, New York County shall have sole and exclusive jurisdiction. Either of these courts shall have proper venue for any such lawsuit or judicial proceeding, and the parties waive any objection to venue or their convenience as a forum. The parties agree to submit to the jurisdiction of any of the courts specified and to accept service of process to vest personal jurisdiction over them in any of these courts. The parties further hereby knowingly, voluntarily and intentionally waive, to the fullest extent permitted by Applicable Law, any right to a trial by jury with respect to any such lawsuit or judicial proceeding arising or relating to this Agreement or the transactions contemplated hereby. Customer certifies that it is a resident of the United States and shall notify Bank of any changes in residency. Bank may rely upon this certification or the certification of such other facts as may be required to administer Bank's obligations hereunder. Customer shall indemnify Bank against all losses, liability, claims or demands arising directly or indirectly from any such certifications.
10.11Severability and Waiver.
(a)If one or more provisions of this Agreement are held invalid, illegal or unenforceable in any respect on the basis of any particular circumstances or in any jurisdiction, the validity, legality and enforceability of such provision or provisions under other circumstances or in other jurisdictions and of the remaining provisions shall not in any way be affected or impaired.
23
(b)Except as otherwise provided herein, no failure or delay on the part of either party in exercising any power or right hereunder operates as a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right. No waiver by a party of any provision of this Agreement, or waiver of any breach or default, is effective unless in writing and signed by the party against whom the waiver is to be enforced.
10.12Counterparts.
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original and together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
[Signature page to follow.]
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES LISTED ON EXHIBIT 1 HERETO
By: |
/s/ Thomas J. Higgins |
|
|
|
Name: |
Thomas J. Higgins |
Title: |
Chief Financial Officer |
JPMORGAN CHASE BANK, N.A.
By: |
/s/ Teresa Heitsenrether |
Name: |
Teresa Heitsenrether |
Title: |
Managing Director |
EXHIBIT 1
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund
Vanguard S&P 500 Value Index Fund
Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund Vanguard Target Retirement Income Fund
Vanguard CMT Funds
Vanguard Market Liquidity Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard REIT II Index Fund
Vanguard Ultra-Short-Term Bond Fund
Vanguard Index Funds
Vanguard Growth Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Index Fund
Vanguard Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Short-Term Inflation-Protected Securities Index Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Government Bond Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Government Bond Index Fund Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Government Bond Index Fund
Vanguard Specialized Funds
Vanguard Dividend Appreciation Index Fund
Vanguard Health Care Fund
Vanguard Precious Metals and Mining Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Variable Insurance Funds
Global Bond Index Portfolio
Total Bond Market Index Portfolio
Total International Stock Market Index Portfolio
Vanguard Wellesley Income Fund
Vanguard Wellesley Income Fund
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard International Growth Fund
The terms and conditions as set forth in the Agreement (except for Sections 2.1 and 2.2) apply with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard 500 Index Fund
Vanguard Extended Market Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard International Equity Index Funds
Vanguard Emerging Markets Stock Index Fund
Vanguard European Stock Index Fund
Vanguard FTSE All-World ex-US Index Fund
Vanguard FTSE All-World ex-US Small-Cap Index Fund
Vanguard Global ex-U.S. Real Estate Index Fund Vanguard Pacific Stock Index Fund Vanguard Total World Stock Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Montgomery Funds
Vanguard Market Neutral Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Scottsdale Funds Vanguard Explorer Value Fund
Vanguard Russell 1000 Growth Index Fund Vanguard Russell 1000 Index Fund Vanguard Russell 1000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard REIT Index Fund
Vanguard Tax-Managed Funds
Vanguard Developed Markets Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Balanced Portfolio
Capital Growth Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
International Portfolio
Mid-Cap Index Portfolio
REIT Index Portfolio
Small Company Growth Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard International Dividend Appreciation Index Fund
Vanguard International High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard Financials Index Fund
Vanguard FTSE Social Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
APPENDIX 1
Information Regarding Country Risk
1.To aid Customer in its determinations regarding Country Risk, Bank shall furnish annually and upon the initial placing of Financial Assets and cash into a country the following information (check items applicable):
A.Opinions of local counsel concerning:
_X_ i. Whether applicable foreign law would restrict the access afforded Customer's independent public accountants to books and records kept by an eligible foreign custodian located in that country.
_X_ ii. Whether applicable foreign law would restrict the Customer's ability to recover its Financial Assets and cash in the event of the bankruptcy of an Eligible Foreign Custodian located in that country.
_X_ iii. Whether applicable foreign law would restrict the Customer's ability to recover Financial Assets that are lost while under the control of an Eligible Foreign Custodian located in the country.
B.Written information concerning:
_X_ |
i. The foreseeability of expropriation, nationalization, freezes, or confiscation of |
Customer's Financial Assets. |
_X_ |
ii. Whether difficulties in converting Customer's cash and cash equivalents to U.S. dollars |
are reasonably foreseeable.
C.A market report with respect to the following topics:
(i)securities regulatory environment, (ii) foreign ownership restrictions, (iii) foreign exchange, (iv) securities settlement and registration, (v) taxation, and (vi) depositories (including depository evaluation), if any.
2.To aid Customer in monitoring Country Risk, Bank shall furnish Customer the following additional information:
Market flashes, including with respect to changes in the information in market reports.
ANNEX A - Electronic Access
1.Bank may permit the Customer and its Authorized Persons to access certain electronic systems and applications (collectively, the "Products") and to access or receive electronically Data (as defined below) in connection with the Agreement. Bank may, from time to time, introduce new features to the Products or otherwise modify or delete existing features of the Products in its sole discretion. Bank shall endeavor to give the Customer reasonable notice of its termination or suspension of access to the Products, including suspension or cancelation of any User Codes, but may do so immediately if Bank determines, in its sole discretion, that providing access to the Products would violate Applicable Law or that the security or integrity of the Products is known or reasonably suspected to be at risk. Access to the Products shall be subject to the Security Procedure.
2.In consideration of the fees paid by the Customer to Bank and subject to any applicable software license addendum in relation to Bank-owned or sublicensed software provided for a particular application and Applicable Law, Bank grants to the Customer a non-exclusive, non-transferable, limited and revocable license to use the Products and the information and data made available through the Products or transferred electronically (the "Data") for the Customer's internal business use only. The Customer may download the Data and print out hard copies for its reference, provided that it does not remove any copyright or other notices contained therein. The license granted herein will permit use by the Customer's Authorized Person, provided that such use shall be in compliance with the Agreement, including this Annex. The Customer acknowledges that elements of the Data, including prices, Corporate Action information, and reference data, may have been licensed by Bank from third parties and that any use of such Data beyond that authorized by the foregoing license, may require the permission of one or more third parties in addition to Bank. Notwithstanding the foregoing, nothing in this Section 2, or elsewhere in this Annex, shall be deemed to give Bank or its licensors ownership of, or any rights in or to, any confidential information of the Customer, including as it may be accessible or receivable through the Products, and all rights in and to such information shall be retained exclusively by the Customer.
3.The Customer acknowledges that there are security, cyberfraud, corruption, transaction error and access availability risks associated with using open networks such as the internet, and the Customer hereby expressly assumes such risks; for clarity, however, the foregoing shall not relieve Bank of its obligation under the first sentence of Section 4 of this Annex. The Customer is solely responsible for obtaining, maintaining and operating all systems, software (including antivirus software, anti-spyware software, and other internet security software) and personnel necessary for the Customer to access and use the Products. All such software must be interoperable with Bank's software. Each of the Customer and Bank shall be responsible for the proper functioning, maintenance and security of its own systems, services, software and other equipment.
4.In cases where Bank's website is unexpectedly down or otherwise unavailable, Bank shall, absent a force majeure event, provide other appropriate means for the Customer or its Authorized Persons to instruct Bank or obtain reports from Bank. Provided that Bank complies with its obligation to provide such other appropriate means, Bank shall not be liable for any Liabilities arising out of the Customer's inability to access or use the Products via Bank's website in the absence of Bank's gross negligence, fraud or willful misconduct.
5.Use of the Products may be monitored, tracked, and recorded. In using the Products, the Customer hereby expressly consents to such monitoring, tracking, and recording, and will ensure that all persons using the Products through or on behalf of Customer are advised of and have consented to this monitoring, tracking and recording, and Bank's right to disclose data derived from such activity in accordance with the Agreement, including this Annex. Bank shall own all right, title and interest in the data reflecting Customer's usage of the Products or Bank's website (including, but not limited to, general usage
data and aggregated transaction data). For clarity, the foregoing shall not be deemed to give Bank ownership of, or any rights in or to, the Customer's confidential information (whether or not in aggregated form), the use or disclosure of which shall at all times be subject to Section 10.6 of this Agreement other otherwise agreed to by the Parties.
6.The Customer shall not knowingly use the Products to transmit (i) any virus, worm, or destructive element or any programs or data that may be reasonably expected to interfere with or disrupt the Products or servers connected to the Products; (ii) material that violates the rights of another, including but not limited to the intellectual property rights of another; and (iii) "junk mail", "spam", "chain letters" or unsolicited mass distribution of e-mail.
7.The Customer shall promptly and accurately designate in writing to Bank the geographic location of its users upon written request. The Customer further represents and warrants to Bank that the Customer shall not access the Products from any jurisdiction which Bank informs the Customer or where the Customer has actual knowledge that the Products are not authorized for use due to local regulations or laws, including applicable software export rules and regulations. Prior to submitting any document which designates the persons authorized to act on the Customer's behalf, the Customer shall obtain from each individual referred to in such document all necessary consents to enable Bank to process the data set out therein for the purposes of providing the Products.
8.Bank and Customer will be subject to and shall comply with all Applicable Law concerning restricting collection, use, disclosure, processing and free movement of the Data (collectively, the "Privacy Regulations"). The Privacy Regulations may include, as applicable, the Federal "Privacy of Consumer Financial Information" Regulation (12 CFR Part 40) and Interagency Guidelines Establishing Information Security Standards (App B to 12 CFR Part 30), as amended from time to time, issued pursuant to Section 504 of the Gramm-Leach-Bliley Act of 1999 (15 U.S.C. §6801, et seq.), the Health and Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d), The Data Protection Act 1998 and Directive 95/46/EC, 2009/136/EC and 2002/58/EC of the European Parliament and of the Council, as amended from time to time, and applicable implementing legislation in connection with the protection of individuals with regard to processing of personal data and the free movement of such data.
9.The Customer shall be responsible for the compliance of its Authorized Persons with the terms of the Agreement, including this Annex.
SCHEDULE 1 – AGENT AND CASH NETWORK (CUSTODY & FUND SERVICES)
MARKET |
SUBCUSTODIAN |
CASH CORRESPONDENT BANK |
ARGENTINA |
HSBC Bank Argentina S.A. |
HSBC Bank Argentina S.A. |
|
Bouchard 680, 9th Floor |
Buenos Aires |
|
C1106ABJ Buenos Aires |
|
|
ARGENTINA |
|
AUSTRALIA |
JPMorgan Chase Bank, N.A.** |
Australia and New Zealand Banking |
|
Level 31, 101 Collins Street |
Group Ltd. |
|
Melbourne 3000 |
Melbourne |
|
AUSTRALIA |
|
AUSTRIA |
UniCredit Bank Austria AG |
J.P. Morgan AG** |
|
Julius Tandler Platz 3 |
Frankfurt am Main |
|
A 1090 Vienna |
|
|
AUSTRIA |
|
BAHRAIN |
HSBC Bank Middle East Limited |
HSBC Bank Middle East Limited |
|
Road No 2832 |
Al Seef |
|
Al Seef 428 |
|
|
BAHRAIN |
|
BANGLADESH |
Standard Chartered Bank |
Standard Chartered Bank |
|
Portlink Tower |
Dhaka |
|
Level 6, 67 Gulshan Avenue |
|
|
Gulshan |
|
|
Dhaka 1212 |
|
|
BANGLADESH |
|
BELGIUM |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan A.G.** |
|
Central Plaza Building |
Frankfurt am Main |
|
Rue de Loxum, 25 |
|
|
7th Floor |
|
|
1000 Brussels |
|
|
BELGIUM |
|
BERMUDA |
HSBC Bank Bermuda Limited |
HSBC Bank Bermuda Limited |
|
6 Front Street |
Hamilton |
|
Hamilton HM 11 |
|
|
BERMUDA |
|
BOTSWANA |
Standard Chartered Bank Botswana Limited |
Standard Chartered Bank Botswana |
|
5th Floor, Standard House |
Limited |
|
P.O. Box 496 |
Gaborone |
|
Queens Road, The Mall |
|
|
Gaborone |
|
|
BOTSWANA |
|
BRAZIL |
J.P. Morgan S.A. DTVM** |
J.P. Morgan S.A. DTVM** |
|
Av. Brigadeiro Faria Lima, 3729, Floor 06 |
Sao Paulo |
|
Sao Paulo SP 04538 905 |
|
|
BRAZIL |
|
BULGARIA |
Citibank Europe plc |
ING Bank N.V. |
|
Serdika Offices |
Sofia |
|
10th Floor |
|
|
48 Sitnyakovo Blvd |
|
|
Sofia 1505 |
|
|
BULGARIA |
|
CANADA |
Canadian Imperial Bank of Commerce |
Royal Bank of Canada |
|
1 York Street, Suite 900 |
Toronto |
|
Toronto Ontario M5J 0B6 |
|
|
CANADA |
|
|
Royal Bank of Canada |
|
|
155 Wellington Street West, |
|
|
Toronto Ontario M5V 3L3 |
|
|
CANADA |
|
CHILE |
Banco Santander Chile |
Banco Santander Chile |
|
Bandera 140, Piso 4 |
Santiago |
|
Santiago |
|
|
CHILE |
|
CHINA A |
HSBC Bank (China) Company Limited |
HSBC Bank (China) Company Limited |
SHARE |
33/F, HSBC Building, Shanghai ifc |
Shanghai |
|
8 Century Avenue, Pudong |
|
|
Shanghai 200120 |
|
|
THE PEOPLE'S REPUBLIC OF CHINA |
|
CHINA B |
HSBC Bank (China) Company Limited |
JPMorgan Chase Bank, N.A.** |
SHARE |
33/F, HSBC Building, Shanghai ifc |
New York |
|
8 Century Avenue, Pudong |
|
|
Shanghai 200120 |
JPMorgan Chase Bank, N.A.** |
|
THE PEOPLE'S REPUBLIC OF CHINA |
Hong Kong |
CHINA |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
CONNECT |
48th Floor, One Island East |
Hong Kong |
|
18 Westlands Road, Quarry Bay |
|
|
HONG KONG |
|
COLOMBIA |
Cititrust Colombia S.A. |
Cititrust Colombia S.A. |
|
Carrera 9 A # 99 02, 3rd floor |
Bogotá |
|
Bogota |
|
|
COLOMBIA |
|
*COSTA RICA* Banco BCT, S.A. |
Banco BCT, S.A. |
150 Metros Norte de la Catedral |
San Jose |
Metropolitana |
|
Edificio BCT |
|
San Jose |
|
COSTA RICA |
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
CROATIA |
Privredna banka Zagreb d.d. |
Zagrebacka banka d.d. |
|
Radnicka cesta 50 |
Zagreb |
|
10000 Zagreb |
|
|
CROATIA |
|
CYPRUS |
HSBC Bank plc |
J.P. Morgan AG** |
|
109 111, Messogian Ave. |
Frankfurt am Main |
|
115 26 Athens |
|
|
GREECE |
|
CZECH |
UniCredit Bank Czech Republic and Slovakia, |
Ceskoslovenska obchodni banka, a.s. |
REPUBLIC |
a.s. |
Prague |
|
BB Centrum FILADELFIE |
|
|
Zeletavska 1525 1 |
|
|
140 92 Prague 1 |
|
|
CZECH REPUBLIC |
|
DENMARK |
Nordea Bank AB (publ) |
Nordea Bank AB (publ) |
|
Christiansbro |
Copenhagen |
|
Strandgade 3 |
|
|
P.O. Box 850 |
|
|
DK 0900 Copenhagen |
|
|
DENMARK |
|
EGYPT |
Citibank, N.A. |
Citibank, N.A. |
|
4 Ahmed Pasha Street |
Cairo |
|
Garden City |
|
|
Cairo |
|
|
EGYPT |
|
ESTONIA |
Swedbank AS |
J.P. Morgan AG** |
|
Liivalaia 8 |
Frankfurt am Main |
|
15040 Tallinn |
|
|
ESTONIA |
|
FINLAND |
Nordea Bank AB (publ) |
J.P. Morgan AG** |
|
Aleksis Kiven katu 3 5 |
Frankfurt am Main |
|
FIN 00020 NORDEA Helsinki |
|
|
FINLAND |
|
FRANCE |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan AG** |
|
3, rue d'Antin |
Frankfurt am Main |
|
75002 Paris |
|
|
FRANCE |
|
GERMANY |
Deutsche Bank AG |
J.P. Morgan AG** |
|
Alfred Herrhausen Allee 16 24 |
Frankfurt am Main |
|
D 65760 Eschborn |
|
|
GERMANY |
|
|
J.P. Morgan AG#** |
|
|
Taunustor 1 (TaunusTurm) |
|
|
60310 Frankfurt am Main |
|
|
GERMANY |
|
|
# Custodian for local German custody clients |
|
|
only. |
|
GHANA |
Standard Chartered Bank Ghana Limited |
Standard Chartered Bank Ghana Limited |
|
Accra High Street |
Accra |
|
P.O. Box 768 |
|
|
Accra |
|
|
GHANA |
|
GREECE |
HSBC Bank plc |
J.P. Morgan AG** |
|
Messogion 109 111 |
Frankfurt am Main |
|
11526 Athens |
|
|
GREECE |
|
HONG KONG |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
|
48th Floor, One Island East |
Hong Kong |
|
18 Westlands Road, Quarry Bay |
|
|
HONG KONG |
|
HUNGARY |
Deutsche Bank AG |
ING Bank N.V. |
|
Hold utca 27 |
Budapest |
|
H 1054 Budapest |
|
|
HUNGARY |
|
*ICELAND* |
Islandsbanki hf. |
Islandsbanki hf. |
|
Kirkjusandur 2 |
Reykjavik |
|
IS 155 Reykjavik |
|
|
ICELAND |
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
INDIA |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
|
6th Floor, Paradigm 'B' Wing |
Mumbai |
|
Mindspace, Malad (West) |
|
|
Mumbai 400 064 |
|
|
INDIA |
|
INDONESIA |
PT Bank HSBC Indonesia |
PT Bank HSBC Indonesia |
|
Menara Mulia 25th Floor |
Jakarta |
|
Jl. Jendral Gatot Subroto Kav. 9 11 |
|
|
Jakarta 12930 |
|
|
INDONESIA |
|
IRELAND |
JPMorgan Chase Bank, N.A.** |
J.P. Morgan AG** |
|
25 Bank Street, Canary Wharf |
Frankfurt am Main |
|
London E14 5JP |
|
|
UNITED KINGDOM |
|
ISRAEL |
Bank Leumi le Israel B.M. |
Bank Leumi le Israel B.M. |
|
35, Yehuda Halevi Street |
Tel Aviv |
|
65136 Tel Aviv |
|
|
ISRAEL |
|
ITALY |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan AG** |
|
Piazza Lina Bo Bardi, 3 |
Frankfurt am Main |
|
20124 Milan |
|
|
ITALY |
|
JAPAN |
Mizuho Bank, Ltd. |
JPMorgan Chase Bank, N.A.** |
|
2 15 1, Konan |
Tokyo |
|
Minato ku |
|
|
Tokyo 108 6009 |
|
|
JAPAN |
|
|
The Bank of Tokyo Mitsubishi UFJ, Ltd. |
|
|
1 3 2 Nihombashi Hongoku cho |
|
|
Chuo ku |
|
|
Tokyo 103 0021 |
|
|
JAPAN |
|
JORDAN |
Standard Chartered Bank |
Standard Chartered Bank |
|
Shmeissani Branch |
Amman |
|
Al Thaqafa Street |
|
|
Building # 2 |
|
|
P.O. Box 926190 |
|
|
Amman |
|
|
JORDAN |
|
KAZAKHSTAN |
JSC Citibank Kazakhstan |
Subsidiary Bank Sberbank of Russia Joint |
|
Park Palace, Building A, Floor 2 |
Stock Company |
|
41 Kazybek Bi |
Almaty |
|
Almaty 050010 |
|
|
KAZAKHSTAN |
|
KENYA |
Standard Chartered Bank Kenya Limited |
Standard Chartered Bank Kenya Limited |
|
Chiromo |
Nairobi |
|
48 Westlands Road |
|
|
Nairobi 00100 |
|
|
KENYA |
|
KUWAIT |
HSBC Bank Middle East Limited |
HSBC Bank Middle East Limited |
|
Kuwait City, Sharq Area |
Safat |
|
Abdulaziz Al Sager Street |
|
|
Al Hamra Tower, 37F |
|
|
Safat 13017 |
|
|
KUWAIT |
|
LATVIA |
Swedbank AS |
J.P. Morgan AG** |
|
Balasta dambis 1a |
Frankfurt am Main |
|
Riga LV 1048 |
|
|
LATVIA |
|
LITHUANIA |
AB SEB Bankas |
J.P. Morgan AG** |
|
12 Gedimino pr. |
Frankfurt am Main |
|
LT 2600 Vilnius |
|
|
LITHUANIA |
|
LUXEMBOURG |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan AG** |
|
33, Rue de Gasperich |
Frankfurt am Main |
|
L 5826 Hesperange |
|
|
LUXEMBOURG |
|
*MALAWI* |
Standard Bank Limited, Malawi |
Standard Bank Limited, Malawi |
|
1st Floor Kaomba House |
Blantyre |
|
Cnr Glyn Jones Road & Victoria Avenue |
|
|
Blantyre |
|
|
MALAWI |
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
MALAYSIA |
HSBC Bank Malaysia Berhad |
HSBC Bank Malaysia Berhad |
|
2 Leboh Ampang |
Kuala Lumpur |
|
12th Floor, South Tower |
|
|
50100 Kuala Lumpur |
|
|
MALAYSIA |
|
MAURITIUS |
The Hongkong and Shanghai Banking |
The Hongkong and Shanghai Banking |
|
Corporation Limited |
Corporation Limited |
|
HSBC Centre |
Ebene |
|
18 Cybercity |
|
|
Ebene |
|
|
MAURITIUS |
|
MEXICO |
Banco Nacional de Mexico, S.A. |
Banco Santander (Mexico), S.A. |
|
Act. Roberto Medellin No. 800 3er Piso Norte |
Mexico, D.F. |
|
Colonia Santa Fe |
|
|
01210 Mexico, D.F. |
|
|
MEXICO |
|
MOROCCO |
Société Générale Marocaine de Banques |
Attijariwafa Bank S.A. |
|
55 Boulevard Abdelmoumen |
Casablanca |
|
Casablanca 20100 |
|
|
MOROCCO |
|
NAMIBIA |
Standard Bank Namibia Limited |
The Standard Bank of South Africa |
|
2nd Floor, Town Square Building |
Limited |
|
Corner of Werner List and Post Street Mall |
Johannesburg |
|
P.O. Box 3327 |
|
|
Windhoek |
|
|
NAMIBIA |
|
NETHERLANDS |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan AG** |
|
Herengracht 595 |
Frankfurt am Main |
|
1017 CE Amsterdam |
|
|
NETHERLANDS |
|
NEW ZEALAND |
JPMorgan Chase Bank, N.A.** |
Westpac Banking Corporation |
|
Level 13, 2 Hunter Street |
Wellington |
|
Wellington 6011 |
|
|
NEW ZEALAND |
|
NIGERIA |
Stanbic IBTC Bank Plc |
Stanbic IBTC Bank Plc |
|
Plot 1712 |
Lagos |
|
Idejo Street |
|
|
Victoria Island |
|
|
Lagos |
|
|
NIGERIA |
|
NORWAY |
Nordea Bank AB (publ) |
Nordea Bank AB (publ) |
|
Essendropsgate 7 |
Oslo |
|
P.O. Box 1166 |
|
|
NO 0107 Oslo |
|
|
NORWAY |
|
OMAN |
HSBC Bank Oman S.A.O.G. |
HSBC Bank Oman S.A.O.G. |
|
2nd Floor Al Khuwair |
Seeb |
|
P.O. Box 1727 PC 111 |
|
|
Seeb |
|
|
OMAN |
|
PAKISTAN |
Standard Chartered Bank (Pakistan) Limited |
Standard Chartered Bank (Pakistan) |
|
P.O. Box 4896 |
Limited |
|
Ismail Ibrahim Chundrigar Road |
Karachi |
|
Karachi 74000 |
|
|
PAKISTAN |
|
PERU |
Citibank del Per÷ S.A. |
Banco de Crédito del Per÷ |
|
Av. Canaval y Moreryra 480 Piso 3 |
Lima |
|
San Isidro |
|
|
Lima 27 |
|
|
PERU |
|
PHILIPPINES |
The Hongkong and Shanghai Banking |
The Hongkong and Shanghai Banking |
|
Corporation Limited |
Corporation Limited |
|
7/F HSBC Centre |
Taguig City |
|
3058 Fifth Avenue West |
|
|
Bonifacio Global City |
|
|
1634 Taguig City |
|
|
PHILIPPINES |
|
POLAND |
Bank Handlowy w. Warszawie S.A. |
mBank S.A. |
|
ul. Senatorska 16 |
Warsaw |
|
00 923 Warsaw |
|
|
POLAND |
|
PORTUGAL |
BNP Paribas Securities Services S.C.A. |
J.P. Morgan AG** |
|
Avenida D.Jo÷o II, Lote 1.18.01, Bloco B, |
Frankfurt am Main |
|
7º andar |
|
|
1998 028 Lisbon |
|
|
PORTUGAL |
|
QATAR |
HSBC Bank Middle East Limited |
The Commercial Bank (P.Q.S.C.) |
|
2nd Floor, Ali Bin Ali Tower |
Doha |
|
Building 150 (Airport Road) |
|
|
P.O. Box 57 |
|
|
Doha |
|
|
QATAR |
|
ROMANIA |
Citibank Europe plc |
ING Bank N.V. |
|
145 Calea Victoriei |
Bucharest |
|
1st District |
|
|
010072 Bucharest |
|
|
ROMANIA |
|
RUSSIA |
J.P. Morgan Bank International (Limited |
JPMorgan Chase Bank, N.A.** |
|
Liability Company)** |
New York |
|
10, Butyrsky Val |
|
|
White Square Business Centre |
|
|
Floor 12 |
|
|
Moscow 125047 |
|
|
RUSSIA |
|
SAUDI ARABIA |
HSBC Saudi Arabia |
HSBC Saudi Arabia |
|
2/F HSBC Building |
Riyadh |
|
7267 Olaya Street North, Al Murooj |
|
|
Riyadh 12283 2255 |
|
|
SAUDI ARABIA |
|
SERBIA |
Unicredit Bank Srbija a.d. |
Unicredit Bank Srbija a.d. |
|
Rajiceva 27 29 |
Belgrade |
|
11000 Belgrade |
|
|
SERBIA |
|
SINGAPORE |
DBS Bank Ltd |
Oversea Chinese Banking Corporation |
|
10 Toh Guan Road |
Singapore |
|
DBS Asia Gateway, Level 04 11 (4B) |
|
|
608838 |
|
|
SINGAPORE |
|
SLOVAK |
UniCredit Bank Czech Republic and Slovakia, |
J.P. Morgan AG** |
REPUBLIC |
a.s. |
Frankfurt am Main |
|
Sancova 1/A |
|
|
SK 813 33 Bratislava |
|
|
SLOVAK REPUBLIC |
|
SLOVENIA |
UniCredit Banka Slovenija d.d. |
J.P. Morgan AG** |
|
Smartinska 140 |
Frankfurt am Main |
|
SI 1000 Ljubljana |
|
|
SLOVENIA |
|
SOUTH AFRICA |
FirstRand Bank Limited |
The Standard Bank of South Africa |
|
1 Mezzanine Floor, 3 First Place, Bank City |
Limited |
|
Cnr Simmonds and Jeppe Streets |
Johannesburg |
|
Johannesburg 2001 |
|
|
SOUTH AFRICA |
|
SOUTH KOREA |
Standard Chartered Bank Korea Limited |
Standard Chartered Bank Korea Limited |
|
47 Jongro, Jongro Gu |
Seoul |
|
Seoul 03160 |
|
|
SOUTH KOREA |
|
|
Kookmin Bank Co., Ltd. |
Kookmin Bank Co., Ltd. |
|
84, Namdaemun ro, Jung gu |
Seoul |
|
Seoul 100 845 |
|
|
SOUTH KOREA |
|
SPAIN |
Santander Securities Services, S.A. |
J.P. Morgan AG** |
|
Ciudad Grupo Santander |
Frankfurt am Main |
|
Avenida de Cantabria, s/n |
|
|
Edificio Ecinar, planta baja |
|
|
Boadilla del Monte |
|
|
28660 Madrid |
|
|
SPAIN |
|
SRI LANKA |
The Hongkong and Shanghai Banking |
The Hongkong and Shanghai Banking |
|
Corporation Limited |
Corporation Limited |
|
24 Sir Baron Jayatillaka Mawatha |
Colombo |
|
Colombo 1 |
|
|
SRI LANKA |
|
SWEDEN |
Nordea Bank AB (publ) |
Svenska Handelsbanken |
|
Hamngatan 10 |
Stockholm |
|
SE 105 71 Stockholm |
|
|
SWEDEN |
|
SWITZERLAND |
UBS Switzerland AG |
UBS Switzerland AG |
|
45 Bahnhofstrasse |
Zurich |
|
8021 Zurich |
|
|
SWITZERLAND |
|
TAIWAN |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
|
8th Floor, Cathay Xin Yi Trading Building |
Taipei |
|
No. 108, Section 5, Xin Yi Road |
|
|
Taipei 11047 |
|
|
TAIWAN |
|
*TANZANIA* |
Stanbic Bank Tanzania Limited |
Stanbic Bank Tanzania Limited |
|
Stanbic Centre |
Dar es Salaam |
|
Corner Kinondoni and A.H. Mwinyi Roads |
|
|
P.O. Box 72648 |
|
|
Dar es Salaam |
|
|
TANZANIA |
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
THAILAND |
Standard Chartered Bank (Thai) Public |
Standard Chartered Bank (Thai) Public |
|
Company Limited |
Company Limited |
|
14th Floor, Zone B |
Bangkok |
|
Sathorn Nakorn Tower |
|
|
90 North Sathorn Road Bangrak |
|
|
Silom, Bangrak |
|
|
Bangkok 10500 |
|
|
THAILAND |
|
TRINIDAD AND |
Republic Bank Limited |
Republic Bank Limited |
TOBAGO |
9 17 Park Street |
Port of Spain |
|
Port of Spain |
|
|
TRINIDAD AND TOBAGO |
|
TUNISIA |
Banque Internationale Arabe de Tunisie, S.A. |
Banque Internationale Arabe de Tunisie, |
|
70 72 Avenue Habib Bourguiba |
S.A. |
|
P.O. Box 520 |
Tunis |
|
Tunis 1000 |
|
|
TUNISIA |
|
TURKEY |
Citibank A.S. |
JPMorgan Chase Bank, N.A.** |
|
Inkilap Mah., Yilmaz Plaza |
Istanbul |
|
O. Faik Atakan Caddesi No: 3 |
|
|
34768 Umraniye, Istanbul |
|
|
TURKEY |
|
UGANDA |
Standard Chartered Bank Uganda Limited |
Standard Chartered Bank Uganda Limited |
|
5 Speke Road |
Kampala |
|
P.O. Box 7111 |
|
|
Kampala |
|
|
UGANDA |
|
*UKRAINE* |
PJSC Citibank |
PJSC Citibank |
|
16 G Dilova Street |
Kiev |
|
03150 Kiev |
|
|
UKRAINE |
JPMorgan Chase Bank, N.A.** |
|
|
New York |
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
UNITED ARAB |
HSBC Bank Middle East Limited |
The National Bank of Abu Dhabi |
EMIRATES |
Emaar Square, Level 4, Building No. 5 |
Abu Dhabi |
ADX |
P.O. Box 502601 |
|
|
Dubai |
|
|
UNITED ARAB EMIRATES |
|
UNITED ARAB |
HSBC Bank Middle East Limited |
The National Bank of Abu Dhabi |
EMIRATES |
Emaar Square, Level 4, Building No. 5 |
Abu Dhabi |
DFM |
P.O. Box 502601 |
|
|
Dubai |
|
|
UNITED ARAB EMIRATES |
|
UNITED ARAB |
HSBC Bank Middle East Limited |
JPMorgan Chase Bank, N.A. ** |
EMIRATES |
Emaar Square, Level 4, Building No. 5 |
New York |
NASDAQ |
P.O. Box 502601 |
|
DUBAI |
Dubai |
|
|
UNITED ARAB EMIRATES |
|
UNITED |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
KINGDOM |
25 Bank Street, Canary Wharf |
London |
|
London E14 5JP |
|
|
UNITED KINGDOM |
|
|
Deutsche Bank AG Depository and Clearing |
Varies by currency |
|
Centre |
|
|
10 Bishops Square |
|
|
London E1 6EG |
|
|
UNITED KINGDOM |
|
UNITED |
JPMorgan Chase Bank, N.A.** |
JPMorgan Chase Bank, N.A.** |
STATES |
4 New York Plaza |
New York |
|
New York NY 10004 |
|
|
UNITED STATES |
|
URUGUAY |
Banco Ita÷ Uruguay S.A. |
Banco Ita÷ Uruguay S.A. |
|
Zabala 1463 |
Montevideo |
|
11000 Montevideo |
|
|
URUGUAY |
|
VENEZUELA |
Citibank, N.A. |
Citibank, N.A. |
|
Avenida Casanova |
Caracas |
|
Centro Comercial El Recreo |
|
|
Torre Norte, Piso 19 |
|
|
Caracas 1050 |
|
|
VENEZUELA |
|
VIETNAM |
HSBC Bank (Vietnam) Ltd. |
HSBC Bank (Vietnam) Ltd. |
|
Centre Point |
Ho Chi Minh City |
|
106 Nguyen Van Troi Street |
|
|
Phu Nhuan District |
|
|
Ho Chi Minh City |
|
|
VIETNAM |
|
*WAEMU |
Standard Chartered Bank C÷te d'Ivoire SA |
Standard Chartered Bank C÷te d'Ivoire SA |
BENIN, |
23 Boulevard de la Republique 1 |
Abidjan |
BURKINA |
01 B.P. 1141 |
|
FASO, GUINEA |
Abidjan 17 |
|
BISSAU, IVORY |
IVORY COAST |
|
COAST, MALI, |
|
|
NIGER, |
|
|
SENEGAL, |
|
|
TOGO* |
|
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
ZAMBIA |
Standard Chartered Bank Zambia Plc |
Standard Chartered Bank Zambia Plc |
|
Standard Chartered House |
Lusaka |
|
Cairo Road |
|
|
P.O. Box 32238 |
|
|
Lusaka 10101 |
|
|
ZAMBIA |
|
*ZIMBABWE* |
Stanbic Bank Zimbabwe Limited |
Stanbic Bank Zimbabwe Limited |
|
Stanbic Centre, 3rd Floor |
Harare |
|
59 Samora Machel Avenue |
|
|
Harare |
|
|
ZIMBABWE |
|
*RESTRICTED SERVICE ONLY. PLEASE CONTACT YOUR RELATIONSHIP MANAGER FOR FURTHER INFORMATION*
** J.P. Morgan affiliate |
Correspondent banks are listed for information only. |
This document is for information only and its contents are subject to change. This document is intended neither to influence your investment decisions nor to amend or supplement any agreement governing your relations with J.P. Morgan. Neither this document nor any of its contents may be disclosed to any third party or used for any other purpose without the proper written consent of J.P. Morgan. J.P. Morgan has gathered the information from a source it considers reliable, however, it cannot be responsible for inaccuracies, incomplete information or updating of the information furnished hereby.
SCHEDULE 3 – SECURITIES DEPOSITORIES
Market |
Depository |
Instruments |
ARGENTINA |
CVSA |
Equity, Corporate Debt, Government Debt |
|
(Caja de Valores S.A.) |
|
AUSTRALIA |
ASX Settlement |
Equity |
|
(ASX Settlement Pty Limited) |
|
|
Austraclear |
Corporate Debt, Government Debt |
|
(Austraclear Limited) |
|
AUSTRIA |
OeKB CSD GmbH |
Equity, Corporate Debt, Government Debt |
|
(Oesterreichische Kontrollbank CSD |
|
|
GmbH) |
|
BAHRAIN |
CSD |
Equity, Corporate Debt |
|
(Bahrain Bourse - Clearing, Settlement and |
|
|
Central Depository) |
|
BANGLADESH |
BB |
Government Debt |
|
(Bangladesh Bank) |
|
|
CDBL |
Equity, Corporate Debt |
|
(Central Depository Bangladesh Limited) |
|
BELGIUM |
Euroclear Belgium |
Equity, Corporate Debt |
|
(Euroclear Belgium SA/NV) |
|
|
NBB |
Corporate Debt, Government Debt |
|
(The National Bank of Belgium) |
|
BERMUDA |
BSD |
Equity, Corporate Debt, Government Debt |
|
(Bermuda Stock Exchange - Bermuda |
|
|
Securities Depository) |
|
BOTSWANA |
BoB |
Government Debt |
|
(Bank of Botswana) |
|
|
CSDB |
Equity, Corporate Debt |
|
(Central Securities Depository of Botswana |
|
|
Ltd) |
|
BRAZIL |
BM&FBOVESPA |
Equity |
|
(B3 S.A. - BM&FBOVESPA) |
|
|
CETIP |
Corporate Debt |
|
(B3 S.A. - CETIP) |
|
|
SELIC |
Government Debt |
|
(Banco Central do Brasil - Sistema Especial |
|
|
de Liquida÷÷o e Cust÷dia) |
|
BULGARIA |
CDAD |
Equity, Corporate Debt |
|
(Central Depository AD) |
|
|
BNB |
Government Debt |
|
(Bulgarian National Bank) |
|
CANADA |
CDS Clearing |
Equity, Corporate Debt, Government Debt |
|
(CDS Clearing and Depository Services |
|
|
Inc.) |
|
CHILE |
DCV |
Equity, Corporate Debt, Government Debt |
|
(Dep÷sito Central de Valores S.A.) |
|
CHINA A-SHARE |
CSDCC |
Equity, Corporate Debt, Government Debt |
|
(China Securities Depository and Clearing |
|
|
Corporation Limited) |
|
|
SCH |
Short-term Corporate Debt |
|
(Shanghai Clearing House) |
|
|
CCDC |
Corporate Debt, Government Debt |
|
(China Central Depository & Clearing Co., |
|
|
Ltd.) |
|
CHINA B-SHARE |
CSDCC |
Equity |
|
(China Securities Depository and Clearing |
|
|
Corporation Limited) |
|
CHINA |
HKSCC - for China Connect |
Equity |
CONNECT |
(Hong Kong Securities Clearing Company |
|
|
Limited) |
|
COLOMBIA |
DCV |
Government Debt |
|
(Banco de la Républica de Colombia - |
|
|
Dep÷sito Central de Valores) |
|
|
DECEVAL |
Equity, Corporate Debt, Government Debt |
|
(Dep÷sito Centralizado de Valores de |
|
|
Colombia S.A.) |
|
COSTA RICA |
InterClear |
Equity, Corporate Debt, Government Debt |
|
(InterClear, S.A.) |
|
CROATIA |
SKDD |
Equity, Corporate Debt, Government Debt |
|
(Središnje klirinško depozitarno društvo |
|
|
d.d.) |
|
CYPRUS |
CDCR |
Equity, Corporate Debt, Government Debt |
|
(Cyprus Stock Exchange - Central |
|
|
Depository and Central Registry) |
|
CZECH |
CNB |
Short-Term Corporate Debt, Short-Term |
REPUBLIC |
(Ceská národn÷ banka) |
Government Debt |
|
CDCP |
Equity, Long-Term Corporate Debt, Long- |
|
(Centráln÷ depozitár cenn÷ch pap÷ru, a.s.) |
Term Government Debt |
DENMARK |
VP |
Equity, Corporate Debt, Government Debt |
|
(VP Securities A/S) |
|
EGYPT |
MCDR |
Equity, Corporate Debt, Treasury Bonds |
|
(Misr for Central Clearing, Depository and |
|
|
Registry) |
|
|
CBE |
Treasury Bills |
|
(Central Bank of Egypt) |
|
ESTONIA |
ECSD |
Equity, Corporate Debt, Government Debt |
|
(Eesti V÷÷rtpaberikeskus AS) |
|
FINLAND |
Euroclear Finland |
Equity, Corporate Debt, Government Debt |
|
(Euroclear Finland Oy) |
|
FRANCE |
Euroclear France |
Equity, Corporate Debt, Government Debt |
|
(Euroclear France SA) |
|
GERMANY |
CBF |
Equity, Corporate Debt, Government Debt |
|
(Clearstream Banking AG) |
|
GHANA |
CSD |
Equity, Corporate Debt, Government Debt |
|
(Central Securities Depository (GH) Ltd.) |
|
GREECE |
BoG |
Government Debt |
|
(Bank of Greece) |
|
|
ATHEXCSD |
Equity, Corporate Debt |
|
(Hellenic Central Securities Depository) |
|
HONG KONG |
HKSCC |
Equity, Corporate Debt, Government Debt |
|
(Hong Kong Securities Clearing Company |
|
|
Limited) |
|
|
CMU |
Corporate Debt, Government Debt |
|
(Hong Kong Monetary Authority - Central |
|
|
Moneymarkets Unit) |
|
HUNGARY |
KELER |
Equity, Corporate Debt, Government Debt |
|
(K÷zponti Elszámol÷ház és ÷rtéktár |
|
|
(Budapest) Zrt.) |
|
ICELAND |
Nasdaq CSD Iceland hf. |
Equity, Corporate Debt, Government Debt |
|
(Nasdaq ver÷bréfami÷st÷÷ hf.) |
|
INDIA |
NSDL |
Equity, Corporate Debt |
|
(National Securities Depository Limited) |
|
|
CDSL |
Equity, Corporate Debt |
|
(Central Depository Services (India) |
|
|
Limited) |
|
|
RBI |
Government Debt |
|
(Reserve Bank of India) |
|
INDONESIA |
KSEI |
Equity, Corporate Debt, Government Debt* |
|
(PT Kustodian Sentral Efek Indonesia) |
(*acts as sub-registry) |
|
BI |
Government Debt |
|
(Bank Indonesia) |
|
INTERNATIONAL |
Euroclear Bank |
Internationally Traded Debt, Equity |
SECURITIES |
(Euroclear Bank SA/NV) |
|
MARKET |
CBL |
Internationally Traded Debt, Equity |
|
|
(Clearstream Banking S.A.) |
|
IRELAND |
EUI |
Equity, Corporate Debt |
|
(Euroclear U.K. & Ireland Limited) |
|
ISRAEL |
TASE-CH |
Equity, Corporate Debt, Government Debt |
|
(Tel-Aviv Stock Exchange Clearing House |
|
|
Ltd.) |
|
ITALY |
Monte Titoli |
Equity, Corporate Debt, Government Debt |
|
(Monte Titoli S.p.A.) |
|
JAPAN |
JASDEC |
Equity, Corporate Debt |
|
(Japan Securities Depository Center, |
|
|
Incorporated) |
|
|
BOJ |
Government Debt |
|
(Bank of Japan) |
|
JORDAN |
SDC |
Equity, Corporate Debt |
|
(Securities Depository Center) |
|
KAZAKHSTAN |
KACD |
Equity, Corporate Debt, Government Debt |
|
(Central Securities Depository Joint-Stock |
|
|
Company) |
|
KENYA |
CDS |
Government Debt |
|
(Central Bank of Kenya - Central |
|
|
Depository System) |
|
|
CDSC |
Equity, Corporate Debt |
|
(Central Depository and Settlement |
|
|
Corporation Limited) |
|
KUWAIT |
KCC |
Equity, Corporate Debt |
|
(The Kuwait Clearing Company K.S.C.) |
|
LATVIA |
LCD |
Equity, Corporate Debt, Government Debt |
|
(Latvian Central Depository) |
|
LITHUANIA |
CSDL |
Equity, Corporate Debt, Government Debt |
|
(Central Securities Depository of |
|
|
Lithuania) |
|
LUXEMBOURG |
CBL |
Equity, Corporate Debt, Government Debt |
|
(Clearstream Banking S.A.) |
|
MALAYSIA |
Bursa Depository |
Equity, Corporate Debt |
|
(Bursa Malaysia Depository Sdn Bhd) |
|
|
BNM |
Government Debt |
|
(Bank Negara Malaysia) |
|
MAURITIUS |
CDS |
Equity, Corporate Debt |
|
(Central Depository & Settlement Co. Ltd) |
|
|
BOM |
Government Debt |
|
(Bank of Mauritius) |
|
MEXICO |
Indeval |
Equity, Corporate Debt, Government Debt |
|
(S.D. Indeval S.A. de C.V.) |
|
MOROCCO |
Maroclear |
Equity, Corporate Debt, Government Debt |
|
(Maroclear) |
|
NETHERLANDS |
Euroclear Nederland |
Equity, Corporate Debt, Government Debt |
|
(Euroclear Nederland) |
|
NEW ZEALAND |
NZCSD |
Equity, Corporate Debt, Government Debt |
|
(New Zealand Central Securities |
|
|
Depository Limited) |
|
NIGERIA |
CSCS |
Equity, Corporate Debt |
|
(Central Securities Clearing System Plc) |
|
|
CBN |
Government Debt |
|
(Central Bank of Nigeria) |
|
NORWAY |
VPS |
Equity, Corporate Debt, Government Debt |
|
(Verdipapirsentralen ASA) |
|
OMAN |
MCD |
Equity, Corporate Debt, Government Debt |
|
(Muscat Clearing and Depository Co. |
|
|
(S.A.O.C)) |
|
PAKISTAN |
SBP |
Government Debt |
|
(State Bank of Pakistan) |
|
|
CDC |
Equity, Corporate Debt |
|
(Central Depository Company of Pakistan |
|
|
Limited) |
|
PERU |
CAVALI |
Equity, Corporate Debt, Government Debt |
|
(CAVALI S.A. I.C.L.V.) |
|
PHILIPPINES |
PDTC |
Equity, Corporate Debt |
|
(Philippine Depository and Trust |
|
|
Corporation) |
|
|
RoSS |
Government Debt |
|
(Bureau of Treasury - Registry of Scripless |
|
|
Securities) |
|
POLAND |
KDPW |
Equity, Corporate Debt, Long-Term |
|
(Krajowy Depozyt Papier÷w |
Government Debt |
|
Wartosciowych S.A.) |
|
|
RPW |
Short-Term Government Debt |
|
(National Bank of Poland - Registry of |
|
|
Securities) |
|
PORTUGAL |
INTERBOLSA |
Equity, Corporate Debt, Government Debt |
|
(Sociedade Gestora de Sistemas de |
|
|
Liquida÷÷o e de Sistemas Centralizados de |
|
|
Valores Mobiliários, S.A.) |
|
QATAR |
QCSD |
Equity, Government Debt |
|
(Qatar Central Securities Depository) |
|
ROMANIA |
CD S.A. |
Equity, Corporate Debt |
|
(Central Depository S.A.) |
|
|
NBR |
Government Debt |
|
(National Bank of Romania) |
|
RUSSIA |
NSD |
Equity, Corporate Debt, Government Debt |
|
(National Settlement Depository) |
|
SAUDI ARABIA |
SDCC |
Equity, Corporate Debt, Government Debt |
|
(Securities Depository Center Company) |
|
SERBIA |
CSD |
Equity, Corporate Debt, Government Debt |
|
(Central Securities Depository and Clearing |
|
|
House) |
|
SINGAPORE |
CDP |
Equity, Corporate Debt, Government |
|
(The Central Depository (Pte) Limited) |
Securities |
|
MAS |
Government Securities |
|
(Monetary Authority of Singapore) |
|
SLOVAK |
CDCP |
Equity, Corporate Debt, Government Debt |
REPUBLIC |
(Centrálny depozitár cenn÷ch papierov SR, |
|
|
a.s.) |
|
SLOVENIA |
KDD |
Equity, Corporate Debt, Government Debt |
|
(Centralna klirinško depotna družba d.d.) |
|
SOUTH AFRICA |
Strate |
Equity, Corporate Debt, Government Debt |
|
(Strate (Pty) Limited) |
|
SOUTH KOREA |
KSD |
Equity, Corporate Debt, Government Debt |
|
(Korea Securities Depository) |
|
SPAIN |
IBERCLEAR |
Equity, Corporate Debt, Government Debt |
|
(Sociedad de Sistemas) |
|
SRI LANKA |
CDS |
Equity, Corporate Debt |
|
(Central Depository Systems (Pvt.) Ltd.) |
|
|
LankaSecure |
Government Debt |
|
(Central Bank of Sri Lanka - LankaSecure) |
|
SWEDEN |
Euroclear Sweden |
Equity, Corporate Debt, Government Debt |
|
(Euroclear Sweden AB) |
|
SWITZERLAND |
SIS |
Equity, Corporate Debt, Government Debt |
|
(SIX SIS AG) |
|
TAIWAN |
TDCC |
Equity, Corporate Debt |
|
(Taiwan Depository and Clearing |
|
|
Corporation) |
|
|
CBC |
Government Debt |
|
(Central Bank of the Republic of China |
|
|
(Taiwan)) |
|
TANZANIA |
CDS |
Equity, Corporate Debt |
|
(Dar es Salaam Stock Exchange Central |
|
|
Depository System) |
|
THAILAND |
TSD |
Equity, Corporate Debt, Government Debt |
|
(Thailand Securities Depository Company |
|
|
Limited) |
|
TRINIDAD AND |
TTCD |
Equity, Corporate Debt, Government Debt |
TOBAGO |
(Trinidad and Tobago Central Depository |
|
|
Limited) |
|
TUNISIA |
Tunisie Clearing |
Equity, Corporate Debt, Government Debt |
|
(Tunisie Clearing) |
|
TURKEY |
CBRT |
Government Debt |
|
(T÷rkiye Cumhuriyet Merkez Bankasi |
|
|
A.S.) |
|
|
CRA |
Equity, Corporate Debt, Government Debt |
|
(Merkezi Kayit Kurulusu A.S.) |
|
UGANDA |
CSD |
Government Debt |
|
(Bank of Uganda - Central Securities |
|
|
Depository) |
|
|
SCD |
Equity, Corporate Debt |
|
(Uganda Securities Exchange - Securities |
|
|
Central Depository) |
|
UKRAINE |
NDU |
Equity, Corporate Debt |
|
(National Depository of Ukraine) |
|
UNITED ARAB |
ADX |
Equity, Corporate Debt, Government Debt |
EMIRATES - ADX |
(Abu Dhabi Securities Exchange) |
|
UNITED ARAB |
DFM |
Equity, Corporate Debt, Government Debt |
EMIRATES - DFM |
(Dubai Financial Market) |
|
UNITED ARAB |
NASDAQ Dubai |
Corporate Debt |
EMIRATES - |
(NASDAQ Dubai Limited) |
|
NASDAQ DUBAI |
|
|
UNITED |
EUI |
Equity, Corporate Debt, Government Debt |
KINGDOM |
(Euroclear U.K. & Ireland Limited) |
|
UNITED STATES |
FRB |
Government Debt, Mortgage Backed |
|
(Federal Reserve Bank) |
Securities |
|
DTC |
Equity, Corporate Debt |
|
(Depository Trust Company) |
|
URUGUAY |
BCU |
Government Debt |
|
(Banco Central del Uruguay) |
|
VENEZUELA |
CVV |
Equity, Corporate Debt |
|
(Caja Venezolana de Valores, S.A.) |
|
|
BCV |
Government Debt |
|
(Banco Central de Venezuela) |
|
VIETNAM |
VSD |
Equity, Corporate Debt, Government Debt |
|
(Vietnam Securities Depository) |
|
WAEMU - BENIN, |
DC/BR |
Equity, Corporate Debt, Government Debt |
BURKINA FASO, |
(Le Dépositaire Central / Banque de |
|
GUINEA-BISSAU, |
Règlement) |
|
IVORY COAST, |
|
|
MALI, NIGER, |
|
|
SENEGAL, TOGO |
|
|
ZAMBIA |
LuSE CSD |
Equity, Corporate Debt, Treasury Bonds |
|
(Lusaka Stock Exchange Central Shares |
|
|
Depository) |
|
|
BoZ |
Government Debt |
|
(Bank of Zambia) |
|
ZIMBABWE |
CDC |
Equity |
|
(Chengetedzai Depository Company |
|
|
Limited) |
|
This document is for information only and its contents are subject to change. This document is intended neither to influence your investment decisions nor to amend or supplement any agreement governing your relations with J.P. Morgan. Neither this document nor any of its contents may be disclosed to any third party or used for any other purpose without the proper written consent of J.P. Morgan. J.P. Morgan has gathered the information from a source it considers reliable, however, it cannot be responsible for inaccuracies, incomplete information or updating of the information furnished hereby.
EXHIBIT 1—Amendment 2
The following is an amendment, dated as of December 22, 2017 ("Amendment"), to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. ("Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). This Amendment serves to update the names of the Trusts and certain of their portfolios (each, a "Fund") listed on Exhibit 1. Bank and Customer hereby agree that all of the terms and conditions as set forth in the Agreement are hereby incorporated by reference with respect to the following Trusts and Funds listed below. Capitalized terms used but not defined in this Amendment have the meanings ascribed to them in the Agreement.
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund
Vanguard S&P 500 Value Index Fund
Vanguard S&P Mid-Cap 400 Growth Index Fund
Vanguard S&P Mid-Cap 400 Index Fund
Vanguard S&P Mid-Cap 400 Value Index Fund
Vanguard S&P Small-Cap 600 Growth Index Fund
Vanguard S&P Small-Cap 600 Index Fund
Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund
Vanguard Intermediate-Term Bond Index Fund
Vanguard Long-Term Bond Index Fund
Vanguard Short-Term Bond Index Fund
Vanguard Total Bond Market Index Fund
Vanguard Total Bond Market II Index Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund
Vanguard Institutional Target Retirement 2020 Fund
Vanguard Institutional Target Retirement 2025 Fund
Vanguard Institutional Target Retirement 2030 Fund
Vanguard Institutional Target Retirement 2035 Fund
Vanguard Institutional Target Retirement 2040 Fund
Vanguard Institutional Target Retirement 2045 Fund
Vanguard Institutional Target Retirement 2050 Fund
Vanguard Institutional Target Retirement 2055 Fund
Vanguard Institutional Target Retirement 2060 Fund
Vanguard Institutional Target Retirement 2065 Fund
Vanguard Institutional Target Retirement Income Fund
Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard REIT II Index Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund
Vanguard Total Corporate Bond ETF
Vanguard Specialized Funds
Vanguard Precious Metals and Mining Fund
Vanguard REIT Index Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Payout Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
REIT Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
(Rest of page left intentionally blank)
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Structured Broad Market Fund
Vanguard Structured Large-Cap Equity Fund
Vanguard Scottsdale Funds Vanguard Explorer Value Fund Vanguard Russell 1000 Index Fund Vanguard Russell 1000 Value Index Fund Vanguard Russell 1000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard REIT Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard REIT Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunications Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
(Rest of page left intentionally blank)
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
INVESTMENT COMPANIES LISTED ON |
|
EXHIBIT 1 HERETO |
By: |
By: |
/s/ Thomas J. Higgins |
Name: |
Name: |
Thomas J. Higgins |
Title: |
Title: |
Chief Financial Officer |
AMENDMENT TO AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
The following is an amendment, dated July __, 2018, (the "Amendment") to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. (the "Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
1.Information Concerning Deposits at Bank. Section 10.5(c) of the Agreement is hereby deleted in its entirety and replaced with the following:
(c) In the event that (i) Bank incurs a loss attributable to Country Risk with respect to any cash balance it maintains on deposit at a Subcustodian or other correspondent bank in regard to its global custody or trust businesses in the country where the Subcustodian or other correspondent bank is located or (ii) J.P. Morgan Bank International LLC incurs a loss attributable to Country Risk with respect to any cash balance it maintains on deposit at its correspondent bank in Russia in regard to its direct custody business, Bank may set such loss off against Customer's Cash Account to the extent that such loss is directly attributable to Customer's investments in that market.
2.Exhibit 1. Exhibit 1 to the Agreement is hereby deleted in its entirety and replaced with the following:
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund Vanguard S&P 500 Value Index Fund Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund
Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard REIT II Index Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund
Vanguard Short-Term Treasury Index Fund
Vanguard Total Corporate Bond ETF
Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Precious Metals and Mining Fund
Vanguard REIT Index Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Payout Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
REIT Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Structured Broad Market Fund
Vanguard Structured Large-Cap Equity Fund
Vanguard Scottsdale Funds Vanguard Explorer Value Fund Vanguard Russell 1000 Index Fund Vanguard Russell 1000 Value Index Fund Vanguard Russell 1000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard REIT Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard REIT Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunications Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
3.Miscellaneous. Except as modified by this Amendment, the Agreement shall remain unmodified, in full force and effect and all terms and conditions of the Agreement are hereby incorporated into and made part of this Amendment as if fully set forth herein.
(Rest of page left intentionally blank)
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
|
INVESTMENT COMPANIES LISTED ON |
|
|
EXHIBIT 1 HERETO |
By: |
/s/ Brian Eckert |
By: |
/s/ Thomas J. Higgins |
Name: |
Brian Eckert |
Name: |
Thomas J. Higgins |
Title: |
Executive Director |
Title: |
Chief Financial Officer |
AMENDMENT TO AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
The following is an amendment, dated October _2_, 2018, (the "Amendment") to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. (the "Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
1.Exhibit 1. Exhibit 1 to the Agreement is hereby deleted in its entirety and replaced with the following:
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund Vanguard S&P 500 Value Index Fund Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Payout Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
REIT Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG US Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Structured Broad Market Fund
Vanguard Structured Large-Cap Equity Fund
Vanguard Scottsdale Funds
Vanguard Explorer Value Fund
Vanguard Russell 1000 Index Fund
Vanguard Russell 1000 Value Index Fund
Vanguard Russell 1000 Growth Index Fund
Vanguard Russell 2000 Index Fund
Vanguard Russell 2000 Value Index Fund
Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard REIT Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Communication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
2.Miscellaneous. Except as modified by this Amendment, the Agreement shall remain unmodified, in full force and effect and all terms and conditions of the Agreement are hereby incorporated into and made part of this Amendment as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
|
INVESTMENT COMPANIES LISTED ON |
|
|
EXHIBIT 1 HERETO |
By: |
/s/ Alan Liang |
By: |
/s/ John Bendl |
Name: |
Alan Liang |
Name: |
John Bendl |
Title: |
Vice President |
Title: |
Chief Accounting Officer |
|
|
|
Controller |
AMENDMENT TO AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
The following is an amendment, dated April _9_, 2019, (the "Amendment") to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. (the "Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
3.Exhibit 1. Exhibit 1 to the Agreement is hereby deleted in its entirety and replaced with the following:
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund Vanguard S&P 500 Value Index Fund Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard Global ESG Select Stock Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Payout Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
REIT Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG US Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with
respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Structured Broad Market Fund
Vanguard Structured Large-Cap Equity Fund
Vanguard Scottsdale Funds
Vanguard Explorer Value Fund
Vanguard Russell 1000 Index Fund
Vanguard Russell 1000 Value Index Fund
Vanguard Russell 1000 Growth Index Fund
Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard REIT Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Communication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
4.Miscellaneous. Except as modified by this Amendment, the Agreement shall remain unmodified, in full force and effect and all terms and conditions of the Agreement are hereby incorporated into and made part of this Amendment as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
|
INVESTMENT COMPANIES LISTED ON |
|
|
EXHIBIT 1 HERETO |
By: |
/s/ Carl Mehldau |
By: |
/s/ Thomas J. Higgins |
Name: |
Carl Mehldau |
Name: |
Thomas J. Higgins |
Title: |
Vice President |
Title: |
Chief Financial Officer |
AMENDMENT TO AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
The following is an amendment, dated August _12_, 2019, (the "Amendment") to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. (the "Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
5.Exhibit 1. Exhibit 1 to the Agreement is hereby deleted in its entirety and replaced with the following:
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund Vanguard S&P 500 Value Index Fund Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Horizon Funds
Vanguard International Core Stock Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard Global ESG Select Stock Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Payout Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
REIT Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG US Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Morgan Growth Fund
Vanguard Morgan Growth Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Structured Broad Market Fund
Vanguard Structured Large-Cap Equity Fund
Vanguard Scottsdale Funds
Vanguard Explorer Value Fund
Vanguard Russell 1000 Index Fund
Vanguard Russell 1000 Value Index Fund Vanguard Russell 1000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard REIT Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Communication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
6.Miscellaneous. Except as modified by this Amendment, the Agreement shall remain unmodified, in full force and effect and all terms and conditions of the Agreement are hereby incorporated into and made part of this Amendment as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
|
INVESTMENT COMPANIES LISTED ON |
|
|
EXHIBIT 1 HERETO |
By: |
/s/ Carl Mehldau |
By: |
/s/ Peter C. Mahoney |
Name: |
Carl Mehldau |
Name: |
Peter C. Mahoney |
Title: |
Vice President |
Title: |
Controller |
AMENDMENT TO AMENDED AND RESTATED GLOBAL CUSTODY AGREEMENT
The following is an amendment, dated August 6, 2020, (the "Amendment") to the Amended and Restated Global Custody Agreement, dated August 14, 2017, as amended from time to time (the "Agreement"), by and between JPMorgan Chase Bank, N.A. (the "Bank") and each open-end management investment company listed on Exhibit 1 thereto (each, a "Trust"). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
7.Exhibit 1. Exhibit 1 to the Agreement is hereby deleted in its entirety and replaced with the following:
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund Vanguard S&P 500 Value Index Fund Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Horizon Funds
Vanguard International Core Stock Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund
Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard Global ESG Select Stock Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Allocation Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio
Mid-Cap Index Portfolio
Moderate Allocation Portfolio
Real Estate Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG U.S. Corporate Bond ETF
Vanguard ESG U.S. Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Malvern Funds
Vanguard U.S. Value Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Scottsdale Funds
Vanguard Explorer Value Fund
Vanguard Russell 1000 Index Fund
Vanguard Russell 1000 Value Index Fund
Vanguard Russell 1000 Growth Index Fund
Vanguard Russell 2000 Index Fund
Vanguard Russell 2000 Value Index Fund
Vanguard Russell 2000 Growth Index Fund
Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard Real Estate Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Communication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
8.Miscellaneous. Except as modified by this Amendment, the Agreement shall remain unmodified, in full force and effect and all terms and conditions of the Agreement are hereby incorporated into and made part of this Amendment as if fully set forth herein.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
JPMORGAN CHASE BANK, N.A. |
EACH OF THE OPEN-END MANAGEMENT |
|
|
INVESTMENT COMPANIES LISTED ON |
|
|
EXHIBIT 1 HERETO |
By: |
/s/ Carl Mehldau |
By: |
/s/ John Bendl |
Name: |
Carl Mehldau |
Name: |
John Bendl |
Title: |
Vice President |
Title: |
Chief Financial Officer |
THIRD AMENDMENT TO THE AMENDED AND RESTATED GLOBAL CUSTODY
AGREEMENT
This Amendment (this "Amendment") to the AMENDED AND RESTATEDGLOBAL CUSTODY AGREEMENT, dated August 14, 2017, as amended or supplementedas of the date hereof (the "Agreement"), between JPMorgan Chase Bank, N.A. ("Bank") and each open-ended management investment company listed on Exhibit 1 attached hereto (each,a "Trust") is entered into and effective as of January 25 , 2022 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, each Trust and Bank entered into the Agreement pursuant to which Bank provides custody and related services as more fully described therein; and
WHEREAS, the parties now wish to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereby agree as follows:
1.Definitions. Terms defined in the Agreement shall, save to the extent that the context otherwise requires, bear the same respective meanings in this Amendment.
2.Amendments. The Agreement shall be amended as follows:
a.The current Exhibit 1 is hereby deleted in its entirely and replaced with the revised Exhibit 1 attached hereto.
b.Save as varied by this Amendment, the Agreement is confirmed and shall remain in full force and effect.
3.Representations. Each party represents to the other party that all representations contained in the Agreement are true and accurate as of the date of this Amendment, and that such representations are deemed to be given or repeated by each party, as the case may be, on the date of this Amendment.
4.Entire Agreement. This Amendment and the Agreement and any documents referred to in each of them, constitutes the whole agreement between the parties relating to their subject matter and supersedes and extinguishes any other drafts, agreements, undertakings, representations, warranties and arrangements of any nature, whether in writing or oral, relating to such subject matter. If any of the provisions of this Amendment are inconsistent with or in conflict with any of the provisions of theAgreement, then, to the extent of any such inconsistency or conflict, the provisions of this Amendment shall prevail.
5.Counterparts. This Amendment may be executed in several counterparts each of which will be deemed to be an original and together will constitute one and the same agreement.
6.Law and Jurisdiction. This Amendment shall be construed, regulated, and administered under the laws of the United States or State of New York, as applicable, without regard to New York's principles regarding conflict of laws.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.
EACH OF THE OPEN-END MANAGEMENT
INVESTMENT COMPANIES LISTED ON
SCHEDULE A HERETO
By: /s/Christine M. Buchanan
Name: Christine M. Buchanan
Title: Funds CFO
JPMORGAN CHASE BANK, N.A.
By: /s/Carl Mehldau
Name: Carl Mehldau
Title: Vice President
EXHIBIT 1
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund
Vanguard S&P 500 Value Index Fund
Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Institutional Target Retirement 2015 Fund Vanguard Institutional Target Retirement 2020 Fund Vanguard Institutional Target Retirement 2025 Fund Vanguard Institutional Target Retirement 2030 Fund Vanguard Institutional Target Retirement 2035 Fund Vanguard Institutional Target Retirement 2040 Fund Vanguard Institutional Target Retirement 2045 Fund Vanguard Institutional Target Retirement 2050 Fund Vanguard Institutional Target Retirement 2055 Fund Vanguard Institutional Target Retirement 2060 Fund Vanguard Institutional Target Retirement 2065 Fund Vanguard Institutional Target Retirement Income Fund Vanguard Target Retirement 2015 Fund Vanguard Target Retirement 2020 Fund Vanguard Target Retirement 2025 Fund Vanguard Target Retirement 2030 Fund Vanguard Target Retirement 2035 Fund Vanguard Target Retirement 2040 Fund Vanguard Target Retirement 2045 Fund Vanguard Target Retirement 2050 Fund Vanguard Target Retirement 2055 Fund Vanguard Target Retirement 2060 Fund Vanguard Target Retirement 2065 Fund Vanguard Target Retirement Income Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Horizon Funds
Vanguard International Core Stock Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Multi-Sector Income Bond Fund
Vanguard Core-Plus Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF
Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard Global ESG Select Stock Fund
Vanguard ST AR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Allocation Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio Mid-Cap Index Portfolio
Moderate Allocation PortfolioReal Estate Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard Advice Select International Growth Fund
Vanguard Advice Select Dividend Growth Fund
Vanguard Advice Select Global Value Fund
Vanguard China Select Stock Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG U.S. Corporate Bond ETF
Vanguard ESG U.S. Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Scottsdale Funds Vanguard Explorer Value Fund Vanguard Russell I 000 Index Fund Vanguard Russell 1000 Value Index Fund Vanguard Russell I 000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard Real Estate Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Advice Select International Growth Fund
Vanguard Advice Select Dividend Growth Fund
Vanguard Advice Select Global Value Fund
Vanguard China Select Stock Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
FOURTH AMENDMENT TO THE AMENDED AND RESTATED GLOBAL
CUSTODYAGREEMENT
This Amendment (this "Amendment") to the AMENDED AND RESTATEDGLOBAL CUSTODY AGREEMENT, dated August 14, 2017, as amended or supplementedas of the date hereof (the "Agreement"), between JPMorgan Chase Bank, N.A. ("Bank") and each open-ended management investment company listed on Exhibit 1 attached hereto (each,a "Trust") is
entered into and effective as of March 25, 2022 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, each Trust and Bank entered into the Agreement pursuant to which Bank provides custody and related services as more fully described therein; and
WHEREAS, the parties now wish to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereby agree as follows:
1.Definitions. Terms defined in the Agreement shall, save to the extent that the context otherwise requires, bear the same respective meanings in this Amendment.
2.Amendments. The Agreement shall be amended as follows:
a.The current Exhibit 1 is hereby deleted in its entirely and replaced with the revised Exhibit 1 attached hereto.
b.Save as varied by this Amendment, the Agreement is confirmed and shall remain in full force and effect.
3.Representations. Each party represents to the other party that all representations contained in the Agreement are true and accurate as of the date of this Amendment, and that such representations are deemed to be given or repeated by each party, as the case may be, on the date of this Amendment.
4.Entire Agreement. This Amendment and the Agreement and any documents referred to in each of them, constitutes the whole agreement between the parties relating to their subject matter and supersedes and extinguishes any other drafts, agreements, undertakings, representations, warranties and arrangements of any nature, whether in writing or oral, relating to such subject matter. If any of the provisions of this Amendment are inconsistent with or in conflict with any of the provisions of theAgreement, then, to the extent of any such inconsistency or conflict, the provisions of this Amendment shall prevail.
5.Counterparts. This Amendment may be executed in several counterparts each of which will be deemed to be an original and together will constitute one and the same agreement.
6.Law and Jurisdiction. This Amendment shall be construed, regulated, and administered under the laws of the United States or State of New York, as applicable, without regard to New York's principles regarding conflict of laws.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.
EACH OF THE OPEN-END MANAGEMENT
INVESTMENT COMPANIES LISTED ON
SCHEDULE A HERETO
By: /s/ Christine Buchanan
Name: Christine Buchanan
Title: Principal VGI, Funds CFO
JPMORGAN CHASE BANK, N.A.
By: /s/ Carl Mehldau
Name: Carl Mehldau
Title: Vice President
EXHIBIT 1
Vanguard Admiral Funds
Vanguard S&P 500 Growth Index Fund
Vanguard S&P 500 Value Index Fund
Vanguard S&P Mid-Cap 400 Growth Index Fund Vanguard S&P Mid-Cap 400 Index Fund Vanguard S&P Mid-Cap 400 Value Index Fund Vanguard S&P Small-Cap 600 Growth Index Fund Vanguard S&P Small-Cap 600 Index Fund Vanguard S&P Small-Cap 600 Value Index Fund
Vanguard Bond Index Funds
Vanguard Inflation-Protected Securities Fund Vanguard Intermediate-Term Bond Index Fund Vanguard Long-Term Bond Index Fund Vanguard Short-Term Bond Index Fund Vanguard Total Bond Market Index Fund Vanguard Total Bond Market II Index Fund
Vanguard Charlotte Funds
Vanguard Global Credit Bond Fund
Vanguard Chester Funds
Vanguard Target Retirement 2015 Fund
Vanguard Target Retirement 2020 Fund
Vanguard Target Retirement 2025 Fund
Vanguard Target Retirement 2030 Fund
Vanguard Target Retirement 2035 Fund
Vanguard Target Retirement 2040 Fund
Vanguard Target Retirement 2045 Fund
Vanguard Target Retirement 2050 Fund
Vanguard Target Retirement 2055 Fund
Vanguard Target Retirement 2060 Fund
Vanguard Target Retirement 2065 Fund
Vanguard Target Retirement Income Fund
Vanguard Target Retirement 2070 Fund
Vanguard Fixed Income Securities Funds
Vanguard GNMA Fund
Vanguard Real Estate II Index Fund
Vanguard Horizon Funds
Vanguard International Core Stock Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard Mid-Cap Growth Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Mid-Cap Value Index Fund
Vanguard Small-Cap Growth Index Fund
Vanguard Small-Cap Index Fund
Vanguard Small-Cap Value Index Fund
Vanguard Total Stock Market Index Fund
Vanguard International Equity Index Funds Vanguard Emerging Markets Stock Index Fund
Vanguard Malvern Funds
Vanguard Core Bond Fund
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Multi-Sector Income Bond Fund
Vanguard Core-Plus Bond Fund
Vanguard Scottsdale Funds
Vanguard Intermediate-Term Corporate Bond Index Fund Vanguard Intermediate-Term Treasury Index Fund Vanguard Long-Term Corporate Bond Index Fund Vanguard Long-Term Treasury Index Fund Vanguard Mortgage-Backed Securities Index Fund Vanguard Short-Term Corporate Bond Index Fund Vanguard Short-Term Treasury Index Fund Vanguard Total Corporate Bond ETF
Vanguard Total World Bond ETF
Vanguard Specialized Funds
Vanguard Global Capital Cycles Fund
Vanguard Real Estate Index Fund
Vanguard Global ESG Select Stock Fund
Vanguard STAR Funds
Vanguard LifeStrategy Conservative Growth Fund
Vanguard LifeStrategy Growth Fund
Vanguard LifeStrategy Income Fund
Vanguard LifeStrategy Moderate Growth Fund
Vanguard STAR Fund
Vanguard Total International Stock Index Fund
Vanguard Tax-Managed Funds
Vanguard Tax-Managed Balanced Fund
Vanguard Tax-Managed Capital Appreciation Fund
Vanguard Tax-Managed Small-Cap Fund
Vanguard Trustees' Equity Fund
Vanguard Diversified Equity Fund
Vanguard International Value Fund
Vanguard Valley Forge Funds
Vanguard Balanced Index Fund
Vanguard Managed Allocation Fund
Vanguard Variable Insurance Funds
Conservative Allocation Portfolio
Equity Index Portfolio
Global Bond Index Portfolio Mid-Cap Index Portfolio
Moderate Allocation PortfolioReal Estate Index Portfolio
Total International Stock Market Index Portfolio
Total Stock Market Index Portfolio
Vanguard Wellington Fund
Vanguard Wellington Fund
Vanguard Whitehall Funds
Vanguard High Dividend Yield Index Fund
Vanguard International Explorer Fund
Vanguard Advice Select International Growth Fund
Vanguard Advice Select Dividend Growth Fund
Vanguard Advice Select Global Value Fund
Vanguard World Fund
Vanguard Extended Duration Treasury Index Fund
Vanguard Global Wellesley Income Fund
Vanguard Global Wellington Fund
Vanguard ESG U.S. Corporate Bond ETF
Vanguard ESG U.S. Stock ETF
Vanguard ESG International Stock ETF
Bank and each following Customer hereby agree that all of the terms and conditions as set forth in the Agreement except for Sections 2.1 and 2.2 are hereby incorporated by reference with respect to the Trusts and Funds listed below limited to their use of account number P 62749 in Vanguard Directly Managed Securities Lending transactions:
Vanguard Chester Funds
Vanguard PRIMECAP Fund
Vanguard Explorer Fund
Vanguard Explorer Fund
Vanguard Fenway Funds
Vanguard Equity Income Fund
Vanguard PRIMECAP Core Fund
Vanguard Horizon Funds
Vanguard Capital Opportunity Fund
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
Vanguard Index Funds
Vanguard Extended Market Index Fund
Vanguard 500 Index Fund
Vanguard Large-Cap Index Fund
Vanguard Mid-Cap Index Fund
Vanguard Small Cap Growth Index Fund
Vanguard Small Cap Value Index Fund
Vanguard Value Index Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Institutional Total Stock Market Index Fund
Vanguard Quantitative Funds
Vanguard Growth and Income Fund
Vanguard Scottsdale Funds Vanguard Explorer Value Fund Vanguard Russell I 000 Index Fund Vanguard Russell 1000 Value Index Fund Vanguard Russell I 000 Growth Index Fund Vanguard Russell 2000 Index Fund Vanguard Russell 2000 Value Index Fund Vanguard Russell 2000 Growth Index Fund Vanguard Russell 3000 Index Fund
Vanguard Specialized Funds
Vanguard Dividend Growth Fund
Vanguard Energy Fund
Vanguard Real Estate Index Fund
Vanguard Trustees' Equity Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard International Value Fund
Vanguard Variable Insurance Funds
Vanguard Balanced Portfolio
Vanguard Capital Growth Portfolio
Vanguard Diversified Value Portfolio
Vanguard Equity Income Portfolio
Vanguard Equity Index Portfolio
Vanguard Growth Portfolio
Vanguard Mid-Cap Index Portfolio
Vanguard Real Estate Index Portfolio
Vanguard Small Company Growth Portfolio
Vanguard International Portfolio
Vanguard Whitehall Funds
Vanguard Global Minimum Volatility Fund
Vanguard High Dividend Yield Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
Vanguard Advice Select International Growth Fund
Vanguard Advice Select Dividend Growth Fund
Vanguard Advice Select Global Value Fund
Vanguard Windsor Funds
Vanguard Windsor Fund
Vanguard Windsor II Fund
Vanguard World Fund
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard FTSE Social Index Fund
Vanguard Financials Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Value Index Fund
Nicole Olech
Vice President
October 20, 2022
AMENDED AND RESTATED MASTER CUSTODIAN AGREEMENT
This Agreement is made as of September 15, 2017 by and among each management investment company identified on Appendix A hereto (each such management investment company made subject to this Agreement in accordance with Section 19.5 below, shall hereinafter be referred to as the "Fund"), and STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company (the "Custodian"). Each Fund and the Custodian agree that this Agreement merges, integrates and supersedes all prior agreements, side letters and understandings between the parties with respect to the matters contained herein; provided, however, that the continuation of any other agreements that may reference the Master Custodian Agreement between the Custodian and the Fund dated prior to the date hereof ("Prior Agreement") is not intended to be affected by the fact of this amendment and restatement of the Master Custodian Agreement, and reference in such other agreements to a Prior Agreement shall be considered to be a reference to this Agreement effective as of the date of this Agreement (provided that matters relating to the time period prior to the date of this Agreement are governed by the terms of the Prior Agreement).
WITNESSETH:
WHEREAS, each Fund is authorized to issue shares of common stock or shares of beneficial interest in separate series ("Shares"), with each such series representing interests in a separate portfolio of securities and other assets;
WHEREAS, each Fund so authorized intends that this Agreement be applicable to each of its series set forth on Appendix A hereto (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 19.6 below, shall hereinafter be referred to as the "Portfolio(s)").
WHEREAS, each Fund not so authorized intends that this Agreement be applicable to it and all references hereinafter to one or more "Portfolio(s)" shall be deemed to refer to such Fund(s); and
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto intending to be legally bound hereby agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
Each Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States ("domestic securities") and securities which the Fund, on behalf of the applicable Portfolio desires to be held outside the United States ("foreign securities"). Each Fund, on behalf of its Portfolio(s), agrees to deliver to the Custodian all securities, other financial assets and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities or other financial assets owned by the Portfolio(s) from time to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio which is not received by it or which is delivered out in accordance with Proper Instructions (as such term is defined in Section 8 hereof) including, without limitation, Portfolio property
(i)held by brokers, private bankers or other entities on behalf of the Portfolio (each a "Local Agent"), (ii) held by Special Sub-Custodians (as such term is defined in Section 6 hereof), (iii) held by entities which have advanced monies to or on behalf of the Portfolio and which have received Portfolio property as security for such advance(s) (each a "Pledgee"), or (iv) delivered or otherwise removed from the custody of the Custodian (a) in connection with any Free Trade (as such term is defined in Sections 2.2(14) and 2.6(7) hereof) or (b) pursuant to Special Instructions (as such term is defined in Section 8 hereof). With
respect to uncertificated shares (the "Underlying Shares") of (i) registered "investment companies" (as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the "1940 Act")), whether in the same "group of investment companies" (as defined in Section 12(d)(1)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act or (ii) investment companies or other pooled investment vehicles that are not registered pursuant to the 1940 Act (the entities listed in clauses (i) and (ii) being hereinafter sometimes referred to as the "Underlying Portfolios") the holding of confirmation statements that identify the shares as being recorded in the Custodian's name on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, the Custodian shall from time to time employ one or more sub- custodians located in the United States for a Fund on behalf of the applicable Portfolio(s. The Custodian may place and maintain each Fund's foreign securities with foreign banking institution sub-custodians employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO BE HELD IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a "U.S. Securities System") and (b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the "Underlying Transfer Agent"). Except as precluded by Section 8-501(d) of the Uniform Commercial Code ("UCC"), the Custodian shall hold all securities and other financial assets, other than cash, of a Portfolio that are delivered to it in a "securities account" with the Custodian for and in the name of such Portfolio and shall treat all such assets other than cash as "financial assets" as those terms are used in the UCC. The Custodian shall identify on its books and records as belonging to a Portfolio the securities and other financial assets, constituting Portfolio assets held by (a) the Custodian, its delegates and sub-custodians, (b) a U.S. Securities System, or (c) an Underlying Transfer Agent in accordance with Section 2.10. To the extent that the Custodian or any of its sub-custodians holds securities constituting the Portfolio's assets in an omnibus account that is identified as belonging to the Custodian for the benefit of its customers, the records of the Custodian shall identify which of such securities constitute a Portfolio's assets.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities and other financial assets owned by a Portfolio held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1)Upon sale of such securities for the account of the Portfolio in accordance with customary or established market practices and procedures, including, without limitation, delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment;
2)Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
Information Classification: Limited Access
3)In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;
4)To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5)To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6)To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7)Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8)For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9)In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10)For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf of the Portfolio, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agent's custodian, in accordance with written Proper Instructions (which need not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;
11)For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
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12)For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund on behalf of a Portfolio;
13)For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the "CFTC") and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund on behalf of a Portfolio;
14)Upon the sale or other delivery of such investments (including, without limitation, to one or more (a) Special Sub-Custodians or (b) additional custodians appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), each a "Repo Custodian"), and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as applicable, shall each be referred to herein as a "Free Trade"), provided that such Proper Instructions shall set forth (a) the securities of the Portfolio to be delivered and (b) the person(s) to whom delivery of such securities shall be made;
15)Upon receipt of instructions from the Fund's transfer agent (the "Transfer Agent") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the "Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption;
16)In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof;
17)For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
18)For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio specifying (a) the securities of the Portfolio to be delivered and
(b) the person or persons to whom delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities or other financial assets held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be
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in "street name" or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts to timely collect income due the Fund on such securities and shall utilize its best efforts to timely notify the Fund of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Trustees or the Board of Directors of the Fund (as appropriate, and in each case, the "Board"). Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities and other financial assets held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. The Custodian shall credit income to the Portfolio as such income is received or in accordance with the Custodian's then current payable date income schedule. The Custodian may reverse any income credited by the Custodian to a Portfolio after the Custodian reasonably determines that actual payment of income will not occur in due course, and the Custodian may charge the Portfolio a rate agreed upon by the parties for the amount of unpaid income credited to the Portfolio. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
The Custodian shall notify a Fund, at the frequency agreed upon by the parties, in writing by facsimile transmission, electronic communication, or in such other manner as the Fund and the Custodian may agree in writing, if any amount payable with respect to portfolio securities or other assets of the Portfolios of a Fund is not received by the Custodian when due. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and agree upon any compensation and expenses payable to the Custodian as a result of taking such measures. The Custodian shall not be responsible for the collection of amounts due and payable with respect to portfolio securities or other assets that are in default.
SECTION 2.6 PAYMENT OF FUND MONIES. The Custodian shall pay out monies of a Portfolio as provided in Section 5 and otherwise upon receipt of Proper Instructions on behalf of the applicable
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Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1)Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) in accordance with customary or established market practices and procedures, including, without limitation, delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of FINRA, (i) against delivery of the securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;
2)In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3)For the redemption or repurchase of Shares issued as set forth in Section 7 hereof;
4)For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or in part capitalized or treated as deferred expenses;
5)For the payment of any dividends on Shares declared pursuant to the Fund's articles of incorporation or organization and by-laws or agreement or declaration of trust, as applicable, and Prospectus and Statement of Additional Information (collectively,
"Governing Documents");
6)For payment of the amount of dividends received in respect of securities sold short;
7)Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a "Free
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Trade"), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made;
8)For payment as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
9)For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio specifying (a) the amount of such payment and (b) the person or persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) agents to carry out such of the provisions of this Agreement as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of any of its duties or obligations hereunder and the Custodian shall be fully responsible and liable for the actions and omissions of any agent (which shall not be deemed to be U.S. Securities Systems, Special Sub-Custodians, U.S. sub-custodians designated pursuant to the last paragraph of Section 1, or Foreign Sub-Custodians and sub-custodians and other agents of the Fund or Portfolio) appointed hereunder. The Underlying Transfer Agent shall not be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions of Rule 17f-4 under the 1940 Act, as amended from time to time.
SECTION 2.9 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash, in the case of a deposit account, or securities and other financial assets (other than cash), in the case of a securities account, of the Portfolio and collateral provided to the Portfolio by its counterparties, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the FINRA, relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (b) in accordance with the provisions of any agreement among the Fund, on behalf of the Portfolio, the Custodian and any futures commission merchant (registered under the Commodity Exchange Act) relating to compliance with the rules of the CFTC or any registered contract market, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (c) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contract options thereon purchased or sold by the Portfolio, (d) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the "SEC"), or no-action letter of the staff of the SEC, relating to the maintenance of segregated accounts by registered management investment companies, and (e) for any other purpose in accordance with Proper Instructions.
SECTION 2.10 DEPOSIT OF FUND ASSETS WITH THE UNDERLYING TRANSFER AGENT. Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an account or accounts maintained with an Underlying Transfer Agent and the Custodian's only responsibilities with respect thereto shall be limited to the following:
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1)Upon receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the name of the Custodian (or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of such Portfolio.
2)In respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall pay out monies of such Portfolio as so directed, and record such payment from the account of such Portfolio on the Custodian's books and records.
3)In respect of the sale or redemption of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall transfer such Underlying Shares as so directed, record such transfer from the account of such Portfolio on the Custodian's books and records and, upon the Custodian's receipt of the proceeds therefor, record such payment for the account of such Portfolio on the Custodian's books and records.
The Custodian shall not be liable to the Fund for any loss or damage to the Fund or any Portfolio resulting from the maintenance of Underlying Shares with an Underlying Transfer Agent except to the extent the loss or damage results directly from the fraud, negligence or willful misconduct of the Custodian or any of its agents or of any of its or their employees.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall deliver to a Fund all forms of proxies, all proxy solicitation materials, all notices of meetings, and any other notices or announcements affecting or relating to securities owned by one or more of a Fund's Portfolios that are received by the Custodian, any sub- custodian, or any nominee of either of them (or with the exercise of reasonable care that the Custodian, any sub-custodian, or any nominee of either of them should have become aware), and, upon receipt of Proper Instructions, the Custodian shall execute and deliver, or cause such sub-custodian or nominee to execute and deliver, such proxies or other authorizations as may be required. Except as directed pursuant to Proper Instructions, neither the Custodian nor any sub-custodian or nominee shall vote upon any such securities, or execute any proxy to vote thereon, or give any consent or take any other action with respect thereto. In the event that the Custodian is unable to vote upon any such securities in accordance with Proper Instructions, the Custodian shall promptly notify (subject to market practices and rules) a Fund. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.
SECTION 2.13 COMMUNICATIONS. Subject to the domestic securities or other financial assets held in the United States being registered as provided in Section 2.3, the Custodian shall transmit promptly to a Fund for each Portfolio all written information received by the Custodian from issuers of the securities and other financial assets being held for the Portfolio, including among other things, maturities of domestic securities and notices of exercise of call and put options. The Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities and other financial assets whose tender or exchange is sought and from the party or its agent making the tender or exchange offer.
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The Custodian shall also transmit promptly to the Fund for each Portfolio all written information received by the Custodian regarding any class action or other collective litigation relating to Portfolio securities or other financial assets issued in the United States and then held, or previously held, during the relevant class- action period during the term of this Agreement by the Custodian for the account of the Fund for the Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. Unless otherwise agreed to by the parties, the Custodian's services with respect to class actions do not extend beyond the timely forwarding of written information so received by the Custodian.
SECTION 2.14 EXERCISE OF RIGHTS; TENDER OFFERS. Upon receipt of Proper Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or similar securities to the issuer or trustee thereof, or to the agent of such issuer or trustee, for the purpose of exercise or sale, provided that the new securities, cash or other assets, if any, acquired as a result of such actions are to be delivered to the Custodian; and (b) deposit securities upon invitations for tenders thereof, provided that the consideration for such securities is to be paid or delivered to the Custodian, or the tendered securities are to be returned to the Custodian. Notwithstanding any provision of this Agreement to the contrary, the Custodian shall take all necessary action, unless otherwise directed to the contrary in Proper Instructions, to comply with the terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or similar rights of security ownership ("Mandatory Corporate Actions"), and shall promptly notify a Fund of such Mandatory Corporate Action in writing by facsimile transmission, electronic communication, or in such other manner as the Fund and the Custodian may agree in writing.
In the event that Custodian is provided notice (in industry standard form) of (a) a proposed merger, recapitalization, reorganization, conversion, consolidation, subdivision, tender offer, takeover offer or other electable or voluntary corporate action or (b) a proposed issuance of securities or rights to participate in the issuance of securities, in each case by or with respect to the issuer of securities held by it for the account of a Portfolio (each a "Voluntary Corporate Action"), the Custodian shall provide written notice to the Fund or its designee promptly upon being provided such notice of the Voluntary Corporate Action. The notice provided by the Custodian shall include (i) a copy, or if a copy is not available, a synopsis of the offering materials provided to the Custodian by the issuer or its agent in connection with the Voluntary Corporate Action and (ii) the date on which the Custodian is required to take action to exercise rights or powers with respect to the Voluntary Corporate Action. Provided that the Custodian shall have delivered timely notice of the Voluntary Corporate Action to the Fund, the Custodian shall not be liable for any untimely exercise of any Voluntary Corporate Action or other right or power in connection with domestic securities or other property of the Portfolios at any time held by it unless (i) the Custodian is in actual possession of such securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least two (2) business days prior to the date on which the Custodian is to take action to exercise such right or power. If the Fund provides the Custodian with such notification after such deadline, the Custodian shall use its reasonable best efforts to process such election.
SECTION 2.15 SECURITIES LENDING. To the extent that a Fund engages in a securities lending program other than with the Custodian, the Fund and the Custodian will agree to procedures that will apply to such securities lending program.
SECTION 3. PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1 DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and
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financial infrastructure (including any Eligible Securities Depository operating in the country), nationalization, expropriation, currency restrictions, prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2 THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. Each Fund,
by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund's Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A. The Custodian will assist a Fund in satisfying the account opening requirements for a country as may be reasonably requested by the Fund. Following the receipt of Proper Instructions directing the Foreign
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Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn, and such withdrawal shall be deemed to be effective, and the Custodian shall cease to be the Foreign Custody Manager with respect to such Portfolio with respect to that country as of the date that is ninety days (or such other period to which the parties may agree in writing) after receipt of any such Proper Instructions by the Foreign Custody Manager.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Ninety days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn.
3.2.3SCOPE OF DELEGATED RESPONSIBILITIES:
(a)SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b)CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c)MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this
Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.
3.2.5REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change. The
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Foreign Custody Manager will also provide the Fund with global market information bulletins on a timely basis.
3.2.6STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In
performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise (unless a higher standard of care is required by Rule 17f-5). Notwithstanding the foregoing, the Custodian acting as Foreign Custody Manager of the Portfolio is subject to the standard of care set forth in Section 16 of this Agreement.
3.2.7REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody Manager
represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY
MANAGER. Each Board's delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective ninety (90) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
3.2.9CERTIFICATION REGARDING ELIGIBLE FOREIGN CUSTODIANS. Each report
presented to a Fund's Board by the Custodian pursuant to Section 3.2.5 above shall be accompanied by a certificate representing that (a) the Custodian has established a system to monitor the appropriateness of maintaining a Portfolio's Foreign Assets with each Eligible Foreign Custodian pursuant to paragraph (c)(1) of Rule 17f-5 and to monitor the performance of each Eligible Foreign Custodian under the sub-custodian agreement between the Custodian and the Eligible Foreign Custodian, (b) the Custodian has monitored all Eligible Foreign Custodians and each Eligible Foreign Custodian continues to be an Eligible Foreign Custodian, (c) each Eligible Foreign Custodian continues to provide the standard of care set forth in Section
3.2.6hereof, after considering all relevant factors, including without limitation, those factors set forth in paragraph (c)(1) of Rule 17f-5, (d) all foreign custody agreements between the Custodian and the Eligible Foreign Custodians continue to meet the requirements of paragraph (c)(2) of Rule 17f-5, (e) since the submission of the last report pursuant to Section 3.2.5 above, there have been no material adverse changes to the Custodian's foreign custody network or arrangements other than those reported to the Board or other governing body or entity of the Fund, on behalf of itself or its applicable Portfolios, in the accompanying report or notified to the Fund through the Custodian's Global Market Bulletins, distributed to designated officers of the Fund and available on the Custodian's internet client portal, my.statestreet.com (which information shall be included in the accompanying report to the Board), and (f) the information included in the report is true, accurate and complete in all material respects.
SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and
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promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2STANDARD OF CARE. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1 (unless a higher standard of care is required by Rule 17f-7). Notwithstanding the foregoing, the Custodian, in performing the duties set forth in Section 3.3.1, is subject to the standard of care set forth in Section 16 of this Agreement.
SECTION 3.4 LOCAL REGULATORY MATTERS. The Custodian shall assist a Fund in complying with regulations and market practices of jurisdictions other than the United States of America applicable to a Fund's Foreign Assets as the Fund may reasonably request from time to time. Such assistance may include, but not be limited to, soliciting information and guidance from depositories, exchanges and regulators; obtaining legal opinions at the expense of the relevant Fund but only after a Fund has been notified and agrees in writing to the amount of such expenses; acting as a Fund's representative (if required by local law) in making filings; and providing such other assistance with respect to its Foreign Assets as a Fund may reasonably request. Based on what the Custodian considers to be reasonably reliable sources of information, including its Eligible Foreign Custodians, Custodian shall inform a Fund as to the Custodian's understanding of a Fund's rights, duties and obligations under regulations and market practices of jurisdictions other than the United States of America in connection with actions taken by a Fund or the Custodian, including, but not limited to, corporate actions involving a Fund's securities.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS TO BE HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities and other financial assets held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities and other financial assets for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities and other financial assets of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
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SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i)Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii)In connection with any repurchase agreement related to foreign securities;
(iii)To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
(iv)To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v)To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi)To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct;
(vii)For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii)In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix)For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
(x)In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi)Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade, provided that
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applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and
(B) the person or persons to whom delivery shall be made;
(xii)In connection with the lending of foreign securities; and
(xiii)For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made.
4.4.2PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i)Upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii)In connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
(iii)For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses;
(iv)For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub- Custodians;
(v)In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(vi)Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s), as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;
(vii)For payment of part or all of the dividends received in respect of securities sold short;
(viii)In connection with the borrowing or lending of foreign securities; and
(ix)For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made.
4.4.3 MARKET CONDITIONS. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery
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of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer but in all events subject to the standard of care set forth in Section 16 of this Agreement.
The Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing provided that the use of a nominee is customary market practice. The applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. To the extent that the use of nominee names is not customary market practice, foreign securities shall not be registered in a nominee name, and the Funds shall not have any obligation to hold harmless any such nominee where the use is not customary market practice. Notwithstanding the foregoing, if the prior written consent of the applicable Fund is given the applicable Fund on behalf of such Portfolio shall hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the applicable Portfolio cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts. The foregoing constitutes the disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.
SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. The Custodian shall notify the Fund, at the frequency agreed to by the parties, in writing by facsimile transmission, electronic communication or in such other manner as the Fund and Custodian may agree in writing, if any amount payable with respect to portfolio securities or other assets of the Portfolio of a Fund are not received by the Custodian when due. The Custodian shall not be responsible for the collection of amounts due and payable with respect to portfolio securities or other assets that are in default. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
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Income on securities loaned other than from the Custodian's securities lending program shall be credited as received.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued, including but not limited to proxy services not being available in certain markets. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors, may have the effect of severely limiting the ability of a Fund to exercise shareholder rights. The Custodian shall, however, as soon as is reasonably practicable communicate information received as to the foregoing to the applicable Fund. In addition to the foregoing, the Custodian agrees to provide the Funds with annual and periodic market updates.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub- Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least two (2) business days prior to the date on which the Custodian is to take action to exercise such right or power. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any information under this Section 4.9.
The Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject to the laws, regulations and practical constraints that may exist in the country where such securities are issued. In the event that the Fund invests in non-U.S. securities in a market in which the Custodian does not offer proxy voting services, the Custodian shall promptly notify the Fund. The Custodian shall also transmit promptly to the Fund all written information received by the Custodian through Foreign Sub-Custodians from issuers of the foreign securities or other financial assets issued outside of the United States and being held for the account of the Portfolio regarding any class action or other collective litigation relating to the Portfolio's foreign securities or other financial assets issued outside the United States and then held, or previously held, during the relevant class-action period during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of the Fund for the Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. Unless otherwise agreed to by the parties, the Custodian's services with respect to class actions do not extend beyond the timely forwarding of written information so received by the Custodian.
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS. The Custodian shall not employ a Foreign Sub-Custodian unless such employment is memorialized in a written agreement. Each such written agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible using best efforts, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of
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such obligations. At a Fund's election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Fund or its Portfolio shall be liable for all taxes, assessments, duties and other government charges, including any interest or penalty with respect thereto, with respect to any cash or securities held on behalf of the Fund or its Portfolios or any transaction related thereto. The Custodian shall withhold or cause to withhold the amount of tax which is required to be withheld under applicable law upon collection of any dividend, interest or other distribution with respect to any domestic security or foreign security and proceeds or income from the sale or other transfer of any domestic security or foreign security in custody at the Custodian. The Custodian shall assist the Fund with respect to any claim for exemption or reclaim under the tax laws of the designated countries listed on Schedule A upon request by a Fund. In providing such services, the Custodian does not act as the Fund's tax adviser or tax counsel.
SECTION 5. CONTRACTUAL SETTLEMENT SERVICES (PURCHASE / SALES)
SECTION 5.1 With respect to each cash account designated in writing by a Portfolio, the Custodian shall, in accordance with the terms set out in this Section 5, debit or credit the appropriate cash account of each Portfolio in connection with (i) the purchase of securities for such Portfolio, and (ii) proceeds of the sale of securities held on behalf of such Portfolio, on a contractual settlement basis (the "Contractual Settlement Services").
SECTION 5.2 The Contractual Settlement Services shall be provided for such instruments and in such markets as the Custodian may advise from time to time. The Custodian may terminate or suspend any part of the provision of the Contractual Settlement Services under this Agreement at its sole discretion immediately upon notice to the applicable Fund on behalf of each Portfolio, including, without limitation, in the event of force majeure events affecting settlement, any disorder in markets, or other changed external business circumstances affecting the markets or the Fund.
SECTION 5.3 The consideration payable in connection with a purchase transaction shall be debited from the appropriate cash account of the Portfolio as of the time and date that monies would ordinarily be required to settle such transaction in the applicable market. The Custodian shall promptly recredit such amount at the time that the Portfolio or the Fund notifies the Custodian by Proper Instruction that such transaction has been canceled.
SECTION 5.4 With respect to the settlement of a sale of securities, a provisional credit of an amount equal to the net sale price for the transaction (the "Settlement Amount") shall be made to the account of the Portfolio as if the Settlement Amount had been received as of the close of business on the date that monies would ordinarily be available in good funds in the applicable market. Such provisional credit will be made conditional upon the Custodian having received Proper Instructions with respect to, or reasonable notice of, the transaction, as applicable; and the Custodian or its agents having possession of the asset(s) (which shall exclude assets subject to any third party lending arrangement entered into by a Portfolio) associated with the transaction in good deliverable form and not being aware of any facts which would lead them to reasonably believe that the transaction will not settle in the time period ordinarily applicable to such transactions in the applicable market.
SECTION 5.5 Subject to the relevant requirements of Section 16, the Custodian shall have the right to reverse any provisional credit or debit given in connection with the Contractual Settlement Services
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when the Custodian believes, in its reasonable judgment, that such transaction will not settle in accordance with its terms or amounts due pursuant thereto will not be collectable or where the Custodian has not been provided Proper Instructions with respect thereto, as applicable. Upon such reversal, a sum equal to the credited or debited amount shall become immediately payable by the Portfolio to the Custodian and may be debited from any cash account held for benefit of the Portfolio. Prior to any such reversal, the Custodian will provide notice to the Fund pursuant to the relevant requirements of Section 16. Following such reversal, the Custodian will promptly notify the Fund of any action taken pursuant to this Section 5.5, which notice shall include a description of the facts forming the basis for the Custodian's decision to reverse the provisional credit.
SECTION 5A. ACTUAL SETTLEMENT SERVICES (PURCHASE / SALES)
SECTION 5A.1 With respect to each cash account designated in writing by a Portfolio, the Custodian shall, in accordance with the terms set out in this Section 5A, debit or credit the appropriate cash account of each Portfolio in connection with (i) the purchase of securities for such Portfolio, and (ii) proceeds of the sale of securities held on behalf of such Portfolio, on an actual settlement basis.
SECTION 5A.2 The consideration payable in connection with a purchase transaction shall be debited from the appropriate cash account of the Portfolio as of the time and date that monies are actually payable.
SECTION 5A.3 With respect to the settlement of a sale of securities, the Custodian shall credit the appropriate cash account of the Portfolio as of the time and date that the cash received as consideration for the transaction is actually received by Custodian.
SECTION 6. SPECIAL SUB-CUSTODIANS
Upon receipt of Special Instructions (as such term is defined in Section 8 hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian for the purposes of effecting such transaction(s) as may be designated by a Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a "Special Sub-Custodian." Each such duly appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by a Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian, and in accordance with Special Instructions, the Custodian shall enter into a sub-custodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
SECTION 6A. FOREIGN EXCHANGE
SECTION 6A.1. GENERALLY. Upon receipt of Proper Instructions, which for purposes of this Section may also include security trade advices, the Custodian shall facilitate the processing and settlement of foreign exchange transactions. Such foreign exchange transactions do not constitute part of the services provided by the Custodian under this Agreement.
SECTION 6A.2. FUND ELECTIONS. Each Fund (or its investment manager or investment advisor ("Investment Advisor") acting on its behalf) may elect to enter into and execute foreign exchange transactions with third parties that are not affiliated with the Custodian, with State Street Global Markets, which is the foreign exchange division of State Street Bank and Trust Company and its affiliated companies
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("SSGM"), or with a sub-custodian. Where the Fund or its Investment Advisor gives Proper Instructions for the execution of a foreign exchange transaction using an indirect foreign exchange service described in the Client Publications (as defined below), the Fund (or its Investment Advisor) instructs the Custodian, on behalf of the Fund, to direct the execution of such foreign exchange transaction to SSGM or, when the relevant currency is not traded by SSGM, to the applicable sub-custodian. The Custodian shall not have any agency (except as contemplated in preceding sentence), trust or fiduciary obligation to the Fund, its Investment Advisor or any other person in connection with the execution of any foreign exchange transaction. The Custodian shall have no responsibility under this Agreement for the selection of the counterparty to, or the method of execution of, any foreign exchange transaction entered into by the Fund (or its Investment Advisor acting on its behalf) or the reasonableness of the execution rate on any such transaction. "Client Publications" means the general client publications of State Street Bank and Trust Company available from time to time to clients.
SECTION 6A.3. FUND ACKNOWLEDGEMENT Each Fund acknowledges that in connection with all foreign exchange transactions entered into by the Fund (or its Investment Advisor acting on its behalf) with SSGM or any sub-custodian, SSGM and each such sub-custodian:
(i)shall be acting in a principal capacity and not as broker, agent or fiduciary to the Fund or its Investment Advisor;
(ii)shall seek to profit from such foreign exchange transactions, and are entitled to retain and not disclose any such profit to the Fund or its Investment Advisor; and
(iii)shall enter into such foreign exchange transactions pursuant to the terms and conditions, including pricing or pricing methodology, (a) agreed with the Fund or its Investment Advisor from time to time or (b) in the case of an indirect foreign exchange service, (i) as established by SSGM and set forth in the Client Publications with respect to the particular foreign exchange execution services selected by the Fund or the Investment Advisor or (ii) as established by the sub-custodian from time to time.
SECTION 6A.4. TRANSACTIONS BY STATE STREET. The Custodian or its affiliates, including SSGM, may trade based upon information that is not available to the Fund (or its Investment Advisor acting on its behalf), and may enter into transactions for its own account or the account of clients in the same or opposite direction to the transactions entered into with the Fund (or its Investment Advisor), and shall have no obligation, under this Agreement, to share such information with or consider the interests of their respective counterparties, including, where applicable, the Fund or the Investment Advisor.
SECTION 7. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection
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with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
SECTION 8. PROPER INSTRUCTIONS AND SPECIAL INSTRUCTIONS
"Proper Instructions," which may also be standing instructions, as such term is used throughout this Agreement shall mean instructions received by the Custodian from a Fund, a Fund's duly authorized investment manager or investment adviser, or a person or entity duly authorized by either of them. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the applicable Fund and the Custodian. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to provide such instructions with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.
"Special Instructions," as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the applicable Fund or any other person designated in writing by the Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.
Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by such Fund's Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.
SECTION 9. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed by or on behalf of the applicable Fund provided that the Custodian exercised reasonable care without negligence in following or acting upon such instruction, notice, request, consent, certificate or other instrument. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
Information Classification: Limited Access
SECTION 10. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
1)Surrender securities in temporary form for securities in definitive form;
2)Endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
3)In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the applicable Board.
SECTION 11. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the applicable Board to keep the books of account of each Portfolio and to compute its net asset value. Each Fund acknowledges and agrees that, with respect to investments maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is the sole source of information on the number of shares of a fund held by it on behalf of a Portfolio and that the Custodian has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Custodian in performing its duties under this Agreement, including without limitation, the duties set forth in this Section 11 and in Section 12 hereof; provided, however, that the Custodian shall be obligated to reconcile information as to purchases and sales of Underlying Shares contained in trade instructions and confirmations received by the Custodian and to report promptly any discrepancies to the Underlying Transfer Agent. Each Fund acknowledges that, in keeping the books of account of the Portfolio, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund's counterparty(ies), or the agents of either of them.
SECTION 12. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of such Fund, including such Fund's independent public accountants, and employees and agents of the SEC. The Custodian shall, at a Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund's counterparty(ies), or the agents of either of them.
SECTION 13. RESERVED
Information Classification: Limited Access
SECTION 14. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the applicable Fund, on behalf of each of the Portfolios at such times as such Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a "Securities System"), relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 15. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 16. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties. The Custodian shall perform the services provided for in this Agreement without negligence, fraud or willful misconduct and with reasonable care. The Custodian shall be liable to a Fund for any failure by the Custodian to satisfy the foregoing standard of care. The Custodian shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, fraud or willful misconduct, including, without limitation, acting in accordance with any Proper Instruction without negligence, fraud or willful misconduct. The indemnification obligations of this Section shall survive termination of this Agreement.
Except as may arise from the Custodian's own negligence, fraud or willful misconduct or the negligence, fraud or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense resulting from or caused by: (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing (a "Force Majeure Event"), including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, acts of war, revolution, riots or terrorism, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts, except to the extent that the Custodian fails to maintain and keep updated the business and continuity and disaster recovery plan as set forth in Section 19.7 and such failure causes such loss; (ii) errors by any Fund or its duly authorized investment manager or investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, any Fund, the Custodian's sub- custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii)
Information Classification: Limited Access
delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (viii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable to a Fund for the acts or omissions of any sub-custodian selected by the Custodian, whether domestic or foreign (but excluding any Special Sub-Custodian or U.S. sub-custodian designated by a Fund pursuant to Special Instructions or Proper Instructions), to the same extent that the Custodian would be liable to the Fund as if such action or omission was performed by the Custodian itself, taking into account the facts and circumstances and the established local market practices and laws prevailing in the relevant jurisdiction at the time of the action or omission. Notwithstanding the foregoing, the Custodian shall in no event be liable for losses arising from Country Risk or from the insolvency or other financial default with respect to (a) any sub-custodian that is not an affiliate of the Custodian or (b) any depositary bank holding in a deposit account cash denominated in any currency other than an "on book" currency for that market.
If a Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the reasonable opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form to be mutually agreed upon between such Fund and Custodian if and when necessary.
If the Custodian, its affiliates, subsidiaries or agents, advances cash or securities for any purpose (including, but not limited to, securities settlements, foreign exchange contracts and assumed settlement, but not including amounts payable to the Custodian pursuant to Section 15 of this Agreement) or in the event that the Custodian or its nominee shall incur or be assessed from a third party any taxes, charges, expenses, assessments, claims or liabilities in connection with the investment activities of a Fund and the Custodian's related performance of this Agreement, except such as may arise from the Custodian's or its nominee's own negligent action, negligent failure to act, fraud, or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to apply available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement. In addition, the Custodian may at any time decline to follow Proper Instructions to deliver out cash, securities or other financial assets if the Custodian reasonably determines that, after giving effect to the Proper Instructions, the cash, securities or other financial assets remaining will not have sufficient value fully to secure the Fund's reimbursement of the relevant advances or other liabilities.
Except as may arise from the Custodian's own negligence, fraud or willful misconduct, each Fund severally and not jointly shall indemnify and hold the Custodian harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities which may be asserted against the Custodian (a) acting in accordance with any Proper Instruction or Special Instruction including, without limitation, any Proper Instruction with respect to Free Trades including, but not limited to, cost, expense, loss, damage, charge, counsel fee, payment or liability resulting from the Custodian's reasonable reliance upon information provided by the applicable Fund, such Fund's counterparty(ies) or the agents of either of them with respect to Fund property released, delivered or purchased pursuant to either of Section 2.2(14) or Section 2.6(7) hereof; (b) for the acts or omissions of any Special Sub-Custodian; or (c) for the acts or omissions of any Local Agent or Pledgee.
Information Classification: Limited Access
None of the parties shall be liable for indirect, special, incidental, punitive or consequential damages. Upon the occurrence of any event that causes or may cause any loss, damage or expense to a Fund, the Custodian shall (i) promptly notify a Fund of the occurrence of such event and (ii) use its commercially reasonable efforts to cause any sub-custodian to use all commercially reasonable efforts and to take all reasonable steps under the circumstances to mitigate the effects of such event and to avoid continuing harm to a Fund.
SECTION 17. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing if termination is being sought by a Fund on behalf of a Portfolio and not sooner than one hundred twenty (120) days if termination is being sought by the Custodian; provided, however, that no Fund shall amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of such Fund's Governing Documents, and further provided, that any Fund on behalf of one or more of the Portfolios may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a bankruptcy trustee or a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Termination of this Agreement with respect to any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio.
Upon termination of the Agreement, the applicable Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for the transaction costs of delivering out the securities of such applicable Portfolio to the successor custodian appointed pursuant to Section 18 of this Agreement, if any.
In connection with any termination of the Agreement for any reason whatsoever, the parties shall also reasonably cooperate with respect to the development of a transition plan setting forth a reasonable timetable for the transition and describing the parties' respective responsibilities for transitioning the services back to the Fund or any successor custodian in an orderly and uninterrupted fashion.
If the Custodian is prevented from carrying out its obligations under the Agreement as a result of a Force Majeure Event for a period of 30 days, a Fund may terminate the Agreement by giving the Custodian not less than 30 days' notice, without prejudice to any of the rights of any party accrued prior to the date of termination; provided, however, that if the Force Majeure Event is a regional wide or market wide event that has similarly affected substantially all other providers of services to funds substantially similar to the services provided hereunder in such region or market, the Fund's termination right shall only arise at such time that two (2) or more of such providers are reasonably able and have begun to recommence the provision of such services. If the Custodian recommences the provision of the affected services in all material respects prior to the exercise by a Fund of its termination right, such termination right shall lapse if the Custodian gives notice to the Fund that it has done so (and it has in fact so recommenced the provision of services) and a Fund has not already provided notice of termination prior to such notice by the Custodian that it has recommenced the services in all material respects.
Information Classification: Limited Access
SECTION 18. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian (or such other location as shall mutually be agreed upon by the Custodian and the applicable Fund on behalf of such Portfolio), duly endorsed and in the form for transfer, all securities, cash, and other assets of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian (or such other location as shall mutually be agreed upon by the Custodian and the applicable Fund on behalf of such Portfolio) and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.
SECTION 19. GENERAL
SECTION 19.1 NEW YORK LAW TO APPLY. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The State of New York.
SECTION 19.2 CONFIDENTIALITY. All information provided under this Agreement by a party (the "Disclosing Party") to the other party (the "Receiving Party") regarding the Disclosing Party's business and operations shall be treated as confidential. All confidential information provided under this Agreement by Disclosing Party shall be used, including disclosure to third parties, by the Receiving Party, or its agents or service providers, solely for the purpose of performing or receiving the services and discharging the Receiving Party's other obligations under the Agreement or managing the internal business of the Receiving Party and its affiliates, including financial and operational management and reporting, risk management, legal and regulatory compliance and client service management. The foregoing shall not be applicable to any information (a) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (b) that is independently derived by the Receiving Party without the use of any information provided by the Disclosing Party in connection with this Agreement, (c) that is disclosed to comply with any proceeding, investigation, audit, examination, subpoena, civil investigative
Information Classification: Limited Access
demand or other similar process that is initiated, authorized, or conducted by a court of law, regulatory agency, or other governmental or administrative body with appropriate jurisdiction over either party, (d) that is disclosed as required by operation of law or regulation or as required to comply with the requirements of any market infrastructure that the Disclosing Party or its agents direct the Custodian or its affiliates to employ (or which is required in connection with the holding or settlement of instruments included in the assets subject to this Agreement), or (e) where the party seeking to disclose has received the prior written consent of the party providing the information.
SECTION 19.3 ASSIGNMENT. This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund.
SECTION 19.4 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement.
SECTION 19.5 ADDITIONAL FUNDS. In the event that any management investment company in addition to those listed on Appendix A hereto desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such management investment company shall become a Fund hereunder and be bound by all terms and conditions and provisions hereof including, without limitation, the representations and warranties set forth in Section 19.7 below.
SECTION 19.6 ADDITIONAL PORTFOLIOS. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
SECTION 19.7 THE PARTIES. All references herein to the "Fund" are to each of the management investment companies listed on Appendix A hereto, and each management investment company made subject to this Agreement in accordance with Section 19.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series corporation, trust or other entity, all references herein to the "Portfolio" are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to "the parties" shall mean the Custodian and such other individual Fund as to which the matter pertains. Each Fund hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its Governing Documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it. The Custodian hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its declaration of trust or other governing documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement;
Information Classification: Limited Access
and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Custodian or any law or regulation applicable to it.
The Custodian hereby represents to each of the Funds, on behalf of each of such Fund's Portfolios, that it
(a)has and shall maintain and update a disaster recovery and business continuation plan that is reasonably designed to enable the Custodian to perform its duties and obligations set forth under this Agreement in the event of a significant business disruption affecting the Custodian, including a Force Majeure Event; (b) shall test the operability of such plan at least once every twelve (12) months and revise such plan as Custodian reasonably believes is necessary to ensure that the plan, in general, continues to be reasonably designed to enable the Custodian to perform its duties and obligations as set forth under this Agreement; and (c) shall activate such plan if Custodian reasonably believes (i) an event has occurred which would materially affect the Custodian's timely discharge of its duties and performance of its obligations under this Agreement and (ii) activation of such plan would allow Custodian to discharge its duties hereunder. The Custodian shall enter into and shall maintain in effect at all times during the term of this Agreement with appropriate parties one or more agreements making reasonable provision for (i) periodic back-up of the computer files and data with respect to the Fund and (ii) emergency use of electronic data processing equipment to provide services under this Agreement. Upon reasonable request, the Custodian shall discuss with the Fund the business continuity/disaster recovery plan of the Custodian. The Custodian represents that its business continuity plan is appropriate for its business as a provider of custodian services to investment companies registered under the 1940 Act.
SECTION 19.8 REMOTE ACCESS SERVICES ADDENDUM. The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
SECTION 19.9 NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To any Fund: |
c/o THE VANGUARD GROUP, INC. |
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400 Devon Park Drive, A29 |
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Wayne, PA 19087 |
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Attention: Chief Financial Officer |
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Telecopy: (610) 669-6112 |
With a copy to: |
THE VANGUARD GROUP, INC. |
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400 Devon Park Drive, V26 |
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Wayne, PA 19087 |
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Attention: General Counsel |
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Telecopy: (610) 669-6600 |
To the Custodian: |
STATE STREET BANK AND TRUST COMPANY |
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1 Iron Street |
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Boston, MA 02210 |
|
Attention: Jay Fulchino |
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Telephone: 617-662-0934 |
Information Classification: Limited Access
With a copy to: |
STATE STREET BANK AND TRUST COMPANY |
|
Legal Division – Global Services Americas |
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One Lincoln Street |
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Boston, MA 02111 |
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Attention: Senior Vice President |
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of facsimile, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, facsimile or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
SECTION 19.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.
SECTION 19.11 SEVERABILITY. If any provision or provisions of this Agreement shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
SECTION 19.12 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 19.13 SHAREHOLDER COMMUNICATIONS ELECTION. Rule 14b-2 promulgated under the Securities Exchange Act of 1934, as amended, requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian to provide such Fund's name, address, and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian "no," the Custodian will not provide this information to requesting companies. If a Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions.
SECTION 19.14 REPORTS. Upon reasonable request of a Fund, the Custodian shall provide the Fund with a copy of the Custodian's System and Organization Controls for Service Organizations: Internal
Information Classification: Limited Access
Control over Financial Reporting (SOC) 1 reports prepared in accordance with the requirements of AT-C section 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities' Internal Control Over Financial Reporting (or any successor attestation standard). In addition, from time to time as requested, the Custodian will furnish the Fund a "gap" or "bridge" letter that will address any material changes that might have occurred in the Custodian's controls covered in the SOC Report from the end of the SOC Report period through a specified requested date. The Custodian shall use commercially reasonable efforts to provide the Fund with such reports as the Fund may reasonably request or otherwise reasonably require to fulfill its duties under Rule 38a-l of the 1940 Act or similar legal and regulatory requirements. Upon reasonable request to the Fund, the Custodian shall also provide to the Fund sub- certifications in connection with Sarbanes-Oxley Act of 2002 certification requirements.
SECTION 19.15 OPINIONS. The Custodian shall take all reasonable action, as the Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with (i) the preparation of any registration statement of a Fund and any other reports required by a governmental agency or regulatory authority with jurisdiction over the Fund, and (ii) the fulfillment by a Fund of any other requirements of a governmental agency or regulatory authority with jurisdiction over the Fund.
SECTION 19.16 REGULATION GG. The Funds are hereby notified that "restricted transactions," as such term is defined in Section 233.2(y) of Federal Reserve Regulation GG, are prohibited in any dealings with the Custodian pursuant to this Agreement or otherwise between or among any party hereto.
SECTION 19.17 PORTFOLIO BY PORTFOLIO BASIS. This Agreement is executed by a Fund with respect to each of its Portfolios and the obligations hereunder are not binding upon any of the directors, officers or shareholders of the Fund individually. Notwithstanding any other provision in this Agreement to the contrary, each and every obligation, liability or undertaking of a particular Portfolio under this Agreement shall constitute solely an obligation, liability or undertaking of, and be binding upon, such particular Portfolio and shall be payable solely from the available assets of such particular Portfolio and shall not be binding upon or affect any assets of any other Portfolio.
SECTION 19.18 SERVICE LEVEL AGREEMENTS. The Custodian and the Funds may from time to time agree to document the manner in which they expect to deliver and receive the services contemplated by this Agreement. In such event, each party will perform its obligations in accordance with any service levels that may be agreed upon by the parties in writing from time to time, subject to the terms of this Agreement
SECTION 19.19 LOAN SERVICES ADDENDUM. If a Fund directs the Custodian in writing to perform loan services, the Custodian and the Fund will be bound by the terms of the Loan Services Addendum attached hereto. The Fund shall reimburse Custodian for its fees and expenses related thereto as agreed upon from time to time in writing by the Fund and the Custodian.
[Signature page to follow.]
Information Classification: Limited Access
SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date first above-written.
FUND SIGNATURE ATTESTED TO BY:EACH OF THE ENTITIES SET FORTH ON APPENDIX
A HERETO
By: |
/s/ Pete Mahoney |
By: |
/s/ Thomas J. Higgins |
Name: |
Pete Mahoney |
Name: |
Thomas J. Higgins |
Title: |
Fund Controller |
Title: |
Chief Financial Officer |
SIGNATURE ATTESTED TO BY: |
STATE STREET BANK AND TRUST COMPANY |
By: |
/s/ Matthew J. Kelly |
By: |
/s/ Andrew Erickson |
Name: |
Matthew J. Kelly |
Name: |
Andrew Erickson |
Title: |
Vice President |
Title: |
Executive Vice President |
Information Classification: Limited Access
31
APPENDIX A
Vanguard California Tax-Free Funds
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
Vanguard CMT Funds
Vanguard Municipal Cash Management Fund
Vanguard Convertible Securities Fund
Vanguard Convertible Securities Fund
Vanguard Institutional Index Funds
Vanguard Institutional Index Fund
Vanguard Malvern Funds
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Massachusetts Tax-Exempt Funds Vanguard Massachusetts Tax-Exempt Fund
Vanguard Municipal Bond Funds
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt Fund
Vanguard Limited-Term Tax-Exempt Fund
Vanguard Long-Term Tax-Exempt Fund
Vanguard Municipal Money Market Fund
Vanguard Short-Term Tax-Exempt Fund
Vanguard Tax-Exempt Bond Index Fund
Vanguard New Jersey Tax-Free Funds
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Vanguard Ohio Tax-Free Funds
Vanguard Ohio Long-Term Tax-Exempt Fund
Vanguard Pennsylvania Tax-Free Funds
Vanguard Pennsylvania Long-Term Tax-Exempt Fund
Vanguard Pennsylvania Municipal Money Market Fund
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Vanguard Growth and Income Fund
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Vanguard STAR Fund
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Balanced Portfolio
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Equity Index Portfolio
High Yield Bond Portfolio
Mid-Cap Index Portfolio
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Small Company Growth Portfolio
Vanguard World Fund
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A-2
SCHEDULE A – GLOBAL CUSTODY NETWORK
MARKET |
|
SUBCUSTODIAN |
ADDRESS |
Albania |
Raiffeisen Bank sh.a. |
|
Blv. "Bajram Curri" ETC – Kati 14 Tirana, Albania |
Argentina |
Citibank, N.A. |
|
Bartolome Mitre 530 |
|
|
|
|
1036 Buenos Aires, Argentina |
Australia |
The Hongkong and Shanghai Banking |
HSBC Securities Services Level 3, |
|
Corporation Limited |
|
10 Smith St., |
|
|
|
|
Parramatta, NSW 2150, Australia |
Austria |
Deutsche Bank AG (operating through its |
Fleischmarkt 1 |
|
Frankfurt branch with support from its |
A-1010 Vienna, Austria |
|
Vienna branch) |
|
|
|
UniCredit Bank Austria AG |
Custody Department / Dept. 8398-TZ Julius Tandler Platz 3 |
|
|
|
|
A-1090 Vienna, Austria |
Bahrain |
HSBC Bank Middle East Limited (as |
1ST Floor, Bldg. #2505 Road # 2832, Al |
|
delegate of The Hongkong and Shanghai |
Seef 428 Kingdom of Bahrain |
|
Banking Corporation Limited) |
|
Bangladesh |
Standard Chartered Bank |
|
Silver Tower, Level 7 |
|
|
|
|
52 South Gulshan Commercial Area Gulshan 1, Dhaka 1212, |
|
|
|
|
Bangladesh |
Belgium |
Deutsche |
Bank AG, |
Netherlands |
De Entrees 99-197 |
|
(operating |
through its |
Amsterdam |
1101 HE Amsterdam, Netherlands |
|
branch with support from its Brussels |
|
|
branch) |
|
|
|
Benin |
via Standard Chartered Bank C÷te d'Ivoire |
23, Bld de la République |
|
S.A., Abidjan, Ivory Coast |
|
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Bermuda |
HSBC Bank Bermuda Limited |
6 Front Street |
|
|
|
|
Hamilton, HM06, Bermuda |
Federation of |
UniCredit Bank d.d. |
|
Zelenih beretki 24 |
Bosnia and |
|
|
|
71 000 Sarajevo |
Herzegovina |
|
|
|
Federation of Bosnia and Herzegovina |
Botswana |
Standard Chartered Bank Botswana Limited |
4th Floor, Standard Chartered House Queens Road |
|
|
|
|
The Mall |
|
|
|
|
Gaborone, Botswana |
Brazil |
Citibank, N.A. |
|
AV Paulista 1111 |
|
|
|
|
S÷o Paulo, SP 01311-920 Brazil |
Bulgaria |
Citibank Europe plc, Bulgaria Branch |
Serdika Offices, 10th floor 48 Sitnyakovo Blvd. |
|
|
|
|
1505 Sofia, Bulgaria |
|
UniCredit Bulbank AD |
|
7 Sveta Nedelya Square |
|
|
|
|
1000 Sofia, Bulgaria |
Burkina Faso |
via Standard Chartered Bank C÷te d'Ivoire |
23, Bld de la République |
|
S.A., Abidjan, Ivory Coast |
|
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Canada |
State Street Trust Company Canada |
30 Adelaide Street East, Suite 800 Toronto, ON Canada |
|
|
|
|
M5C 3G6 |
Chile |
Ita÷ CorpBanca S.A. |
|
Presidente Riesco Street # 5537 Floor 18 |
|
|
|
|
Las Condes, Santiago de Chile |
People's |
HSBC Bank (China) Company Limited |
33rd Floor, HSBC Building, Shanghai IFC 8 Century Avenue |
Republic of |
(as delegate of The Hongkong and |
Pudong, Shanghai, China (200120) |
China |
Shanghai Banking Corporation Limited) |
|
|
China Construction Bank Corporation |
No.1 Naoshikou Street Chang An Xing Rong |
|
|
|
|
Plaza Beijing 100032-33, China |
SCH A-1
China Connect |
Citibank N.A. |
|
39/F., Champion Tower 3 Garden Road |
|
|
|
|
Central, Hong Kong |
|
The Hongkong and Shanghai Banking |
Level 30, |
|
Corporation Limited |
|
HSBC Main Building 1 Queen's |
|
|
|
|
Road Central, Hong Kong |
|
Standard Chartered Bank (Hong Kong) |
15th Floor Standard Chartered Tower 388 Kwun Tong Road |
|
Limited |
|
|
Kwun Tong, Hong Kong |
Colombia |
Cititrust Colombia S.A. Sociedad Fiduciaria |
Carrera 9A, No. 99-02 Bogotá DC, |
|
|
|
|
Colombia |
Costa Rica |
Banco BCT S.A. |
|
160 Calle Central Edificio BCT |
|
|
|
|
San José, Costa Rica |
Croatia |
Privredna Banka Zagreb d.d. |
Custody Department Radnička cesta 50 |
|
|
|
|
10000 Zagreb, Croatia |
|
Zagrebacka Banka d.d. |
|
Savska 60 |
|
|
|
|
10000 Zagreb, Croatia |
Cyprus |
BNP Paribas Securities Services, S.C.A., |
2 Lampsakou Str. |
|
Greece (operating through its Athens |
115 28 Athens, Greece |
|
branch) |
|
|
|
Czech Republic |
Československá obchodn÷ banka, a.s. |
Radlická 333/150 |
|
|
|
|
150 57 Prague 5, Czech Republic |
|
UniCredit Bank Czech Republic and |
BB Centrum – FILADELFIE Želetavská 1525/1 |
|
Slovakia, a.s. |
|
140 92 Praha 4 - Michle, Czech Republic |
Denmark |
Nordea Bank AB (publ), Sweden |
Strandgade 3 |
|
(operating through its branch, Nordea |
0900 Copenhagen C, Denmark |
|
Danmark, Filial af Nordea Bank AB |
|
|
(publ), Sverige) |
|
|
|
Skandinaviska Enskilda Banken AB |
Bernstorffsgade 50 |
|
(publ), Sweden (operating through its |
1577 Copenhagen, Denmark |
|
Copenhagen branch) |
|
|
Egypt |
HSBC Bank Egypt S.A.E. |
|
6th Floor |
|
(as delegate of The Hongkong and |
306 Corniche El Nil Maadi |
|
Shanghai Banking Corporation Limited) |
Cairo, Egypt |
Estonia |
AS SEB Pank |
|
Tornim÷e 2 |
|
|
|
|
15010 Tallinn, Estonia |
Finland |
Nordea Bank AB (publ), Sweden |
Satamaradankatu 5 |
|
(operating through its branch, Nordea |
00500 Helsinki, Finland |
|
Bank AB (publ), Finnish branch) |
|
|
Skandinaviska Enskilda Banken AB (publ), |
Securities Services Box 630 |
|
Sweden (operating through its Helsinki |
SF-00101 Helsinki, Finland |
|
branch) |
|
|
|
France |
Deutsche |
Bank AG, |
Netherlands |
De Entrees 99-197 |
|
(operating |
through its |
Amsterdam |
1101 HE Amsterdam, Netherlands |
|
branch with support from its Paris |
|
|
branch) |
|
|
|
Republic of |
JSC Bank of Georgia |
|
29a Gagarini Str. Tbilisi 0160, |
Georgia |
|
|
|
Georgia |
Germany |
State Street Bank International GmbH |
Brienner Strasse 59 |
|
|
|
|
80333 Munich, Germany |
|
Deutsche Bank AG |
|
Alfred-Herrhausen-Allee16-24 |
|
|
|
|
D-65760 Eschborn, Germany |
Ghana |
Standard Chartered Bank Ghana Limited |
P. O. Box 768 |
|
|
|
|
1st Floor |
SCH A-2
|
|
High Street Building Accra, Ghana |
Greece |
BNP Paribas Securities Services, S.C.A. |
2 Lampsakou Str. |
|
|
115 28 Athens, Greece |
Guinea-Bissau |
via Standard Chartered Bank C÷te d'Ivoire |
23, Bld de la République |
|
S.A., Abidjan, Ivory Coast |
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Hong Kong |
Standard Chartered Bank (Hong Kong) |
15th Floor Standard Chartered Tower 388 Kwun Tong Road |
|
Limited |
Kwun Tong, Hong Kong |
Hungary |
Citibank Europe plc Magyarországi |
7 Szabadság tér, Bank Center Budapest, H-1051 Hungary |
|
Fi÷ktelepe |
|
|
UniCredit Bank Hungary Zrt. |
6th Floor Szabadság tér 5-6 |
|
|
H-1054 Budapest, Hungary |
Iceland |
Landsbankinn hf. |
Austurstr÷ti 11 |
|
|
155 Reykjavik, Iceland |
India |
Deutsche Bank AG |
Block B1, 4th Floor, Nirlon Knowledge Park |
|
|
Off Western Express Highway Goregaon (E) |
|
|
Mumbai 400 063, India |
|
The Hongkong and Shanghai Banking |
11F, Building 3, NESCO - IT Park, NESCO Complex, |
|
Corporation Limited |
Western Express Highway Goregaon (East), |
|
|
Mumbai 400 063, India |
Indonesia |
Deutsche Bank AG |
Deutsche Bank Building, 4th floor Jl. Imam Bonjol, No. 80 |
|
|
Jakarta 10310, Indonesia |
Ireland |
State Street Bank and Trust Company, |
525 Ferry Road |
|
United Kingdom branch |
Edinburgh EH5 2AW, Scotland |
Israel |
Bank Hapoalim B.M. |
50 Rothschild Boulevard Tel Aviv, Israel |
|
|
61000 |
Italy |
Deutsche Bank S.p.A. |
Investor Services |
|
|
Via Turati 27 – 3rd Floor |
|
|
20121 Milan, Italy |
Ivory Coast |
Standard Chartered Bank C÷te d'Ivoire S.A. |
23, Bld de la République |
|
|
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Japan |
Mizuho Bank, Limited |
Shinagawa Intercity Tower A 2-15-1, Konan, Minato-ku |
|
|
Tokyo 108-6009, Japan |
|
The Hongkong and Shanghai Banking |
HSBC Building |
|
Corporation Limited |
11-1 Nihonbashi 3-chome, Chuo-ku Tokyo 1030027, Japan |
Jordan |
Standard Chartered Bank |
Shmeissani Branch |
|
|
Al-Thaqafa Street, Building # 2 |
|
|
P.O. Box 926190 |
|
|
Amman 11110, Jordan |
Kazakhstan |
JSC Citibank Kazakhstan |
Park Palace, Building A, 41 Kazibek Bi street, |
|
|
Almaty A25T0A1, Kazakhstan |
Kenya |
Standard Chartered Bank Kenya Limited |
Custody Services |
|
|
Standard Chartered @ Chiromo, Level 5 48 Westlands Road |
|
|
P.O. Box 40984 – 00100 GPO |
|
|
Nairobi, Kenya |
Republic of Korea |
Deutsche Bank AG |
18th Fl., Young-Poong Building 41 Cheonggyecheon-ro |
|
|
Jongro-ku-, Seoul 03188, Korea |
|
The Hongkong and Shanghai Banking |
5F |
|
Corporation Limited |
HSBC Building #37 Chilpae-ro |
|
|
Jung-gu, Seoul 04511, Korea |
Kuwait |
HSBC Bank Middle East Limited |
Kuwait City, Sharq Area Abdulaziz Al Sager Street Al Hamra |
|
(as delegate of The Hongkong and |
Tower, 37F |
SCH A-3
|
Shanghai Banking Corporation Limited) |
P. O. Box 1683, Safat 13017, Kuwait |
Latvia |
AS SEB banka |
Unicentrs, Valdlauči |
|
|
LV-1076 Kekavas pag., Rigas raj., Latvia |
Lithuania |
AB SEB bankas |
Gedimino av. 12 |
|
|
LT 2600 Vilnius, Lithuania |
Malawi |
Standard Bank Limited |
Kaomba Centre |
|
|
Cnr. Victoria Avenue & Sir Glyn Jones Road |
|
|
Blantyre, Malawi |
Malaysia |
Deutsche Bank (Malaysia) Berhad |
Domestic Custody Services Level 20, Menara IMC |
|
|
8 Jalan Sultan Ismail |
|
|
50250 Kuala Lumpur, Malaysia |
|
Standard Chartered Bank Malaysia Berhad |
Menara Standard Chartered 30 Jalan Sultan Ismail |
|
|
50250 Kuala Lumpur, Malaysia |
Mali |
via Standard Chartered Bank C÷te d'Ivoire |
23, Bld de la République |
|
S.A., Abidjan, Ivory Coast |
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Mauritius |
The Hongkong and Shanghai Banking |
6F HSBC Centre 18 CyberCity |
|
Corporation Limited |
Ebene, Mauritius |
Mexico |
Banco Nacional de México, S.A. |
3er piso, Torre Norte |
|
|
Act. Roberto Medell÷n No. 800 Col. Santa Fe |
|
|
Mexico, DF 01219 |
Morocco |
Citibank Maghreb |
Zénith Millénium Immeuble1 Sidi Maârouf – |
|
|
B.P. 40 Casablanca 20190, Morocco |
Namibia |
Standard Bank Namibia Limited |
Standard Bank Center |
|
|
Cnr. Werner List St. and Post St. Mall 2nd Floor |
|
|
Windhoek, Namibia |
Netherlands |
Deutsche Bank AG |
De Entrees 99-197 |
|
|
1101 HE Amsterdam, Netherlands |
New Zealand |
The Hongkong and Shanghai Banking |
HSBC House |
|
Corporation Limited |
Level 7, 1 Queen St. Auckland 1010, New |
|
|
Zealand |
Niger |
via Standard Chartered Bank C÷te d'Ivoire |
23, Bld de la République |
|
S.A., Abidjan, Ivory Coast |
17 BP 1141 Abidjan 17 C÷te d'Ivoire |
Nigeria |
Stanbic IBTC Bank Plc. |
Plot 1712 Idejo St Victoria Island, |
|
|
Lagos 101007, Nigeria |
Norway |
Nordea Bank AB (publ), Sweden |
Essendropsgate 7 |
|
(operating through its branch, Nordea |
0368 Oslo, Norway |
|
Bank AB (publ), filial i Norge) |
|
|
Skandinaviska Enskilda Banken AB (publ), |
P.O. Box 1843 Vika Filipstad Brygge 1 |
|
Sweden (operating through its Oslo branch) |
N-0123 Oslo, Norway |
Oman |
HSBC Bank Oman S.A.O.G. |
2nd Floor Al Khuwair PO Box 1727 PC 111 |
|
(as delegate of The Hongkong and |
Seeb, Oman |
|
Shanghai Banking Corporation Limited) |
|
Pakistan |
Deutsche Bank AG |
Unicentre – Unitowers |
|
|
I.I. Chundrigar Road |
|
|
P.O. Box 4925 |
|
|
Karachi - 74000, Pakistan |
Panama |
Citibank, N.A. |
Boulevard Punta Pacifica Torre de las Americas Apartado |
|
|
Panama City, Panama 0834-00555 |
Peru |
Citibank del Per÷, S.A. |
Canaval y Moreyra 480 3rd Floor, San |
|
|
Isidro Lima 27, Per÷ |
Philippines |
Deutsche Bank AG |
Global Transaction Banking Tower One, Ayala |
SCH A-4
Poland |
Bank Handlowy w Warszawie S.A. |
|
Bank Polska Kasa Opieki S.A. |
Portugal |
Deutsche |
Bank AG, |
Netherlands |
|
(operating |
through its |
Amsterdam |
|
branch with support from its Lisbon |
|
branch) |
|
|
Puerto Rico |
Citibank N.A. |
|
Qatar |
HSBC Bank Middle East Limited |
|
(as delegate of The Hongkong and |
|
Shanghai Banking Corporation Limited) |
Romania |
Citibank Europe plc, Dublin – Romania |
|
Branch |
|
|
Russia |
AO Citibank |
|
Saudi Arabia |
HSBC Saudi Arabia |
|
|
(as delegate of The Hongkong and |
|
Shanghai Banking Corporation Limited) |
Senegal |
via Standard Chartered Bank C÷te d'Ivoire |
|
S.A., Abidjan, Ivory Coast |
|
Serbia |
UniCredit Bank Serbia JSC |
Singapore |
Citibank N.A. |
|
|
United Overseas Bank Limited |
Slovak Republic |
UniCredit Bank Czech Republic and |
|
Slovakia, a.s. |
|
Slovenia |
UniCredit Banka Slovenija d.d. |
South Africa |
FirstRand Bank Limited |
|
|
Standard Bank of South Africa Limited |
Spain |
Deutsche Bank S.A.E. |
|
Sri Lanka |
The Hongkong and Shanghai Banking |
|
Corporation Limited |
|
Republic of |
UniCredit Bank d.d. |
|
Srpska |
|
|
|
Swaziland |
Standard Bank Swaziland Limited |
Sweden |
Nordea Bank AB (publ) |
|
Triangle 1226 Makati City, Philippines
ul. Senatorska 16
00-293 Warsaw, Poland
31 Zwirki I Wigury Street
02-091, Warsaw, Poland
De Entrees 99-197
1101 HE Amsterdam, Netherlands
235 Federico Costa Street, Suite 315 San Juan, Puerto Rico
00918
2 Fl Ali Bin Ali Tower Building no.: 150 Airport Road Doha, Qatar
8, Iancu de Hunedoara Boulevard 712042, Bucharest Sector 1, Romania
8-10 Gasheka Street, Building 1
125047 Moscow, Russia
HSBC Head Office 7267 Olaya - Al Murooj Riyadh 12283- 2255
Kingdom of Saudi Arabia
23, Bld de la République
17 BP 1141 Abidjan 17 C÷te d'Ivoire
Rajiceva 27-29
11000 Belgrade, Serbia
3 Changi Business Park Crescent
#07-00, Singapore 486026
156 Cecil Street
FEB Building #08-03
Singapore 069544
Ŝancová 1/A
813 33 Bratislava, Slovak Republic
•martinska 140
SI-1000 Ljubljana, Slovenia
Mezzanine Floor
3 First Place Bank City
Corner Simmonds & Jeppe Sts. Johannesburg 2001
Republic of South Africa
3rd Floor, 25 Pixley Ka Isaka Seme St. Johannesburg 2001 Republic of South Africa
Calle de Rosario Pino 14-16, Planta 1 28020 Madrid, Spain
24, Sir Baron Jayatilake Mawatha Colombo 01, Sri Lanka
Zelenih beretki 24 71 000 Sarajevo
Federation of Bosnia and Herzegovina
Standard House, Swazi Plaza Mbabane,
Swaziland H101
Sm÷landsgatan 17
105 71 Stockholm, Sweden
|
Skandinaviska Enskilda Banken AB (publ) |
Switzerland |
Credit Suisse (Switzerland) Limited |
|
UBS Switzerland AG |
Taiwan - R.O.C. |
Deutsche Bank AG |
|
Standard Chartered Bank (Taiwan) Limited |
Tanzania |
Standard Chartered Bank (Tanzania) |
|
Limited |
Thailand |
Standard Chartered Bank (Thai) Public |
|
Company Limited |
Togo |
via Standard Chartered Bank C÷te d'Ivoire |
|
S.A., Abidjan, Ivory Coast |
Tunisia |
Union Internationale de Banques |
Turkey |
Citibank, A.Ş. |
|
Deutsche Bank A.Ş. |
Uganda |
Standard Chartered Bank Uganda Limited |
Ukraine |
PJSC Citibank |
United Arab |
HSBC Bank Middle East Limited |
Emirates Dubai |
(as delegate of The Hongkong and |
Financial |
Shanghai Banking Corporation Limited) |
Market |
|
United Arab |
HSBC Bank Middle East Limited |
Emirates Dubai |
(as delegate of The Hongkong and |
International |
Shanghai Banking Corporation Limited) |
Financial Center |
|
United Arab |
HSBC Bank Middle East Limited |
Emirates Abu |
(as delegate of The Hongkong and |
Dhabi |
Shanghai Banking Corporation Limited) |
United Kingdom |
State Street Bank and Trust Company, |
|
United Kingdom branch |
Uruguay |
Banco Ita÷ Uruguay S.A. |
Venezuela |
Citibank, N.A. |
Vietnam |
HSBC Bank (Vietnam) Limited |
|
(as delegate of The Hongkong and |
|
Shanghai Banking Corporation Limited) |
Sergels Torg 2
SE-106 40 Stockholm, Sweden
Uetlibergstrasse 231
8070 Zurich, Switzerland
Max-H÷gger-Strasse 80-82
CH-8048 Zurich-Alstetten, Switzerland
296 Ren-Ai Road
Taipei 106 Taiwan, Republic of China
168 Tun Hwa North Road
Taipei 105, Taiwan, Republic of China
1 Floor, International House
Corner Shaaban Robert St and Garden Ave PO Box 9011
Dar es Salaam, Tanzania
Sathorn Nakorn Tower 14th Floor, Zone B
90 North Sathorn Road
Silom, Bangkok 10500, Thailand
23, Bld de la République
17 BP 1141 Abidjan 17 C÷te d'Ivoire
65 Avenue Bourguiba
1000 Tunis, Tunisia
Tekfen Tower
Eski Buyukdere Caddesi 209 Kat 3
Levent 34394 Istanbul, Turkey
Eski Buyukdere Caddesi Tekfen Tower No. 209 Kat: 17 4 Levent 34394 Istanbul, Turkey
5 Speke Road
P.O. Box 7111
Kampala, Uganda
16-g Dilova St.
Kyiv 03150, Ukraine
HSBC Securities Services Emaar Square
Level 3, Building No. 5 P O Box 502601
Dubai, United Arab Emirates
HSBC Securities Services Emaar Square
Level 3, Building No. 5 P O Box 502601
Dubai, United Arab Emirates
HSBC Securities Services Emaar Square
Level 3, Building No. 5 P O Box 502601
Dubai, United Arab Emirates
525 Ferry Road
Edinburgh EH5 2AW, Scotland
Zabala 1463
11000 Montevideo, Uruguay
Centro Comercial El Recreo Torre Norte,
Piso 19 Avenida Casanova Caracas,
Venezuela 1050
Centre Point
106 Nguyen Van Troi Street Phu Nhuan District
Ho Chi Minh City, Vietnam
Zambia |
Standard Chartered Bank Zambia Plc. |
Standard Chartered House Cairo Road |
|
|
P.O. Box 32238 |
|
|
10101, Lusaka, Zambia |
Zimbabwe |
Stanbic Bank Zimbabwe Limited |
3rd Floor Stanbic Centre |
|
(as delegate of Standard Bank of South |
59 Samora Machel Avenue Harare, |
|
Africa Limited) |
Zimbabwe |
SCH A-7
SCHEDULE B – DEPOSITORIES OPERATING IN NETWORK MARKETS
MARKET |
DEPOSITORY |
Albania |
Bank of Albania |
Argentina |
Caja de Valores S.A. |
Australia |
Austraclear Limited |
Austria |
OeKB Central Securities |
|
Depository GmbH |
Bahrain |
Clearing, Settlement, Depository |
|
and Registry System of the |
|
Bahrain Bourse |
Bangladesh |
Bangladesh Bank |
|
Central Depository Bangladesh |
|
Limited |
Belgium |
Euroclear Belgium |
|
National Bank of Belgium |
Benin |
Dépositaire Central – Banque de |
|
Règlement |
|
Banque Centrale des Etats |
|
d'Afrique de l'Ouest |
Bermuda |
Bermuda Securities Depository |
Federation of |
Registar vrijednosnih papira u |
Bosnia and |
Federaciji Bosne i Hercegovine, |
Herzegovina |
d.d. |
Botswana |
Bank of Botswana |
|
Central Securities Depository |
|
Company of Botswana Ltd. |
Brazil |
Central de Cust÷dia e de |
|
Liquida÷÷o Financeira de T÷tulos |
|
Privados (CETIP) |
|
BM&F BOVESPA Depository |
|
Services, a department of BM&F |
|
BOVESPA S.A. |
|
Sistema Especial de Liquida÷÷o e |
|
de Cust÷dia (SELIC) |
Bulgaria |
Bulgarian National Bank |
|
Central Depository AD |
Burkina Faso |
Dépositaire Central – Banque de |
|
Règlement |
TYPES OF SECURITIES
Government debt
Equities, government and corporate bonds, and corporate money market instruments
Government securities, corporate bonds, and corporate money market instruments
All securities listed on Wiener B÷rse AG, the Vienna Stock Exchange (as well as virtually all other Austrian securities)
Equities
Government securities
Equities and corporate bonds
Equities and most corporate bonds
Government securities, corporate bonds, and money market instruments
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Treasury bills and Treasury bonds issued by the following West African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Equities, corporate bonds
Equities, corporate bonds, government securities, money market instruments
Government debt
Equities and corporate bonds
Corporate debt and money market instruments
Equities and corporate bonds traded on-exchange
Government debt issued by the central bank and the National Treasury
Government securities
Eligible equities and corporate bonds
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
|
Banque Centrale des Etats |
Treasury bills and Treasury bonds issued by the following West |
|
d'Afrique de l'Ouest |
African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory |
|
|
Coast, Mali, Niger, Senegal and Togo. |
Canada |
The Canadian Depository for |
All book-entry eligible securities, including government securities, |
|
Securities Limited |
equities, corporate bonds, money market instruments, strip bonds, |
|
|
and asset- backed securities |
Chile |
Dep÷sito Central de Valores S.A. |
Government securities, equities, corporate bonds, mortgage-backed |
|
|
securities, and money market instruments |
People's |
China Securities Depository and |
A shares, B shares, Treasury bonds, local government bonds, |
Republic of |
Clearing Corporation Limited, |
enterprise bonds, corporate bonds, open and closed-end funds, |
China |
Shanghai and Shenzhen Branches |
convertible bonds, and warrants |
|
China Central Depository and |
Bonds traded through the China Interbank Bond Market (CIBM), |
|
Clearing Co., Ltd. |
including Treasury bonds, local government bonds, policy bank |
|
|
bonds, central bank bills, medium-term notes, commercial paper, |
|
|
enterprise bonds, and commercial bank bonds |
|
Shanghai Clearing House |
Bonds traded through the China Interbank Bond Market (CIBM), |
|
|
including Treasury bonds, local government bonds, policy bank |
|
|
bonds, central bank bills, enterprise bonds, certain issues of |
|
|
medium-term notes, commercial paper, and commercial bank |
|
|
bonds |
Colombia |
Dep÷sito Central de Valores |
Securities issued by the central bank and the Republic of Colombia |
|
Dep÷sito Centralizado de Valores |
Equities, corporate bonds, money market instruments |
|
de Colombia S.A. (DECEVAL) |
|
Costa Rica |
Interclear Central de Valores S.A. |
Securities traded on Bolsa Nacional de Valores |
Croatia |
Središnje klirinško depozitarno |
Eligible equities, corporate bonds, government securities, and |
|
društvo d.d. |
corporate money market instruments |
Cyprus |
Central Depository and Central |
Equities, corporate bonds, dematerialized government securities, |
|
Registry |
corporate money market instruments |
Czech Republic |
Centráln÷ depozitář cenn÷ch |
All dematerialized equities, corporate debt, and government debt, |
|
pap÷rů, a.s. |
excluding Treasury bills |
|
Czech National Bank |
Treasury bills |
Denmark |
VP Securities A/S |
Equities, government securities, corporate bonds, corporate money |
|
|
market instruments, warrants |
Egypt |
Central Bank of Egypt |
Treasury bills |
|
Misr for Central Clearing, |
Eligible equities, corporate bonds, and Treasury bonds |
|
Depository and Registry S.A.E. |
|
Estonia |
AS Eesti V÷÷rtpaberikeskus |
All registered equity and debt securities |
Finland |
Euroclear Finland |
Equities, corporate bonds, government securities, money market |
|
|
instruments |
France |
Euroclear France |
Government securities, equities, bonds, and money market |
|
|
instruments |
Republic of |
Georgian Central Securities |
Equities, corporate bonds, and money market instruments |
Georgia |
Depository |
|
|
National Bank of Georgia |
Government securities |
Germany |
Clearstream Banking AG, |
Equities, government securities, corporate bonds, money market |
|
Frankfurt |
instruments, warrants, investment funds, and index certificates |
|
|
SCH B-2 |
Ghana |
Central Securities Depository |
|
(Ghana) Limited |
Greece |
Bank of Greece, System for |
|
Monitoring Transactions in |
|
Securities in Book-Entry Form |
|
Hellenic Central Securities |
|
Depository |
Guinea-Bissau |
Dépositaire Central – Banque de |
|
Règlement |
Government securities and Bank of Ghana securities; equities and corporate bonds
Government debt
Eligible listed equities, government debt, and corporate bonds
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
|
Banque Centrale des Etats |
Treasury bills and Treasury bonds issued by the following West |
|
d'Afrique de l'Ouest |
African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory |
|
|
Coast, Mali, Niger, Senegal and Togo. |
Hong Kong |
Central Moneymarkets Unit |
Government debt (i.e., exchange fund bills and notes issued by the |
|
|
HKMA), other private debt, and money market instruments |
|
Hong Kong Securities Clearing |
Securities listed or traded on the Stock Exchange of Hong Kong |
|
Company Limited |
Limited |
Hungary |
KELER K÷zponti ÷rtéktár Zrt. |
Government securities, equities, corporate bonds, and investment |
|
|
fund notes |
Iceland |
Nasdaq ver÷bréfami÷st÷÷ hf. |
Government securities, equities, corporate bonds, and money |
|
|
market instruments |
India |
Central Depository Services |
Eligible equities, debt securities, and money market instruments |
|
(India) Limited |
|
|
National Securities Depository |
Eligible equities, debt securities, and money market instruments |
|
Limited |
|
|
Reserve Bank of India |
Government securities |
Indonesia |
Bank Indonesia |
Sertifikat Bank Indonesia (central bank certificates), Surat Utang |
|
|
Negara (government debt instruments), and Surat Perbendaharaan |
|
|
Negara (Treasury bills) |
|
PT Kustodian Sentral Efek |
Equities, corporate bonds, and money market instruments |
|
Indonesia |
|
Ireland |
Euroclear UK & Ireland Limited |
GBP- and EUR-denominated money market instruments |
|
Euroclear Bank S.A./N.V. |
Government securities |
Israel |
Tel Aviv Stock Exchange Clearing |
Government securities, equities, corporate bonds and trust fund |
|
House Ltd. (TASE Clearing |
units |
|
House) |
|
Italy |
Monte Titoli S.p.A. |
Equities, corporate debt, government debt, money market |
|
|
instruments, and warrants |
Ivory Coast |
Dépositaire Central – Banque de |
All securities traded on Bourse Régionale des Valeurs Mobilières, |
|
Règlement |
the West African regional exchange, including securities from the |
|
|
following West African nations: Benin, Burkina Faso, Guinea- |
|
|
Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo. |
|
Banque Centrale des Etats |
Treasury bills and Treasury bonds issued by the following West |
|
d'Afrique de l'Ouest |
African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory |
|
|
Coast, Mali, Niger, Senegal and Togo. |
Japan |
Bank of Japan – Financial |
Government securities |
|
Network System |
|
|
Japan Securities Depository |
Equities, corporate bonds, and corporate money market instruments |
|
Center (JASDEC) Incorporated |
|
|
|
SCH B-3 |
Jordan |
Central Bank of Jordan |
|
Securities Depository Center |
Kazakhstan |
Central Securities Depository |
Kenya |
Central Bank of Kenya |
|
Central Depository and Settlement |
|
Corporation Limited |
Republic of |
Korea Securities Depository |
Korea |
|
Kuwait |
Kuwait Clearing Company KSC |
Latvia |
Latvian Central Depository |
Lebanon |
Banque du Liban |
|
Custodian and Clearing Center of |
|
Financial Instruments for Lebanon |
|
and the Middle East (Midclear) |
|
S.A.L. |
Lithuania |
Central Securities Depository of |
|
Lithuania |
Malawi |
Reserve Bank of Malawi |
Malaysia |
Bank Negara Malaysia |
|
Bursa Malaysia Depository Sdn. |
|
Bhd. |
Mali |
Dépositaire Central – Banque de |
|
Règlement |
|
Banque Centrale des Etats |
|
d'Afrique de l'Ouest |
Mauritius |
Bank of Mauritius |
|
Central Depository and Settlement |
|
Co. Limited |
Mexico |
S.D. Indeval, S.A. de C.V. |
Morocco |
Maroclear |
Namibia |
Bank of Namibia |
Netherlands |
Euroclear Nederland |
New Zealand |
New Zealand Central Securities |
|
Depository Limited |
Niger |
Dépositaire Central – Banque de |
|
Règlement |
Treasury bills, government bonds, development bonds, and public entity bonds
Equities and corporate bonds
Government securities, equities, corporate bonds, and money market instruments
Treasury bills and Treasury bonds
Equities and corporate debt
Equities, government securities, corporate bonds and money market instruments
Money market instruments, equities, and corporate bonds
Equities, government securities, corporate bonds, and money market instruments
Government securities and certificates of deposit issued by the central bank
Equities, corporate bonds and money market instruments
All securities available for public trading
Reserve Bank of Malawi bills and Treasury bills
Treasury bills, Bank Negara Malaysia bills, Malaysian government securities, private debt securities, and money market instruments
Securities listed on Bursa Malaysia Securities Berhad
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Treasury bills and Treasury bonds issued by the following West African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Government debt (traded through primary dealers)
Listed and unlisted equity and debt securities (corporate debt and T-bills traded on the exchange)
All securities
Eligible listed equities, corporate and government debt, certificates of deposit, commercial paper
Treasury bills
Government securities, equities, corporate bonds, corporate money market instruments, and stripped government bonds
Government securities, equities, corporate bonds, and money market instruments
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
|
Banque Centrale des Etats |
|
d'Afrique de l'Ouest |
Nigeria |
Central Bank of Nigeria |
|
Central Securities Clearing |
|
System Limited |
Norway |
Verdipapirsentralen |
Oman |
Muscat Clearing & Depository |
|
Company S.A.O.G. |
Pakistan |
Central Depository Company of |
|
Pakistan Limited |
|
State Bank of Pakistan |
Panama |
Central Latinoamericana de |
|
Valores, |
|
S.A. (LatinClear) |
Peru |
CAVALI S.A. Instituci÷n de |
|
Compensaci÷n y Liquidaci÷n de |
|
Valores |
Philippines |
Philippine Depository & Trust |
|
Corporation |
|
Registry of Scripless Securities |
|
(ROSS) of the Bureau of the |
|
Treasury |
Poland |
Rejestr Papier÷w Wartościowych |
|
Krajowy Depozyt Papier÷w |
|
Wartościowych, S.A. |
Portugal |
INTERBOLSA - Sociedad |
|
Gestora de Sistemas de |
|
Liquida÷÷o e de Sistemas |
|
Centralizados de Valores |
|
Mobiliários, S.A. |
Qatar |
Qatar Central Securities |
|
Depository |
Romania |
National Bank of Romania |
|
S.C. Depozitarul Central S.A. |
Russia |
National Settlement Depository |
Saudi Arabia |
Saudi Arabian Monetary |
|
Authority |
|
Securities Depository Center |
|
Company |
Senegal |
Dépositaire Central – Banque de |
|
Règlement |
|
Banque Centrale des Etats |
|
d'Afrique de l'Ouest |
Treasury bills and Treasury bonds issued by the following West African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Treasury bills and government bonds
Equities and corporate bonds traded on the Nigeria Stock Exchange
All listed securities
Equities, corporate bonds, government debt
Equities and corporate bonds
Government securities
Equities, government and corporate debt, commercial paper, short- term securities
All securities in book-entry form traded on the stock exchange
Eligible equities and debt
Government securities
Treasury bills
Equities, corporate bonds, corporate money market instruments, Treasury bonds, warrants, and futures contracts
All local Portuguese instruments
Equities, government bonds and Treasury bills listed on the Qatar Exchange
Treasury bills and bonds
Bursa de Valori Bucuresti- (Bucharest Stock Exchange-) listed equities, corporate bonds, government bonds, and municipal bonds
Eligible equities, Obligatsii Federal'nogo Zaima (OFZs), and corporate debt denominated in RUB
Government securities and Saudi government development bonds (SGDBs)
Equities
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
Treasury bills and Treasury bonds issued by the following West African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
SCH B-5
Serbia |
Central Securities Depository and |
|
Clearinghouse |
Singapore |
Monetary Authority of Singapore |
|
The Central Depository (Pte.) |
|
Limited |
Slovak Republic |
Centrálny depozitár cenn÷ch |
|
papierov SR, a.s. |
Slovenia |
KDD – Centralna klirinško |
|
depotna družba d.d. |
South Africa |
Strate (Pty) Ltd. |
Spain |
IBERCLEAR |
Sri Lanka |
Central Bank of Sri Lanka |
|
Central Depository System (Pvt) |
|
Limited |
Republic of |
Central Registry of Securities in |
Srpska |
the Republic of Srpska JSC |
Swaziland |
Central Bank of Swaziland |
Sweden |
Euroclear Sweden |
Switzerland |
SIX SIS AG |
Taiwan - R.O.C. |
Central Bank of the Republic of |
|
China (Taiwan) |
|
Taiwan Depository and Clearing |
|
Corporation |
Tanzania |
Central Depository System (CDS), |
|
a department of the Dar es Salaam |
|
Stock Exchange |
Thailand |
Thailand Securities Depository |
|
Company Limited |
Togo |
Dépositaire Central – Banque de |
|
Règlement |
All instruments
Government securities
Eligible listed equities and eligible private debt traded in Singapore
All dematerialized securities
All publicly traded securities
Eligible equities, government securities, corporate bonds, money market instruments, and warrants
Government securities, equities, warrants, money market instruments, and corporate bonds
Government securities
Equities and corporate bonds
Government securities, equities, and corporate and municipal bonds
Treasury bills and Treasury bonds
Government securities, equities, bonds, money market instruments, derivatives, exchange traded funds, and warrants
Government securities, equities, corporate bonds, money market instruments, derivatives, mutual funds, and warrants
Government securities
Listed equities, short-term bills, and corporate bonds
Equities and corporate bonds
Government securities, equities and corporate bonds
All securities traded on Bourse Régionale des Valeurs Mobilières, the West African regional exchange, including securities from the following West African nations: Benin, Burkina Faso, Guinea- Bissau, the Ivory Coast, Mali, Niger, Senegal and Togo.
|
Banque Centrale des Etats |
Treasury bills and Treasury bonds issued by the following West |
|
d'Afrique de l'Ouest |
African nations: Benin, Burkina Faso, Guinea-Bissau, the Ivory |
|
|
Coast, Mali, Niger, Senegal and Togo. |
Tunisia |
Tunisie Clearing |
All eligible listed securities |
Turkey |
Central Bank of Turkey |
Government securities |
|
Central Registry Agency |
Equities, corporate bonds, money market instruments, mutual fund |
|
|
certificates, exchange traded funds |
Uganda |
Bank of Uganda |
Treasury bills and Treasury bonds |
|
Securities Central Depository |
Equities, corporate bonds |
Ukraine |
National Depository of Ukraine |
Equities, bonds, and money market instruments |
|
|
SCH B-6 |
United Arab |
Clearing, Settlement, Depository |
Equities, government securities, and corporate debt |
Emirates – Abu |
and Registry department of the |
|
Dhabi |
Abu Dhabi Securities Exchange |
|
United Arab |
Clearing, Settlement and |
Equities, government securities, and corporate debt listed on the |
Emirates – |
Depository Division, a department |
DFM |
Dubai Financial |
of the Dubai Financial Market |
|
Market |
|
|
United Arab |
Central Securities Depository, |
Equities, corporate bonds, and corporate money market instruments |
Emirates – |
owned and operated by NASDAQ |
|
Dubai |
Dubai Limited |
|
International |
|
|
Financial |
|
|
United Kingdom |
Euroclear UK & Ireland Limited |
GBP- and EUR-denominated money market instruments |
Uruguay |
Banco Central del Uruguay |
Government securities |
Venezuela |
Banco Central de Venezuela |
Government securities |
Vietnam |
Vietnam Securities Depository |
Equities, government bonds, T-bills, corporate bonds, and public |
|
|
fund certificates |
Zambia |
Bank of Zambia |
Treasury bills and Treasury bonds |
|
LuSE Central Shares Depository |
Treasury bonds, corporate bonds, and equities |
|
Limited |
|
Zimbabwe |
Chengetedzai Depository |
Equities and corporate bonds |
|
Company Limited |
|
|
Reserve Bank of Zimbabwe |
Treasury bills and Treasury bonds |
TRANSNATIONAL DEPOSITORIES |
|
Euroclear Bank S.A./N.V. |
Domestic securities from more than 40 markets |
Clearstream Banking, S.A. |
Domestic securities from more than 50 markets |
SCH B-7
SCHEDULE C – GLOBAL CUSTODY NETWORK PUBLICATIONS
Publication / Type of Information
(scheduled update frequency)
The Guide to Custody in World Markets (regular my.statestreet.com updates)
Global Custody Network Review (updated annually on my.statestreet.com)
Securities Depository Review
(updated annually on my.statestreet.com)
Global Legal Survey
(updated annually on my.statestreet.com)
Subcustodian Agreements (available on CD-ROM annually)
Global Market Bulletin
(daily or as necessary via email and on my.statestreet.com)
Foreign Custody Risk
Advisories
(provided as necessary and on my.statestreet.com)
Foreign Custody Manager Material Change Notices
(quarterly or as necessary and on my.statestreet.com)
Brief Description
An overview of settlement and safekeeping procedures, custody practices, and foreign investor considerations for the markets in which State Street offers custodial services.
Information relating to Foreign Subcustodians in State Street's Global Custody Network. The Review stands as an integral part of the materials that State Street provides to its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street's market expansion and Foreign Subcustodian selection processes, as well as the procedures and controls used to monitor the financial condition and performance of our Foreign Subcustodian banks.
Custody risk analyses of the Foreign Securities Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7.
With respect to each market in which State Street offers custodial services, opinions relating to whether local law restricts:
(i)access of a fund's independent public accountants to books and records of a Foreign Subcustodian or Foreign Securities System,
(ii)a fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Subcustodian or Foreign Securities System,
(iii)a fund's ability to recover in the event of a loss by a Foreign Subcustodian or Foreign Securities System, and
(iv)the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars.
Copies of the contracts that State Street has entered into with each Foreign Subcustodian that maintains U.S. mutual fund assets in the markets in which State Street offers custodial services.
Information on changing settlement and custody conditions in markets where State Street offers custodial services. Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street's clients.
For those markets where State Street offers custodial services that exhibit special risks or infrastructures impacting custody, State Street maintains market advisories to highlight those unique market factors which might impact our ability to offer recognized custody service levels.
Informational letters and accompanying materials, pursuant to our role as Foreign Custody Manager, confirming State Street's foreign custody arrangements, including a summary of material changes with Foreign Subcustodians that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories.
Please contact GlobalMarketInformation@statestreet.com with questions about this document.
The information contained in this document has been carefully researched and is believed to be reliable as of the publication date. Due to the complexities of the markets and changing conditions, however, State Street cannot guarantee that it is complete or accurate in every respect. This document should not be construed or used as a substitute for appropriate legal or investment counsel. Specific advice should be sought on matters relevant to the investment activities of the reader. This application contains proprietary information and is fully protected by relevant copyright laws worldwide.
Copyright 2017 State Street Corporation
www.statestreet.com
SCH C-1
SCHEDULE D – SPECIAL SUB-CUSTODIANS
SPECIAL SUB-CUSTODIANS
*[None/Name of Special Sub-Custodian(s)]
SCH D-1
LOAN SERVICES ADDENDUM
As used in this Addendum, the term "Fund", in relation to a Loan (as defined below), includes a Portfolio on whose behalf the Fund acts with respect to the Loan.
The following provisions will apply with respect to interests in commercial loans, including loan participations, whether the loans are bilateral or syndicated and whether any obligor is located in or outside of the United States (collectively, "Loans"), made or acquired by a Fund on behalf of one or more of its Portfolios.
SECTION 1. PAYMENT CUSTODY. If a Fund wishes the Custodian to receive payments directly with respect to a Loan for credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement,
(a)the Fund will cause the Custodian to be named as the Fund's nominee for payment purposes under the relevant financing documents, e.g., in the case of a syndicated loan, the administrative contact for the agent bank, and otherwise provide for the payment to the Custodian of the payments with respect to the Loan; and
(b)the Custodian will credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement any payment on or in respect of the Loan actually received by the Custodian and identified as relating to the Loan, but with any amount credited being conditional upon clearance and actual receipt by the Custodian of final payment.
SECTION 2. MONITORING. If a Fund wishes the Custodian to monitor payments on and forward notices relating to a Loan,
(a)the Fund will deliver, or cause to be delivered, to the Custodian a schedule identifying the amount and due dates of the scheduled principal payments, the scheduled interest payment dates and related payment amount information, and such other information with respect to the Loan as the Custodian may reasonably require in order to perform its services hereunder (collectively, "Loan Information") and in such form and format as the Custodian may reasonably request; and
(b)the Custodian will (i) if the amount of a principal, interest, fee or other payment with respect to the Loan is not received by the Custodian on the date on which the amount is scheduled to be paid as reflected in the Loan Information, provide a report to the Fund that the payment has not been received and (ii) if the Custodian receives any consent solicitation, notice of default or similar notice from any syndication agent, lead or obligor on the Loan, undertake reasonable efforts to forward the notice to the Fund.
SECTION 3. EXCULPATION OF THE CUSTODIAN.
(a)Payment Custody and Monitoring. The Custodian will have no liability for any delay or failure by the Fund or any third party in providing Loan Information to the Custodian or for any inaccuracy or incompleteness of any Loan Information. The Custodian will have no obligation to verify, investigate, recalculate, update or otherwise confirm the accuracy or completeness of any Loan Information or other information or notices received by the Custodian in respect of the Loan. The Custodian will be entitled to (i) rely upon the Loan Information provided to it by or on behalf of the Fund or any other information or notices that the Custodian may receive from time to time from any syndication agent, lead or obligor or any similar party with respect to the Loan and (ii) update its records on the basis of such information or notices as may from time to time be received by the Custodian.
(b) Any Service. The Custodian will have no obligation to (i) determine whether any necessary steps have been taken or requirements have been met for the Fund to have acquired good or record title to a Loan,
(ii)ensure that the Fund's acquisition of the Loan has been authorized by the Fund, (iii) collect past due payments
LSA-2
on the Loan, preserve any rights against prior parties, exercise any right or perform any obligation in connection with the Loan (including taking any action in connection with any consent solicitation, notice of default or similar notice received from any syndication agent, lead or obligor on the Loan) or otherwise take any other action to enforce the payment obligations of any obligor on the Loan, (iv) become itself the record title holder of the Loan or (v) make any advance of its own funds with respect to the Loan.
(c)Miscellaneous. The Custodian will not be considered to have been or be charged with knowledge of the sale of a Loan by the Fund, unless and except to the extent that the Custodian shall have received written notice of the sale from the Fund and the proceeds of the sale have been received by the Custodian for credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement. If any question arises as to the Custodian's duties under this Addendum, the Custodian may request instructions from the Fund and will be entitled at all times to refrain from taking any action unless it has received Proper Instructions from the Fund. The Custodian will in all events have no liability, risk or cost for any action taken or omitted with respect to the Loan pursuant to Proper Instructions. The Custodian will have no responsibilities or duties whatsoever with respect to the Loan except as are expressly set forth in this Addendum.
LSA-3
FIRST AMENDMENT TO AMENDED AND RESTATED
MASTER CUSTODIAN AGREEMENT
This first amendment dated January __, 2018 (the "Amendment") to the Amended and Restated Master Custodian Agreement dated September 15, 2017 (the "Agreement") between State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"), and each management investment company listed on Appendix A thereto (each, a "Fund"). Custodian and each Fund may be referred to individually as a "Party" or collectively as the "Parties".
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
The Parties hereby amend and restate Appendix A to the Agreement as set forth below:
APPENDIX A
VANGUARD CALIFORNIA TAX-FREE FUNDS
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
VANGUARD CHARLOTTE FUNDS
Vanguard Total International Bond Index Fund
VANGUARD CMT FUNDS
Vanguard Municipal Cash Management Fund
VANGUARD CONVERTIBLE SECURITIES FUND
Vanguard Convertible Securities Fund
VANGUARD FENWAY FUNDS
Vanguard PRIMECAP Core Fund
VANGUARD FIXED INCOME SECURITIES
Vanguard Intermediate-Term Investment-Grade Fund
Vanguard Short-Term Investment-Grade Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard Ultra-Short-Term Bond Fund
VANGUARD EXPLORER FUND
Vanguard Explorer Fund
VANGUARD HORIZON FUNDS
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
VANGUARD INDEX FUNDS
Vanguard 500 Index Fund
VANGUARD INSTITUTIONAL INDEX FUNDS
Vanguard Institutional Index Fund
LSA-4
VANGUARD INTERNATIONAL EQUITY INDEX FUNDS Vanguard Global ex-U.S. Real Estate Index Fund Vanguard Total World Stock Index Fund
VANGUARD MALVERN FUNDS
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Emerging Markets Bond Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS Vanguard Massachusetts Tax-Exempt Fund
VANGUARD MONTGOMERY FUNDS
Vanguard Market Neutral Fund
VANGUARD MORGAN GROWTH FUND
Vanguard Morgan Growth Fund
VANGUARD MUNICIPAL BOND FUNDS
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt Fund
Vanguard Limited-Term Tax-Exempt Fund
Vanguard Long-Term Tax-Exempt Fund
Vanguard Municipal Money Market Fund
Vanguard Short-Term Tax-Exempt Fund
Vanguard Tax-Exempt Bond Index Fund
VANGUARD NEW JERSEY TAX-FREE FUNDS Vanguard New Jersey Long-Term Tax-Exempt Fund Vanguard New Jersey Municipal Money Market Fund
VANGUARD NEW YORK TAX-FREE FUNDS Vanguard New York Long-Term Tax-Exempt Fund Vanguard New York Municipal Money Market Fund
VANGUARD OHIO TAX-FREE FUNDS
Vanguard Ohio Long-Term Tax-Exempt Fund
VANGUARD PENNSYLVANIA TAX-FREE FUNDS
Vanguard Pennsylvania Long-Term Tax-Exempt Fund
Vanguard Pennsylvania Municipal Money Market Fund
VANGUARD QUANTITATIVE FUNDS
Vanguard Growth and Income Fund
VANGUARD SCOTTSDALE FUND
Vanguard Explorer Value Fund
Vanguard Russell 3000 Index Fund
LSA-5
VANGUARD SPECIALIZED FUNDS
Dividend Appreciation Index Fund
Vanguard Energy Fund
Vanguard Health Care Fund
VANGUARD STAR FUNDS
Vanguard STAR Fund
VANGUARD TAX-MANAGED FUNDS
Vanguard Developed Markets Index Fund
VANGUARD TRUSTEES' EQUITY FUND
Vanguard Alternative Strategies Fund
Vanguard Emerging Markets Select Stock Fund
VANGUARD VARIABLE INSURANCE FUNDS
Balanced Portfolio
Capital Growth Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High Yield Bond Portfolio
Mid-Cap Index Portfolio
REIT Index Portfolio
International Portfolio
Small Company Growth Portfolio
VANGUARD WELLESLEY INCOME FUND
Vanguard Wellesley Income Fund
VANGUARD WHITEHALL FUNDS
Vanguard Emerging Markets Government Bond Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
VANGUARD WINDSOR FUNDS
Vanguard Windsor Fund
Vanguard Windsor II Fund
VANGUARD WORLD FUND
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard Financials Index Fund
Vanguard FTSE Social Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Growth Index Fund
LSA-6
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
IN WITNESS WHEREOF, the Parties has caused their duly authorized officers to execute and deliver this
Amendment as of the date set forth above.
STATE STREET BANK AND TRUST |
EACH OF THE OPEN-END |
COMPANY |
MANAGEMENT INVESTMENT |
|
COMPANIES LISTED ON APPENDIX A |
By: /s/Andrew Erickson |
By: |
/s/ Thomas J. Higgins |
Name: Andrew Erickson |
Name: |
Thomas J. Higgins |
Title: Executive Vice President |
Title: |
Chief Financial Officer |
LSA-7
SECOND AMENDMENT TO AMENDED AND RESTATED
MASTER CUSTODIAN AGREEMENT
This second amendment dated April __, 2019 (the "Amendment") to the Amended and Restated Master Custodian Agreement dated September 15, 2017 (the "Agreement") between State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"), and each management investment company listed on Appendix A thereto (each, a "Fund"). Custodian and each Fund may be referred to individually as a "Party" or collectively as the "Parties".
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
The Parties hereby amend and restate Appendix A to the Agreement as set forth below:
APPENDIX A
VANGUARD CALIFORNIA TAX-FREE FUNDS
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
VANGUARD CHARLOTTE FUNDS
Vanguard Total International Bond Index Fund
VANGUARD CMT FUNDS
Vanguard Municipal Cash Management Fund
VANGUARD FENWAY FUNDS
Vanguard PRIMECAP Core Fund
VANGUARD FIXED INCOME SECURITIES
Vanguard Intermediate-Term Investment-Grade Fund
Vanguard Short-Term Investment-Grade Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard Ultra-Short-Term Bond Fund
VANGUARD EXPLORER FUND
Vanguard Explorer Fund
VANGUARD HORIZON FUNDS
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
VANGUARD INDEX FUNDS
Vanguard 500 Index Fund
VANGUARD INSTITUTIONAL INDEX FUNDS
Vanguard Institutional Index Fund
VANGUARD INTERNATIONAL EQUITY INDEX FUNDS
LSA-8
Vanguard Global ex-U.S. Real Estate Index Fund
Vanguard Total World Stock Index Fund
VANGUARD MALVERN FUNDS
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Emerging Markets Bond Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS Vanguard Massachusetts Tax-Exempt Fund
VANGUARD MONTGOMERY FUNDS
Vanguard Market Neutral Fund
VANGUARD MUNICIPAL BOND FUNDS
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt Fund
Vanguard Limited-Term Tax-Exempt Fund
Vanguard Long-Term Tax-Exempt Fund
Vanguard Municipal Money Market Fund
Vanguard Short-Term Tax-Exempt Fund
Vanguard Tax-Exempt Bond Index Fund
VANGUARD NEW JERSEY TAX-FREE FUNDS Vanguard New Jersey Long-Term Tax-Exempt Fund Vanguard New Jersey Municipal Money Market Fund
VANGUARD NEW YORK TAX-FREE FUNDS Vanguard New York Long-Term Tax-Exempt Fund Vanguard New York Municipal Money Market Fund
VANGUARD OHIO TAX-FREE FUNDS
Vanguard Ohio Long-Term Tax-Exempt Fund
VANGUARD PENNSYLVANIA TAX-FREE FUNDS
Vanguard Pennsylvania Long-Term Tax-Exempt Fund
Vanguard Pennsylvania Municipal Money Market Fund
VANGUARD QUANTITATIVE FUNDS
Vanguard Growth and Income Fund
VANGUARD SCOTTSDALE FUND
Vanguard Explorer Value Fund
Vanguard Russell 3000 Index Fund
VANGUARD SPECIALIZED FUNDS
Dividend Appreciation Index Fund
Vanguard Energy Fund
LSA-9
Vanguard Health Care Fund
VANGUARD STAR FUNDS
Vanguard STAR Fund
VANGUARD TAX-MANAGED FUNDS
Vanguard Developed Markets Index Fund
VANGUARD TRUSTEES' EQUITY FUND
Vanguard Alternative Strategies Fund
Vanguard Emerging Markets Select Stock Fund
Vanguard Commodity Strategy Fund
VANGUARD VARIABLE INSURANCE FUNDS
Balanced Portfolio
Capital Growth Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High Yield Bond Portfolio
Mid-Cap Index Portfolio
REIT Index Portfolio
International Portfolio
Small Company Growth Portfolio
VANGUARD WELLESLEY INCOME FUND
Vanguard Wellesley Income Fund
VANGUARD WHITEHALL FUNDS
Vanguard Emerging Markets Government Bond Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
VANGUARD WINDSOR FUNDS
Vanguard Windsor Fund
Vanguard Windsor II Fund
VANGUARD WORLD FUND
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard Financials Index Fund
Vanguard FTSE Social Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index Fund
LSA-10
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
IN WITNESS WHEREOF, the Parties has caused their duly authorized officers to execute and deliver this
Amendment as of the date set forth above.
STATE STREET BANK AND TRUST |
EACH OF THE OPEN-END |
COMPANY |
MANAGEMENT INVESTMENT |
|
COMPANIES LISTED ON APPENDIX A |
By: /s/ Andrew Erickson |
By: |
/s/ Thomas J. Higgins |
Name: Andrew Erickson |
Name: |
Thomas J. Higgins |
Title: Executive Vice President |
Title: |
Chief Financial Officer |
THIRD AMENDMENT TO AMENDED AND RESTATED
MASTER CUSTODIAN AGREEMENT
This third amendment dated January 3, 2020 (the "Amendment") to the Amended and Restated Master Custodian Agreement dated September 15, 2017 (the "Agreement") between State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"), and each management investment
LSA-11
company listed on Appendix A thereto (each, a "Fund"). Custodian and each Fund may be referred to individually as a "Party" or collectively as the "Parties."
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
The Parties hereby amend and restate Appendix A to the Agreement as set forth below:
APPENDIX A
VANGUARD CALIFORNIA TAX-FREE FUNDS
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
VANGUARD CHARLOTTE FUNDS
Vanguard Total International Bond Index Fund
Vanguard Total International Bond II Index Fund
VANGUARD CMT FUNDS
Vanguard Municipal Cash Management Fund
VANGUARD FENWAY FUNDS
Vanguard PRIMECAP Core Fund
VANGUARD FIXED INCOME SECURITIES
Vanguard Intermediate-Term Investment-Grade Fund
Vanguard Short-Term Investment-Grade Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard Ultra-Short-Term Bond Fund
VANGUARD EXPLORER FUND
Vanguard Explorer Fund
VANGUARD HORIZON FUNDS
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
VANGUARD INDEX FUNDS
Vanguard 500 Index Fund
VANGUARD INSTITUTIONAL INDEX FUNDS
Vanguard Institutional Index Fund
VANGUARD INTERNATIONAL EQUITY INDEX FUNDS
Vanguard Global ex-U.S. Real Estate Index Fund
Vanguard Total World Stock Index Fund
VANGUARD MALVERN FUNDS
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
LSA-12
Vanguard Capital Value Fund
Vanguard U.S. Value Fund
Vanguard Emerging Markets Bond Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS Vanguard Massachusetts Tax-Exempt Fund
VANGUARD MONTGOMERY FUNDS
Vanguard Market Neutral Fund
VANGUARD MUNICIPAL BOND FUNDS
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt Fund
Vanguard Limited-Term Tax-Exempt Fund
Vanguard Long-Term Tax-Exempt Fund
Vanguard Municipal Money Market Fund
Vanguard Short-Term Tax-Exempt Fund
Vanguard Tax-Exempt Bond Index Fund
VANGUARD NEW JERSEY TAX-FREE FUNDS Vanguard New Jersey Long-Term Tax-Exempt Fund Vanguard New Jersey Municipal Money Market Fund
VANGUARD NEW YORK TAX-FREE FUNDS Vanguard New York Long-Term Tax-Exempt Fund Vanguard New York Municipal Money Market Fund
VANGUARD OHIO TAX-FREE FUNDS
Vanguard Ohio Long-Term Tax-Exempt Fund
VANGUARD PENNSYLVANIA TAX-FREE FUNDS
Vanguard Pennsylvania Long-Term Tax-Exempt Fund
Vanguard Pennsylvania Municipal Money Market Fund
VANGUARD QUANTITATIVE FUNDS
Vanguard Growth and Income Fund
VANGUARD SCOTTSDALE FUND
Vanguard Explorer Value Fund
Vanguard Russell 3000 Index Fund
VANGUARD SPECIALIZED FUNDS
Dividend Appreciation Index Fund
Vanguard Energy Fund
Vanguard Health Care Fund
VANGUARD STAR FUNDS
Vanguard STAR Fund
VANGUARD TAX-MANAGED FUNDS
LSA-13
Vanguard Developed Markets Index Fund
VANGUARD TRUSTEES' EQUITY FUND
Vanguard Alternative Strategies Fund
Vanguard Commodity Strategy Fund
Vanguard Emerging Markets Select Stock Fund
VANGUARD VARIABLE INSURANCE FUNDS
Balanced Portfolio
Capital Growth Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High Yield Bond Portfolio
Mid-Cap Index Portfolio
Real Estate Index Portfolio
International Portfolio
Small Company Growth Portfolio
VANGUARD WELLESLEY INCOME FUND
Vanguard Wellesley Income Fund
VANGUARD WHITEHALL FUNDS
Vanguard Emerging Markets Government Bond Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
VANGUARD WINDSOR FUNDS
Vanguard Windsor Fund
Vanguard Windsor II Fund
VANGUARD WORLD FUND
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard Financials Index Fund
Vanguard FTSE Social Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
LSA-14
IN WITNESS WHEREOF, the Parties has caused their duly authorized officers to execute and deliver this
Amendment as of the date set forth above.
STATE STREET BANK AND TRUST |
EACH OF THE OPEN-END |
COMPANY |
MANAGEMENT INVESTMENT |
|
COMPANIES LISTED ON APPENDIX A |
By: |
/s/ Andrew Erickson |
By: |
/s/ John Bendl |
Name: |
Andrew Erickson |
Name: |
John Bendl |
Title: |
Executive Vice President |
Title: |
Chief Financial Officer |
LSA-15
FOURTH AMENDMENT TO
AMENDED AND RESTATED
MASTER CUSTODIAN AGREEMENT
This fourth amendment dated March 8, 2021 (the "Amendment") is to the Amended and Restated Master Custodian Agreement dated September 15, 2017 (the "Agreement") between State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"), and each management investment company listed on Appendix A thereto (each, a "Fund"). Custodian and each Fund may be referred to individually as a "Party" or collectively as the "Parties."
In accordance with Sections 17, 19.5 and 19.6 of the Agreement, the parties desire to amend the Agreement as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1.Appendix A. The current Appendix A to the Agreement is hereby replaced and superseded with the Appendix A attached hereto, effective as of the date hereof; and
2.Except as specifically set forth in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties has caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
STATE STREET BANK AND TRUST COMPANY
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES LISTED ON APPENDIX A
By: /s/ Michelle Ross______________________ |
By: |
/s/ John Bendl__________________ |
Name: Michelle Ross |
Name: |
John Bendl |
Title: Vice President |
Title: |
Chief Financial Officer |
LSA-16
APPENDIX A
March 8, 2021
VANGUARD BOND INDEX FUNDS
Vanguard Ultra-Short Bond ETF
VANGUARD CALIFORNIA TAX-FREE FUNDS
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
VANGUARD CHARLOTTE FUNDS
Vanguard Total International Bond Index Fund Vanguard Total International Bond II Index Fund
VANGUARD CMT FUNDS
Vanguard Municipal Cash Management Fund
VANGUARD FENWAY FUNDS
Vanguard PRIMECAP Core Fund
VANGUARD FIXED INCOME SECURITIES
Vanguard Intermediate-Term Investment-Grade Fund
Vanguard Short-Term Investment-Grade Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard Ultra-Short-Term Bond Fund
VANGUARD EXPLORER FUND
Vanguard Explorer Fund
VANGUARD HORIZON FUNDS
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
VANGUARD INDEX FUNDS
Vanguard 500 Index Fund
VANGUARD INSTITUTIONAL INDEX FUNDS
Vanguard Institutional Index Fund
VANGUARD INTERNATIONAL EQUITY INDEX FUNDS Vanguard Global ex-U.S. Real Estate Index Fund Vanguard Total World Stock Index Fund
VANGUARD MALVERN FUNDS
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Emerging Markets Bond Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS Vanguard Massachusetts Tax-Exempt Fund
LSA-17
APPENDIX A (continued)
March 8, 2021
VANGUARD MONTGOMERY FUNDS
Vanguard Market Neutral Fund
VANGUARD MUNICIPAL BOND FUNDS
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt Fund
Vanguard Limited-Term Tax-Exempt Fund
Vanguard Long-Term Tax-Exempt Fund
Vanguard Municipal Money Market Fund
Vanguard Short-Term Tax-Exempt Fund
Vanguard Tax-Exempt Bond Index Fund
VANGUARD NEW JERSEY TAX-FREE FUNDS Vanguard New Jersey Long-Term Tax-Exempt Fund Vanguard New Jersey Municipal Money Market Fund
VANGUARD NEW YORK TAX-FREE FUNDS Vanguard New York Long-Term Tax-Exempt Fund Vanguard New York Municipal Money Market Fund
VANGUARD OHIO TAX-FREE FUNDS
Vanguard Ohio Long-Term Tax-Exempt Fund
VANGUARD PENNSYLVANIA TAX-FREE FUNDS Vanguard Pennsylvania Long-Term Tax-Exempt Fund
VANGUARD QUANTITATIVE FUNDS
Vanguard Growth and Income Fund
VANGUARD SCOTTSDALE FUND
Vanguard Explorer Value Fund
Vanguard Russell 3000 Index Fund
VANGUARD SPECIALIZED FUNDS
Dividend Appreciation Index Fund
Vanguard Energy Fund
Vanguard Health Care Fund
VANGUARD STAR FUNDS
Vanguard STAR Fund
VANGUARD TAX-MANAGED FUNDS
Vanguard Developed Markets Index Fund
VANGUARD TRUSTEES' EQUITY FUND
Vanguard Alternative Strategies Fund
Vanguard Commodity Strategy Fund
Vanguard Emerging Markets Select Stock Fund
LSA-18
APPENDIX A (continued)
March 8, 2021
VANGUARD VARIABLE INSURANCE FUNDS
Balanced Portfolio
Capital Growth Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High Yield Bond Portfolio
Mid-Cap Index Portfolio
Real Estate Index Portfolio
International Portfolio
Small Company Growth Portfolio
VANGUARD WELLESLEY INCOME FUND
Vanguard Wellesley Income Fund
VANGUARD WHITEHALL FUNDS
Vanguard Emerging Markets Government Bond Index Fund
Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
VANGUARD WINDSOR FUNDS
Vanguard Windsor Fund
Vanguard Windsor II Fund
VANGUARD WORLD FUND
Vanguard Consumer Discretionary Index Fund
Vanguard Consumer Staples Index Fund
Vanguard Energy Index Fund
Vanguard Financials Index Fund
Vanguard FTSE Social Index Fund
Vanguard Health Care Index Fund
Vanguard Industrials Index Fund
Vanguard Information Technology Index Fund
Vanguard Materials Index Fund
Vanguard Mega Cap Growth Index Fund
Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index Fund
Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
LSA-19
FIFTH AMENDMENT TO
AMENDED AND RESTATED
MASTER CUSTODIAN AGREEMENT
This fifth amendment dated September 15, 2022 (the "Amendment") is to the Amended and Restated Master Custodian Agreement dated September 15, 2017 (the "Agreement") between State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"), and each management investment company listed on Appendix A thereto (each, a "Fund"). Custodian and each Fund may be referred to individually as a "Party" or collectively as the "Parties."
In accordance with Sections 17, 19.5 and 19.6 of the Agreement, the parties desire to amend the Agreement as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
l.Appendix A. The current Appendix A to the Agreement is hereby replaced and superseded with the Appendix A attached hereto, effective as of the date hereof; and
2.Except as specifically set forth in this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the Parties has caused their duly authorized officers to execute and deliver this Amendment as of the date set forth above.
STATE STREET BANK
AND TRUST COMPANY
By: /s/ Corey Groves
Name: Corey Groves
Title: Managing Director, Authorized Signer
EACH OF THE OPEN-END MANAGEMENT INVESTMENT COMPANIES LISTED ON APPENDIX A
By: /s/ Christine Buchanan
Name: Christine Buchanan
Title: Chief Financial Officer
APPENDIX A
September 15, 2022
VANGUARD BOND INDEX FUNDS
Vanguard Ultra-Short Bond ETF
VANGUARD CALIFORNIA TAX-FREE FUNDS
Vanguard California Intermediate-Term Tax-Exempt Fund
Vanguard California Long-Term Tax-Exempt Fund
Vanguard California Municipal Money Market Fund
VANGUARD CHARLOTTE FUNDS
Vanguard Total International Bond Index Fund Vanguard Total International Bond II Index Fund
VANGUARD CMT FUNDS
Vanguard Municipal Cash Management Fund
VANGUARD FENWAY FUNDS
Vanguard PRIMECAP Core Fund
VANGUARD FIXED INCOME SECURITIES
Vanguard Intermediate-Term Investment-Grade Fund
Vanguard Short-Term Investment-Grade Fund
Vanguard High-Yield Corporate Fund
Vanguard Long-Term Investment-Grade Fund
Vanguard Ultra-Short-Term Bond Fund
VANGUARD EXPLORER FUND
Vanguard Explorer Fund
VANGUARD HORIZON FUNDS
Vanguard Global Equity Fund
Vanguard Strategic Equity Fund
Vanguard Strategic Small-Cap Equity Fund
VANGUARD INDEX FUNDS
Vanguard 500 Index Fund
VANGUARD INSTITUTIONAL INDEX FUNDS
Vanguard Institutional Index Fund
VANGUARD INTERNATIONAL EQUITY INDEX FUNDS Vanguard Global ex-U.S. Real Estate Index Fund Vanguard Total World Stock Index Fund
VANGUARD MALVERN FUNDS
Vanguard Institutional Intermediate-Term Bond Fund
Vanguard Institutional Short-Term Bond Fund
Vanguard Emerging Markets Bond Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund
VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS Vanguard Massachusetts Tax-Exempt Fund
LSA-22
APPENDIX A (continued)
September 15, 2022
VANGUARD MONTGOMERY FUNDS
Vanguard Market Neutral Fund
VANGUARD MUNICIPAL BOND FUNDS
Vanguard High-Yield Tax-Exempt Fund
Vanguard Intermediate-Term Tax-Exempt
Fund Vanguard Limited-Term Tax-Exempt
Fund Vanguard Long-Term Tax-Exempt
Fund Vanguard Municipal Money Market
Fund Vanguard Short-Term Tax-Exempt
Fund Vanguard Tax-Exempt Bond Index
Fund
VANGUARD NEW JERSEY TAX-FREE FUNDS
Vanguard New Jersey Long-Term Tax-Exempt
Fund
VANGUARD NEW YORK TAX-FREE FUNDS
Vanguard New York Long-Term Tax-Exempt
Fund Vanguard New York Municipal Money
Market Fund
VANGUARD OHIO TAX-FREE FUNDS
Vanguard Ohio Long-Term Tax-Exempt
Fund
VANGUARD PENNSYLVANIA TAX-FREE FUNDS Vanguard Pennsylvania Long-Term Tax-Exempt Fund
VANGUARD QUANTITATIVE FUNDS
Vanguard Growth and Income Fund
VANGUARD SCOTTSDALE FUND
Vanguard Explorer Value Fund
Vanguard Russell 3000 Index
Fund
VANGUARD SPECIALIZED FUNDS
Dividend Appreciation Index
Fund Vanguard Energy Fund
Vanguard Health Care Fund
VANGUARD TAX-MANAGED FUNDS
Vanguard Developed Markets Index Fund
VANGUARD TRUSTEES' EQUITY FUND
Vanguard Alternative Strategies
Fund Vanguard Commodity
Strategy Fund
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Vanguard Emerging Markets Select Stock Fund
Vanguard Global Environmental Opportunities Stock Fund
APPENDIX A (continued)
September 15, 2022
VANGUARD VARIABLE INSURANCE FUNDS
Balanced Portfolio
Capital Growth
Portfolio
Diversified Value
Portfolio Equity Income
Portfolio Equity Index
Portfolio Growth
Portfolio
High Yield Bond
Portfolio Mid-Cap
Index Portfolio Real
Estate Index Portfolio
International Portfolio
Small Company Growth Portfolio
VANGUARD WELLESLEY INCOME FUND
Vanguard Wellesley Income Fund
VANGUARD WHITEHALL FUNDS
Vanguard Emerging Markets Government Bond Index
Fund Vanguard Mid-Cap Growth Fund
Vanguard Selected Value Fund
VANGUARD WINDSOR FUNDS
Vanguard Windsor
Fund Vanguard
Windsor II Fund
VANGUARD WORLD FUND
Vanguard Consumer Discretionary Index
Fund Vanguard Consumer Staples Index
Fund Vanguard Energy Index Fund
Vanguard Financials Index
Fund Vanguard FTSE Social
Index Fund Vanguard Health
Care Index Fund Vanguard
Industrials Index Fund
Vanguard Information Technology Index
Fund Vanguard Materials Index Fund
LSA-24
Vanguard Mega Cap Growth Index
Fund Vanguard Mega Cap Index Fund
Vanguard Mega Cap Value Index Fund
Vanguard Telecommunication Services Index
Fund Vanguard U.S. Growth Fund
Vanguard Utilities Index Fund
LSA-25
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of Vanguard Wellesley Income Fund of our report dated November 18, 2022, relating to the financial statements and financial highlights, which appears in Vanguard Wellesley Income Fund’s Annual Report on Form N-CSR for the year ended September 30, 2022. We also consent to the references to us under the headings “Financial Statements”, “Service Providers—Independent Registered Public Accounting Firm” and “Financial Highlights” in such Registration Statement.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
January 26, 2023
VANGUARD FUNDS
MULTIPLE CLASS PLAN
I.INTRODUCTION
This Multiple Class Plan (the "Plan") describes seven separate classes of shares that may be offered by investment company members of The Vanguard Group of Mutual Funds (collectively the "Funds," individually a "Fund"). The Plan has been adopted pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "1940 Act") to allow each Fund to offer multiple classes of shares in a manner permitted by Rule 18f-3, subject to the requirements imposed by the Rule. Each Fund may offer any one or more of the specified classes.
The Plan has been approved by the Board of Directors of The Vanguard Group, Inc. ("VGI"). In addition, the Plan has been adopted by a majority of the Board of Trustees of each Fund ("Fund Board"), including a majority of the Trustees who are not interested persons of each Fund. The classes of shares offered by each Fund are designated in Schedule A hereto, as such Schedule may be amended from time to time.
II.SHARE CLASSES
A Fund may offer any one or more of the following share classes:
Investor Shares
Admiral Shares
Institutional Shares
Institutional Plus Shares
Institutional Select Shares
ETF Shares
Transition Shares
III.DISTRIBUTION, AVAILABILITY AND ELIGIBILITY
Distribution arrangements for all classes are described below. Distribution arrangements vary by VGI business line depending on the eligibility of the client segments to whom they market. Each Fund retains sole discretion in determining share class availability, and VGI retains discretion in determining whether Fund shares shall be offered either directly or through certain financial intermediaries, or on certain financial intermediary platforms. Eligibility requirements for purchasing shares of each class will differ, as follows:
A.Investor Shares
Investor Shares of actively-managed Funds generally will be available to investors who are not permitted to purchase other classes of shares, subject to the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. It is expected that the minimum investment amount for Investor Shares of actively-managed Funds will normally be lower than the amount required for any other class of shares of such Funds. Investor Shares of actively-
1
managed Funds are typically distributed by all VGI business lines. Investor Shares of index Funds generally will be available to Funds that operate as a Fund-of-Funds and certain retirement plan clients receiving recordkeeping services from VGI.
B.Admiral Shares
Admiral Shares generally will be available to retail, institutional, and other investors who meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. These eligibility requirements may include, but are not limited to the following factors: (i) the total amount invested in the Fund; or (ii) any other factors deemed appropriate by a Fund's Board. Admiral Shares are typically distributed by all VGI business lines.
C.Institutional Shares
Institutional Shares generally will be available to institutional and other investors who meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. It is expected that the minimum investment amount per account for Institutional Shares will be substantially higher than the amounts required for Investor Shares or Admiral Shares. Institutional Shares are typically distributed by Vanguard's financial advisory services and institutional business lines.
D.Institutional Plus Shares
Institutional Plus Shares generally will be available to institutional and other investors who meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. It is expected that the minimum investment amount for Institutional Plus Shares will be substantially higher than the amount required for Institutional Shares. Institutional Plus Shares are typically distributed by VGI's financial advisory services and institutional business lines.
E.Institutional Select Shares
Institutional Select Shares generally will be available to institutional investors who meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. It is expected that the minimum investment amount for Institutional Select Shares will be the highest among all Fund share classes. Institutional Select Shares are typically distributed by VGI's institutional business line.
F.ETF Shares
A Fund will sell ETF Shares to investors that are (or who purchase through) Authorized Participants and who generally pay for their ETF shares by depositing a prescribed basket consisting predominantly of securities with the Fund. An Authorized Participant is an institution, usually a broker-dealer, that is a participant in the Depository Trust Company (DTC) and that has executed a Participant Agreement with the Fund's distributor. Additional eligibility requirements may be specified in
2
Schedule B hereto, as such Schedule may be amended from time to time. Investors who are not Authorized Participants may buy and sell ETF shares through various exchanges and market centers. ETF Shares are typically distributed by all VGI business lines.
G.Transition Shares
Transition Shares generally will be available solely to Funds that operate as Funds-of-Funds and meet the eligibility requirements specified in Schedule B hereto, as such Schedule may be amended from time to time. Transition Shares are only internally distributed.
IV. SERVICE ARRANGEMENTS
Shareholders in all share classes will receive a range of shareholder services provided by VGI. These services may include transaction processing and shareholder recordkeeping, as well as the mailing of updated prospectuses, shareholder reports, tax statements, confirmation statements, quarterly portfolio summaries, and other items. Each share class will bear its proportionate share of VGI's cost of providing such services in accordance with Section VI of the Plan.
V.CONVERSION FEATURES
A. Self-Directed Conversions
1.Conversion into Investor Shares, Admiral Shares, Institutional Shares, Institutional Plus Shares, and Institutional Select Shares. Shareholders may conduct self-directed conversions from one share class into another share class of the same Fund for which they are eligible. Self-directed conversions may be initiated by the shareholder; however, depending upon the particular share class and the complexity of the shareholder's accounts, such conversions may require the assistance of a VGI representative. Shareholders may convert from one share class into another share class provided that following the conversion the shareholder meets the then applicable eligibility requirements for the share class into which they are converting. Any such conversion will occur at the respective net asset values of the share classes next calculated after VGI's receipt of the shareholder's request in good order.
2.Conversion into ETF Shares. Except as otherwise provided, a shareholder may convert Investor Shares, Admiral Shares, or Institutional Shares into ETF Shares of the same Fund (if available), provided that: (i) the share class out of which the shareholder is converting and the ETF Shares declare and distribute dividends on the same schedule; (ii) the shares to be converted are not held through an employee benefit plan; and (iii) following the conversion, the shareholder will hold ETF Shares through a brokerage account. Any such conversion will occur at the respective net asset values of the share classes next calculated after VGI's receipt of the shareholder's request in good order. VGI or the Fund may charge an administrative fee to process conversion transactions.
3
B.Automatic Conversions
1.Automatic conversion into Admiral Shares. VGI may automatically convert Investor Shares into Admiral Shares of the same Fund (if available), provided that following the conversion the shareholder meets the eligibility requirements for Admiral Shares. Any such conversion will occur at the respective net asset values of the share classes next calculated after VGI's conversion without the imposition of any charge. Such automatic conversions may occur on a periodic, or one-time basis. Automatic conversions may not apply to certain financial types of accounts (e.g., accounts held through certain intermediaries, or other accounts as may be excluded by VGI management).
2.Automatic conversion into Institutional Shares, Institutional Plus Shares, or Institutional Select Shares. VGI may conduct automatic conversions of any share class into either Institutional Shares, Institutional Plus Shares, or Institutional Select Shares in accordance with then-current eligibility requirements.
C.Involuntary Conversions and Cash Outs
1.Cash Outs. If a shareholder in any class of shares no longer meets the eligibility requirements for such shares, the Fund may, if permitted under applicable law, cash out the shareholder's remaining account balance. Any such cash out will be preceded by written notice to the shareholder and will be subject to the Fund's normal redemption fees, if any.
2.Conversion of Admiral Shares, Institutional Shares, and Institutional Plus Shares. If a shareholder no longer meets the eligibility requirements for the share class currently held, the Fund may convert the shareholder's holdings into the share class for which such shareholder is eligible. Any such conversion will be preceded by written notice to the shareholder and will occur at the respective net asset values of the share classes without the imposition of any sales load, fee, or other charge.
3.Conversions of Transition Shares. When a Fund that issues Transition Shares has completed the relevant portfolio transition, the Fund will convert the Transition Shares to another share class of the same Fund as appropriate, based on the eligibility requirements of such class as specified in Schedule B hereto, as such Schedule may be amended from time to time.
VI. EXPENSE ALLOCATION AMONG CLASSES
A.Background
VGI is a jointly-owned subsidiary of the Funds. VGI provides the Funds, on an at-cost basis, virtually all of their corporate management, administrative, and distribution services. VGI also may provide investment advisory services on an at-cost basis to the Funds. VGI was established and operates pursuant to a Funds'
4
Service Agreement between itself and the Funds (the "Agreement"), and pursuant to certain exemptive orders granted by the U.S. Securities and Exchange Commission ("Exemptive Orders"). VGI's direct and indirect expenses of providing corporate management, administrative, and distribution services to the Funds are allocated among such Funds in accordance with methods specified in the Agreement or such other methods as may be approved by the Board of Directors of VGI ("VGI Board") as permitted under the Agreement and by the Fund Board.1
B.Class Specific Expenses
1.Expenses for Account-Based Services. Expenses associated with
VGI's provision of account-based services to the Funds will be allocated among the share classes of each Fund on the basis of the amount incurred by each such class as follows:
(a)Account maintenance expenses. Expenses associated with the maintenance of investor accounts will be proportionately allocated among each Fund's share classes based upon a monthly determination of the costs to service each class of shares. Factors considered in this determination are (i) the percentage of total shareholder accounts represented by each class and (ii) the relative percentage of total net assets of each class.
(b)Expenses of special servicing arrangements. Expenses relating to any special servicing arrangements for a specific class will be proportionally allocated among each eligible Fund's share classes primarily based on their percentage of total shareholder accounts receiving the special servicing arrangements.
(c)Literature production and mailing expenses. Expenses associated with shareholder reports, proxy materials and other literature will be allocated among each Fund's share classes based upon the number of such items produced and mailed for each class.
2.Other Class Specific Expenses. Expenses for the primary benefit of a particular share class will be allocated to that share class. Such expenses would include any legal fees attributable to a particular class.
C.Fund-Wide Expenses
1.Marketing and Distribution Expenses. Each share class will bear marketing and distribution expenses proportionate to the marketing and distribution expenses of the business lines that distribute that share class.
1In accordance with the methods set out in the Agreement and VGI Board and Fund Board approved methods, the expenses that would otherwise have been allocated to each Fund that operates as a Fund-of-Funds are reallocated to the approved share class of the underlying Funds in the Fund-of-Funds' portfolio on a pro rata basis based on the Fund-of-Fund's relative net assets invested in the underlying Fund's share class.
5
Retail and institutional businesses expenses will be allocated based on the percentage of client accounts in each share class serviced by the respective business. Financial advisory service expenses will be apportioned based on the percentage of assets in each share class.
Expenses associated with each share class will be allocated only among the Funds that have such share class according to the "Vanguard Modified Formula," with each share class or each Fund treated as if it were a separate Fund. The Vanguard Modified Formula is set forth in the Agreement and in certain of the SEC Exemptive Orders. This allocation has been deemed an appropriate allocation methodology by each Fund Board under paragraph (c)(1)(v) of Rule 18f-3 under the 1940 Act.
2.Asset Management Expenses. Expenses associated with management of a Fund's assets (including all advisory, tax preparation, and custody fees) will be allocated among the Fund's share classes on the basis of their relative net assets.
3.Other Fund Expenses. Any other Fund expenses not described above will be allocated among the share classes on the basis of their relative net assets.
VII. ALLOCATION OF INCOME, GAINS, AND LOSSES
Income, gains, and losses will be allocated among each Fund's share classes on the basis of their relative net assets. As a result of differences in allocated expenses, it is expected that the net income of, and dividends payable to, each class of shares will vary. Dividends and distributions paid to each class of shares will be calculated in the same manner, on the same day and at the same time.
VIII. VOTING AND OTHER RIGHTS
Each share class will have: (i) exclusive voting rights on any matter submitted to shareholders that relates solely to its service or distribution arrangements; and (ii) separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of the other class; and (iii) in all other respects the same rights, obligations, and privileges as each other, except as described in the Plan.
IX. AMENDMENTS
All material amendments to the Plan must be approved by a majority of the Board of Trustees of each Fund, including a majority of the Trustees who are not interested persons of the Fund. In addition, any material amendment to the Plan must be approved by the Board of Directors of VGI.
Original Board Approval: July 21, 2000
Last Approved by Board: December 17, 2021
6
SCHEDULE A to
VANGUARD FUNDS MULTIPLE CLASS PLAN
Note: Transition Shares, when offered by a Fund, are available for a limited period of time and are then converted into another share class. For this reason, Transition Shares are not shown on Schedule A.
Vanguard Fund |
Share Classes Authorized |
|
Vanguard Admiral Funds |
|
|
• |
Treasury Money Market Fund |
Investor |
• S&P 500 Value Index Fund |
Institutional, ETF |
• S&P 500 Growth Index Fund |
Institutional, ETF |
• S&P Mid-Cap 400 Index Fund |
Institutional, ETF |
• S&P Mid-Cap 400 Value Index Fund |
Institutional, ETF |
• S&P Mid-Cap 400 Growth Index Fund |
Institutional, ETF |
• S&P Small-Cap 600 Index Fund |
Institutional, ETF |
• S&P Small-Cap 600 Value Index Fund |
Institutional, ETF |
• S&P Small-Cap 600 Growth Index Fund |
Institutional, ETF |
Vanguard Bond Index Funds |
|
|
• Short-Term Bond Index Fund |
Investor, Admiral, Institutional, |
• Intermediate-Term Bond Index Fund |
Institutional Plus, ETF |
Investor, Admiral, Institutional, Institutional |
|
|
Plus, ETF |
• Long-Term Bond Index Fund |
Admiral, Institutional, Institutional Plus, |
|
|
ETF |
• Total Bond Market Index Fund |
Investor, Admiral, Institutional, Institutional |
• Total Bond Market II Index Fund |
Plus, Institutional Select, ETF |
Investor, Institutional |
• |
Inflation-Protected Securities Fund |
Investor, Admiral, Institutional |
• |
Ultra-Short Bond ETF |
ETF |
Vanguard California Tax-Free Funds |
|
|
• Municipal Money Market Fund |
Investor |
• |
Intermediate-Term Tax-Exempt Fund |
Investor, Admiral |
• |
Long-Term Tax-Exempt Fund |
Investor, Admiral |
Vanguard Charlotte Funds |
|
|
• Total International Bond Index Fund |
Investor, Admiral, Institutional, |
|
|
Institutional Select, ETF |
• Global Credit Bond Fund |
Investor, Admiral |
• Total International Bond II Index Fund |
Investor, Admiral, Institutional |
1
Vanguard Fund |
Share Classes Authorized |
Vanguard Chester Funds |
|
• |
PRIMECAP Fund |
Investor, Admiral |
• Target Retirement Income Fund |
Investor |
• Target Retirement 2020 Fund |
Investor |
• Target Retirement 2025 Fund |
Investor |
• Target Retirement 2030 Fund |
Investor |
• Target Retirement 2035 Fund |
Investor |
• Target Retirement 2040 Fund |
Investor |
• Target Retirement 2045 Fund |
Investor |
• Target Retirement 2050 Fund |
Investor |
• Target Retirement 2055 Fund |
Investor |
• Target Retirement 2060 Fund |
Investor |
• Target Retirement 2065 Fund |
Investor |
• Target Retirement 2070 Fund |
Investor |
Vanguard Explorer Fund |
Investor, Admiral |
Vanguard Fenway Funds |
|
• |
Equity Income Fund |
Investor, Admiral |
• |
PRIMECAP Core Fund |
Investor |
Vanguard Fixed Income Securities Funds |
|
• |
Ultra-Short-Term Bond Fund |
Investor, Admiral |
• Real Estate II Index Fund |
Institutional Plus |
• |
Short-Term Treasury Fund |
Investor, Admiral |
• |
Short-Term Federal Fund |
Investor, Admiral |
• |
Short-Term Investment-Grade Fund |
Investor, Admiral, Institutional |
• |
Intermediate-Term Treasury Fund |
Investor, Admiral |
• |
Intermediate-Term Investment-Grade Fund |
Investor, Admiral |
• |
GNMA Fund |
Investor, Admiral |
• |
Long-Term Treasury Fund |
Investor, Admiral |
• |
Long-Term Investment-Grade Fund |
Investor, Admiral |
• |
High-Yield Corporate Fund |
Investor, Admiral |
Vanguard Horizon Funds |
|
• |
Capital Opportunity Fund |
Investor, Admiral |
• |
Global Equity Fund |
Investor |
• |
Strategic Equity Fund |
Investor |
• |
Strategic Small-Cap Equity Fund |
Investor |
• International Core Stock Fund |
Investor, Admiral |
2
Vanguard Fund |
Share Classes Authorized |
|
Vanguard Index Funds |
|
|
• |
500 Index Fund |
Investor, Admiral, Institutional Select, ETF |
• Extended Market Index Fund |
Investor, Admiral, Institutional, |
• |
|
Institutional Plus, Institutional Select, ETF |
Growth Index Fund |
Investor, Admiral, Institutional, ETF |
• |
Large-Cap Index Fund |
Investor, Admiral, Institutional, ETF |
• Mid-Cap Growth Index Fund |
Investor, Admiral, ETF |
• |
Mid-Cap Index Fund |
Investor, Admiral, Institutional, |
• Mid-Cap Value Index Fund |
Institutional Plus, ETF |
Investor, Admiral, ETF |
• Small-Cap Growth Index Fund |
Investor, Admiral, Institutional, ETF |
• |
Small-Cap Index Fund |
Investor, Admiral, Institutional, |
• Small-Cap Value Index Fund |
Institutional Plus, ETF |
Investor, Admiral, Institutional, ETF |
• Total Stock Market Index Fund |
Investor, Admiral, Institutional, Institutional |
• |
|
Plus, Institutional Select, ETF |
Value Index Fund |
Investor, Admiral, Institutional, ETF |
Vanguard Institutional Index Funds |
|
|
• |
Institutional Index Fund |
Institutional, Institutional Plus |
• Institutional Total Stock Market Index Fund |
Institutional, Institutional Plus |
Vanguard International Equity Index Funds |
|
|
• Emerging Markets Stock Index Fund |
Investor, Admiral, Institutional, |
|
|
Institutional Plus |
|
FTSE Emerging Markets ETF |
ETF |
• European Stock Index Fund |
Investor, Admiral, Institutional, |
|
|
Institutional Plus |
|
FTSE Europe ETF |
ETF |
• FTSE All-World ex US Index Fund |
Admiral, Institutional, Institutional |
|
|
Plus, ETF |
• Pacific Stock Index Fund |
Investor, Admiral, Institutional |
|
FTSE Pacific ETF |
ETF |
• Total World Stock Index Fund |
Admiral, Institutional, ETF |
• FTSE All World ex-US Small-Cap Index Fund |
Admiral, Institutional, ETF |
• Global ex-U.S. Real Estate Index Fund |
Admiral, Institutional, ETF |
3
Vanguard Fund |
Share Classes Authorized |
Vanguard Malvern Funds
•Short-Term Inflation-Protected Securities
|
Index Fund |
Investor, Admiral, Institutional, ETF |
• Institutional Short-Term Bond Fund |
Institutional Plus |
• |
Institutional Intermediate-Term Bond Fund |
Institutional Plus |
• |
Core Bond Fund |
Investor, Admiral |
• Emerging Markets Bond Fund |
Investor, Admiral |
• |
Core-Plus Bond Fund |
Investor, Admiral |
• Multi-Sector Income Bond Fund |
Investor, Admiral |
Vanguard Massachusetts Tax-Exempt Funds |
|
• |
Massachusetts Tax-Exempt Fund |
Investor |
Vanguard Money Market Funds |
|
• Cash Reserves Federal Money Market Fund |
Admiral |
• |
Federal Money Market Fund |
Investor |
Vanguard Montgomery Funds |
|
• |
Market Neutral Fund |
Investor, Institutional |
Vanguard Municipal Bond Funds |
|
• Municipal Money Market Fund |
Investor |
• |
Short-Term Tax-Exempt Fund |
Investor, Admiral |
• |
Limited-Term Tax-Exempt Fund |
Investor, Admiral |
• |
Intermediate-Term Tax-Exempt Fund |
Investor, Admiral |
• |
Long-Term Tax-Exempt Fund |
Investor, Admiral |
• |
High-Yield Tax-Exempt Fund |
Investor, Admiral |
• Tax-Exempt Bond Index Fund |
Admiral, ETF |
Vanguard New Jersey Tax-Free Funds |
|
• |
Long-Term Tax-Exempt Fund |
Investor, Admiral |
Vanguard New York Tax-Free Funds |
|
• Municipal Money Market Fund |
Investor |
• |
Long-Term Tax-Exempt Fund |
Investor, Admiral |
Vanguard Ohio Tax-Free Funds |
|
• |
Long-Term Tax-Exempt Fund |
Investor |
Vanguard Pennsylvania Tax-Free Funds |
|
• |
Long-Term Tax-Exempt Fund |
Investor, Admiral |
4
Vanguard Fund |
Share Classes Authorized |
Vanguard Quantitative Funds |
|
• Growth and Income Fund |
Investor, Admiral |
Vanguard Scottsdale Funds |
|
• |
Short-Term Treasury Index Fund |
Institutional, Admiral, ETF |
• |
Intermediate-Term Treasury Index Fund |
Institutional, Admiral, ETF |
• Long-Term Treasury Index Fund |
Institutional, Admiral, ETF |
• Short-Term Corporate Bond Index Fund |
Institutional, Admiral, ETF |
• Intermediate-Term Corporate Bond Index Fund |
Institutional, Admiral, ETF |
• Long-Term Corporate Bond Index Fund |
Institutional, Admiral, ETF |
• Mortgage-Backed Securities Index Fund |
Institutional, Admiral, ETF |
• |
Explorer Value Fund |
Investor |
• Russell 1000 Index Fund |
Institutional, ETF |
• Russell 1000 Value Index Fund |
Institutional, ETF |
• Russell 1000 Growth Index Fund |
Institutional, ETF |
• Russell 2000 Index Fund |
Institutional, ETF |
• Russell 2000 Value Index Fund |
Institutional, ETF |
• Russell 2000 Growth Index Fund |
Institutional, ETF |
• Russell 3000 Index Fund |
Institutional, ETF |
• Total Corporate Bond ETF |
ETF |
• Total World Bond ETF |
ETF |
Vanguard Specialized Funds |
|
• |
Energy Fund |
Investor, Admiral |
• Global Capital Cycles Fund |
Investor |
• |
Health Care Fund |
Investor, Admiral |
• |
Dividend Growth Fund |
Investor |
• Real Estate Index Fund |
Investor, Admiral, Institutional, ETF |
• Dividend Appreciation Index Fund |
Admiral, ETF |
• Global ESG Select Stock Fund |
Investor, Admiral |
Vanguard STAR Funds |
|
• |
LifeStrategy Conservative Growth Fund |
Investor |
• |
LifeStrategy Growth Fund |
Investor |
• |
LifeStrategy Income Fund |
Investor |
• LifeStrategy Moderate Growth Fund |
Investor |
• |
STAR Fund |
Investor |
• Total International Stock Index Fund |
Investor, Admiral, Institutional, |
|
|
Institutional Plus, Institutional Select, |
|
|
ETF |
Vanguard Tax-Managed Funds |
|
• |
Tax-Managed Balanced Fund |
Admiral |
• Tax-Managed Capital Appreciation Fund |
Admiral, Institutional |
• Developed Markets Index Fund |
Investor, Admiral, Institutional, |
|
|
Institutional Plus |
|
FTSE Developed Markets ETF |
ETF |
• |
Tax-Managed Small-Cap Fund |
Admiral, Institutional |
5
Vanguard Fund |
Share Classes Authorized |
Vanguard Trustees' Equity Fund |
|
• |
International Value Fund |
Investor |
• |
Diversified Equity Fund |
Investor |
• Emerging Markets Select Stock Fund |
Investor |
• |
Alternative Strategies Fund |
Investor |
• |
Commodity Strategy Fund |
Admiral |
• Global Environmental Opportunities Stock Fund |
Investor, Admiral |
Vanguard Valley Forge Funds |
|
• |
Balanced Index Fund |
Investor, Admiral, Institutional |
• |
Managed Allocation Fund |
Investor |
• Baillie Gifford Global Positive Impact Stock Fund |
Investor |
Vanguard Variable Insurance Funds |
|
• |
Balanced Portfolio |
Investor |
• |
Conservative Allocation Portfolio |
Investor |
• |
Diversified Value Portfolio |
Investor |
• |
Equity Income Portfolio |
Investor |
• |
Equity Index Portfolio |
Investor |
• |
Growth Portfolio |
Investor |
• Global Bond Index Portfolio |
Investor |
• Total Bond Market Index Portfolio |
Investor |
• High Yield Bond Portfolio |
Investor |
• |
International Portfolio |
Investor |
• |
Mid-Cap Index Portfolio |
Investor |
• |
Moderate Allocation Portfolio |
Investor |
• |
Money Market Portfolio |
Investor |
• Real Estate Index Portfolio |
Investor |
• Short-Term Investment Grade Portfolio |
Investor |
• Small Company Growth Portfolio |
Investor |
• |
Capital Growth Portfolio |
Investor |
• Total International Stock Market Index Portfolio |
Investor |
• Total Stock Market Index Portfolio |
Investor |
Vanguard Wellesley Income Fund |
Investor, Admiral |
Vanguard Wellington Fund |
|
• U.S. Minimum Volatility ETF |
ETF |
• U.S. Momentum Factor ETF |
ETF |
• |
U.S. Multifactor ETF |
ETF |
• |
U.S. Multifactor Fund |
Admiral |
• U.S. Quality Factor ETF |
ETF |
• U.S. Value Factor ETF |
ETF |
• |
Wellington Fund |
Investor, Admiral |
6
Vanguard Fund |
Share Classes Authorized |
Vanguard Whitehall Funds |
|
• |
Selected Value Fund |
Investor |
• |
Mid-Cap Growth Fund |
Investor |
• |
International Explorer Fund |
Investor |
• High Dividend Yield Index Fund |
Admiral, ETF |
•Emerging Markets Government
|
Bond Index Fund |
Admiral, Institutional, ETF |
• Global Minimum Volatility Fund |
Investor, Admiral |
• International Dividend Appreciation Index Fund |
Admiral, ETF |
• International High Dividend Yield Index Fund |
Admiral, ETF |
• Advice Select International Growth Fund |
Admiral |
• Advice Select Global Value Fund |
Admiral |
• Advice Select Dividend Growth Fund |
Admiral |
Vanguard Windsor Funds |
|
• |
Windsor Fund |
Investor, Admiral |
• |
Windsor II Fund |
Investor, Admiral |
Vanguard World Fund |
|
• Extended Duration Treasury Index Fund |
Institutional, Institutional Plus, ETF |
• FTSE Social Index Fund |
Admiral, Institutional |
• Global Wellesley Income Fund |
Investor, Admiral |
• |
Global Wellington Fund |
Investor, Admiral |
• |
International Growth Fund |
Investor, Admiral |
• Mega Cap Index Fund |
Institutional, ETF |
• Mega Cap Growth Index Fund |
Institutional, ETF |
• Mega Cap Value Index Fund |
Institutional, ETF |
• |
U.S. Growth Fund |
Investor, Admiral |
• Consumer Discretionary Index Fund |
Admiral, ETF |
• Consumer Staples Index Fund |
Admiral, ETF |
• |
Energy Index Fund |
Admiral, ETF |
• |
Financials Index Fund |
Admiral, ETF |
• Health Care Index Fund |
Admiral, ETF |
• |
Industrials Index Fund |
Admiral, ETF |
• Information Technology Index Fund |
Admiral, ETF |
• |
Materials Index Fund |
Admiral, ETF |
• Communication Services Index Fund |
Admiral, ETF |
• |
Utilities Index Fund |
Admiral, ETF |
• ESG U.S. Stock ETF |
ETF |
• |
ESG International Stock ETF |
ETF |
• ESG U.S. Corporate Bond ETF |
ETF |
Original Board Approval: July 21, 2000
Last Updated: December 12, 2022
7
SCHEDULE B
to
VANGUARD FUNDS MULTIPLE CLASS
PLAN
VGI has policies and procedures designed to ensure consistency and compliance with the offering of multiple classes of shares within this Multiple Class Plan's eligibility requirements.2 These policies are reviewed and monitored on an ongoing basis in conjunction with VGI's Compliance Department.
Investor Shares - Eligibility Requirements
Investor Shares generally require a minimum initial investment and ongoing account balance of $3,000. Personal Advisor Services clients, clients investing through financial intermediaries, and institutional clients may hold Investor Shares without restriction in Funds that do not offer Admiral Shares. Investor Shares of index Funds generally are available only to Funds that operate as a Fund- of-Funds and certain retirement plan clients receiving recordkeeping services from VGI. A Vanguard Fund may, from time to time, establish higher or lower minimum amounts for Investor Shares. Each Fund and VGI also reserve the right to establish higher or lower minimum amounts for certain investors or a group of investors.
Financial intermediaries that serve as mutual fund supermarkets may only invest in Investor Shares of Funds in which Investor Shares are available and may not invest in other share classes of such Funds.3 Mutual fund supermarket means a program or platform offered by a financial intermediary through which such intermediary's retail clients may purchase and sell mutual funds offered by a variety of independent fund families on a self-directed basis without advice or recommendation from a financial advisor or broker. This definition may be changed or amended at any time and without prior notice as may be determined in the discretion of VGI management. Nothing in the definition of mutual fund supermarket should be construed to prohibit Vanguard Brokerage Services from offering the Funds' other share classes to its eligible clients.
Admiral Shares – Eligibility Requirements
Admiral Shares generally are intended for clients who meet the required minimum initial investment and ongoing account balance of $3,000 for retail clients in index Funds and $50,000 for retail clients in actively-managed Funds. Personal Advisor Services clients, clients investing through financial intermediaries and institutional clients may hold Admiral Shares of both index and actively-managed Funds without restriction. Funds may, from time to time, establish higher or lower minimum amounts for Admiral Shares, and each Fund and VGI reserve the right to establish higher or lower minimum amounts for certain investors or a group of investors. Admiral Share class eligibility also is subject to the following rule:
•Certain Retirement Plans – Admiral Shares of actively-managed Funds generally are not available for SIMPLE IRAs and Vanguard Individual 401(k) Plans.4
•Mutual Fund Supermarkets – Admiral Shares are not available to mutual fund supermarkets, except where a Fund does not have Investor Shares.
2The eligibility of a Fund that operates as a Fund-of-Funds to invest in a particular share class of an underlying Fund is determined by VGI and the Fund Board.
3Admiral Shares of the Vanguard Cash Reserves Federal Money Market Fund are available to financial intermediaries that serve as mutual fund supermarkets.
4Admiral Share classes of all Funds are available to 403(b) plan participants in Vanguard's Retail 403(b) business, which is serviced by The Newport Group. Admiral Shares of the Vanguard Cash Reserves Federal Money Market Fund are available to SIMPLE IRAs and Vanguard Individual 401(k) Plans.
Institutional Shares – Eligibility Requirements
Institutional Shares generally require a minimum initial investment and ongoing account balance of
$5,000,000. However, each Fund and VGI also reserve the right to establish higher or lower minimum amounts for certain investors or a group of investors.
Institutional Share class eligibility also is subject to the following special rules:
•Retail clients. Retail clients may hold Institutional Shares by aggregating up to 3 accounts held by the same client (same tax I.D. number) in a single Fund. Single family offices serviced by the Retail Investor Group with $200 million or more in assets in the Funds through the Retail Investor Group may hold Institutional Shares by aggregating assets across all family members who are part of a single family office.
•Financial intermediary clients. Financial intermediaries generally may hold Institutional Shares for the benefit of their underlying clients provided that:
(1)each underlying investor individually meets the investment minimum amount described above;
and
(2)the financial intermediary agrees to monitor ongoing compliance of the underlying investor accounts with the investment minimum amount; or
(3)an arrangement is established between VGI and the financial intermediary to allow VGI to monitor compliance with the eligibility requirements.
Home office model portfolios offered on wealth management platforms administered by financial intermediaries5 may offer Institutional Shares, provided:
(1)the financial intermediary in aggregate at the firm level, excluding custody assets, has total assets of at least $25 billion invested in Vanguard; and
(2)the financial intermediary in aggregate at the firm level, excluding custody assets, meets the investment minimum of Institutional Shares for the Fund.
A home office model portfolio must meet the following criteria:
(1)the allocations and Funds used in the model portfolios on the platform are set and selected by the financial intermediary (i.e., the firm itself);
(2)the allocations and Funds used in the model portfolios on the platform are not subject to change by individual financial advisors; and
(3)an arrangement is established between VGI and the financial intermediary to allow VGI to monitor compliance with the eligibility requirements.
•Institutional clients. An institutional client may hold Institutional Shares if the total amount aggregated among all accounts held by such a client (including accounts held through financial intermediaries) and invested in the Fund is at least $5 million (or such higher minimum required by the individual Fund). Such an institutional client must disclose to VGI on behalf of its accounts the following: (1) that the client acts as a common-decision maker6 for each account; and (2) the total
5For purposes of this Schedule B, this is not intended to include robo advisors.
6For purposes of this Schedule B, a common-decision maker includes, but is not limited to, a corporate entity that controls multiple pools of assets invested in a Fund. For example, a corporate entity that acts as a plan sponsor for a retirement plan may have one or more investment committees or boards of trustees overseeing both the retirement plan account as well as other accounts invested in the Fund. In this case, the corporate entity would be considered a common-decision maker for each account where there is a common membership across each investment committee or governing body making investment decisions for each account. Common-decision makers do not include financial intermediaries.
balance in each account in the Fund.
•Institutional clients with assets in certain Vanguard collective investment trusts and Funds. Institutional clients with assets in the following collective investment trusts and Funds may aggregate such assets with assets invested in the corresponding Funds listed below in the right column ("Corresponding Funds") for purposes of meeting the investment minimum for
Institutional Shares of the Corresponding Funds.
Trust/Fund |
Corresponding Fund |
Vanguard Institutional Total Stock |
Vanguard Total Stock Market Index |
Market Index Trust |
Fund |
Vanguard Institutional Total Stock |
Vanguard Institutional Total Stock |
Market Index Trust |
Market Index Fund |
Vanguard Institutional Total Bond |
Vanguard Total Bond Market Index |
Market Index Trust |
Fund |
Vanguard Institutional Total |
Vanguard Total International Stock |
International Stock Market Index Trust |
Market Index Fund |
Vanguard Institutional 500 Index Trust |
Vanguard Institutional Index Fund |
Vanguard Institutional 500 Index Trust |
Vanguard 500 Index Fund |
Vanguard Institutional Extended Market |
Vanguard Extended Market Index Fund |
Index Trust |
|
Vanguard Employee Benefit Index |
Vanguard Institutional Index Fund |
Fund |
|
Vanguard Employee Benefit Index |
Vanguard 500 Index Fund |
Fund |
|
Vanguard Russell 1000 Growth Index |
Vanguard Russell 1000 Growth Index |
Trust |
Fund |
Vanguard Russell 1000 Value Index |
Vanguard Russell 1000 Value Index |
Trust |
Fund |
Vanguard Russell 2000 Growth Index |
Vanguard Russell 2000 Growth Index |
Trust |
Fund |
Vanguard Russell 2000 Value Index |
Vanguard Russell 2000 Value Index |
Trust |
Fund |
•Investment by Vanguard Target Retirement Collective Trust. A Vanguard Target Retirement Trust that is a collective trust exempt from regulation under the Investment Company Act and that seeks to achieve its investment objective by investing in underlying Funds (a "TRT") may hold
Institutional Shares of an underlying Fund whether or not its investment meets the minimum investment threshold specified above.
•Accumulation Period ⎯ Accounts funded through regular contributions (e.g., employer sponsored participant contribution plans), whose assets are expected to quickly achieve eligibility levels, may qualify for Institutional Shares upon account creation, rather than undergoing the conversion process shortly after account set-up if VGI management determines that the account will become eligible for Institutional Shares within a limited period of time (generally 90 days). The accumulation period eligibility is subject to the discretion of VGI management.
Institutional Plus Shares - Eligibility Requirements
Institutional Plus Shares generally require a minimum initial investment and ongoing account balance of $100,000,000. However, each Fund and VGI also reserve the right to establish higher or lower minimum amounts for certain investors or a group of investors. Institutional Plus Share class eligibility also is subject to the following special rules:
•Retail clients. Retail clients may hold Institutional Plus Shares by aggregating up to 3 accounts held by the same client (same tax I.D. number) in a single Fund. For purposes of this rule, VGI management is authorized to permit aggregation of a greater number of accounts in the case of clients whose aggregate assets within the Funds are expected to generate substantial economies in the servicing of their accounts. Single family offices serviced by the Retail Investor Group with $200 million or more in assets in the Funds through the Retail Investor Group may hold Institutional Plus Shares by aggregating assets across all family members who are part of a single family office.
•Institutional clients. An institutional client may hold Institutional Plus Shares if the total amount aggregated among all accounts held by such client (including accounts held through financial intermediaries) and invested in the Fund is at least $100 million (or such higher or lower minimum required by the individual Fund). Such an institutional client must disclose to VGI on behalf of its accounts the following: (1) that the client acts as a common-decision maker for each account; and
(2) the total balance in each account held in the Fund.
•Institutional clients with assets in certain Vanguard collective investment trusts and Funds. Institutional clients with assets in the following collective investment trusts and Funds may aggregate such assets with assets invested in the corresponding Funds listed below in the right column ("Corresponding Funds") for purposes of meeting the investment minimum for Institutional Plus Shares of the Corresponding Funds.
Trust/Fund |
Corresponding Fund |
Vanguard Institutional Total Stock |
Vanguard Total Stock Market Index |
Market Index Trust |
Fund |
Vanguard Institutional Total Stock |
Vanguard Institutional Total Stock |
Market Index Trust |
Market Index Fund |
Vanguard Institutional Total Bond |
Vanguard Total Bond Market Index |
Market Index Trust |
Fund |
Vanguard Institutional Total |
Vanguard Total International Stock |
International Stock Market Index Trust |
Market Index Fund |
Vanguard Institutional 500 Index Trust |
Vanguard Institutional Index Fund |
Vanguard Institutional 500 Index Trust |
Vanguard 500 Index Fund |
Vanguard Institutional Extended Market |
Vanguard Extended Market Index Fund |
Index Trust |
|
Vanguard Employee Benefit Index |
Vanguard Institutional Index Fund |
Fund |
|
Vanguard Employee Benefit Index |
Vanguard 500 Index Fund |
Fund |
|
Vanguard Russell 1000 Growth Index |
Vanguard Russell 1000 Growth Index |
Trust |
Fund |
Vanguard Russell 1000 Value Index |
Vanguard Russell 1000 Value Index |
Trust |
Fund |
Vanguard Russell 2000 Growth Index |
Vanguard Russell 2000 Growth Index |
Trust |
Fund |
Vanguard Russell 2000 Value Index |
Vanguard Russell 2000 Value Index |
Trust |
Fund |
•Financial intermediary clients. Financial intermediaries generally may hold Institutional Plus Shares for the benefit of their underlying clients provided that:
(1)each underlying investor individually meets the investment minimum amount described above;
and
(2)the financial intermediary agrees to monitor ongoing compliance of the underlying investor accounts with the investment minimum amount; or
(3)an arrangement is established between VGI and the financial intermediary to allow VGI to monitor compliance with the eligibility requirements.
Home office model portfolios offered on wealth management platforms administered by financial intermediaries may offer Institutional Plus Shares, provided:
(1)the financial intermediary in aggregate at the firm level, excluding custody assets, has total assets of at least $25 billion invested in Vanguard; and
(2)the financial intermediary in aggregate at the firm level, excluding custody assets, meets the investment minimum of Institutional Plus Shares for the Fund.
A home office model portfolio must meet the following criteria:
(1)the allocations and Funds used in the model portfolios on the platform are set and selected by the financial intermediary (i.e., the firm itself);
(2)the allocations and Funds used in the model portfolios on the platform are not subject to change by individual financial advisors; and
(3)an arrangement is established between VGI and the financial intermediary to allow VGI to monitor compliance with the eligibility requirements.
•Accumulation Period - Accounts funded through regular contributions (e.g., employer sponsored participant contribution plans), whose assets are expected to quickly achieve eligibility levels, may qualify for Institutional Plus Shares upon account creation, rather than undergoing the conversion process shortly after account set-up if VGI management determines that the account will become eligible for Institutional Plus Shares within a limited period of time (generally 90 days). The accumulation period eligibility is subject to the discretion of VGI management.
•Asset Allocation Models - Clients with defined asset allocation models whose assets meet eligibility requirements may qualify for Institutional Plus Shares if such models comply with policies and procedures that have been approved by VGI management.
Institutional Select Shares - Eligibility Requirements
Institutional Select Shares generally require a minimum initial investment and ongoing account balance of $3,000,000,000. However, each Fund and VGI also reserve the right to establish higher or lower minimum amounts for certain investors or a group of investors. Institutional Select Share class eligibility also is subject to the following special rules:
•Institutional clients. An institutional client may hold Institutional Select Shares if the total amount aggregated among all accounts held by such client (including accounts held through financial intermediaries) and invested in the Fund is at least $3 billion (or such higher or lower minimum required by the individual Fund). Such an institutional client must disclose to VGI on behalf of its accounts the following: (1) the client acts as a common-decision maker for each account; and (2) the total balance in each account in the Fund.
•Financial intermediary clients. Financial intermediaries generally may hold Institutional Select Shares for the benefit of their underlying clients provided that:
(1)each underlying investor individually meets the investment minimum amount described above; and
(2)the financial intermediary agrees to monitor ongoing compliance of the underlying investor accounts with the investment minimum amount; or
(3)an arrangement is established between VGI and the financial intermediary to allow VGI to monitor compliance with the eligibility requirements.
•Accumulation Period - Accounts funded through regular contributions (e.g., employer sponsored participant contribution plans), whose assets are expected to quickly achieve eligibility levels, may qualify for Institutional Select Shares upon account creation, rather than undergoing the conversion process shortly after account set-up, if VGI management determines that the account will become eligible for Institutional Select Shares within a limited period of time (generally 90 days). The accumulation period eligibility is subject to the discretion of VGI management.
•Investment by VGI collective investment trusts with a similar mandate. A VGI collective investment trust exempt from regulation under the Investment Company Act and that seeks to achieve its investment objective by investing in an underlying Fund with an index-based mandate may hold Institutional Select Shares of an underlying Fund with a similar index-based mandate whether or not its investment meets the minimum investment threshold specified above.
ETF Shares – Eligibility Requirements
The eligibility requirements for ETF Shares will be set forth in the Fund's registration statement. To be eligible to purchase ETF Shares directly from a Fund, an investor must be (or must purchase through) an Authorized Participant, as defined in Paragraph III.F of the Multiple Class Plan. Investors purchasing ETF Shares from a Fund must purchase a minimum number of shares, known as a Creation Unit. The number of ETF Shares in a Creation Unit may vary from Fund to Fund. The value of a Fund's Creation Unit will vary with the net asset value of the Fund's ETF Shares but is expected to be several million dollars. An eligible investor generally must purchase a Creation Unit by depositing a prescribed basket consisting predominantly of securities with the Fund.
Transition Shares – Eligibility Requirements
Transition Shares will be offered only to Funds that operate as a Fund-of-Funds and only by an underlying Fund (i) that is receiving assets in kind from one or more Funds and (ii) that will "transition" those in-kind assets by selling some or all of them and using the proceeds to purchase different assets. There is no minimum investment amount for Transition Shares.
Original Board Approval: July 21, 2000
Last Approved by Board: March 19, 2021
Access Person Code of Conduct
Effective Date: 01 March 2022 | Contact: Code_of_Ethics@vanguard.com
Background – Why This Access Person Code of Conduct Matters
Vanguard was founded with a singular focus on clients and serving their best interests, and this has been the foundation of our strong ethical culture. One way in which we consistently seek to earn and maintain the trust and loyalty of our clients is by adhering to the highest standards of ethical behavior. Acting with integrity and complying with applicable laws and regulations necessarily extends to your conduct in general and to your personal investing and trading activities in particular.
Some crew and contingent workers at Vanguard, by virtue of their role or department, are designated as an "Access Person" (i.e., an Advisor Access Person, Fund Access Person, or Investment Access Person) because they or their department are authorized to know about present or future transactions by Vanguard funds, or have the authority to influence those transactions, or otherwise have access to sensitive market or client activity. Because of that knowledge, authority, and access, Access Persons are subject to additional standards of business conduct, stricter personal investment rules, and greater oversight, among other things. These standards and rules, as set forth in this Access Person Code of Conduct (APCC)1, have been adopted with the goals of ensuring we comply with applicable law and avoiding conflicts of interest or the appearance of conflicts of interest. This is especially true regarding any potential conflicts of interest that could arise between the securities trading that Vanguard undertakes on behalf of the Vanguard funds or our clients and the personal securities trading by crew, contingent workers, and their household or family members.
Policy Coverage
To Whom Does the APCC Apply?
This policy2 applies to all crew members and contingent workers globally who are in a role that has been designated as an "Access Person" role. Certain provisions of this policy also apply to Associated Persons.
Are you an Access Person? Visit Appendix A to learn whether the role you're in is an Access Person role, and if so, which Access Person "designation" applies.
What about Non-Access Persons? Any crew member or contingent worker who is not in a role that has been designated as an Access Person role is a "Non-Access Person" and must
comply with the Personal Investment Activity Policy for Non-Access Persons, not this policy.
Are you a contingent worker? A "contingent worker" is any person other than a crew member who provides services to or on behalf of Vanguard through staffing firms, consulting
1The APCC constitutes the code of ethics that the Vanguard funds have adopted in compliance with U.S. SEC Rules 17j-1 and 204A-1.
2The APCC is a policy that has been created and approved, and is governed, similar to other policies at Vanguard. As used herein, references to "this policy" mean the APCC.
firms, service providers, or as independent contractors. Like crew, a contingent worker can be in either an Access Person or Non-Access Person role.
What about Associated Persons? For U.S. crew and contingent workers who are Associated Persons (to reiterate, not Access Persons, but Associated Persons) under FINRA rules and regulations, please note you have additional investment-related obligations under
the FINRA Licensing Policy, including the Securities Account Reporting Obligations for Associated Persons. Please review and comply with those documents, as well.
Policy Overview
There are four primary sections to this policy:
Section 1 – Standards of Business Conduct, sets forth rules and expectations regarding your behavior and conduct.
Section 2 – Personal Investment Activities, contains rules on how you and your Household or Family Members may own and trade securities for your own personal benefit. Note that some of these rules differ based on your Access Person designation. While the details are set forth in Section 2, at a high level there are four subsections applicable to you and your personal investment activities:
A – Reminders on who is covered B – Brokerage firms you may use C – Disclosure obligations
D – Investment and trading restrictions
Section 3 – Penalties and Sanctions, describes how violations of this policy are addressed and enforced.
Section 4 – Defined terms, provides definitions for the capitalized terms used in this policy.
Please carefully read the rest of this policy and ensure you understand and comply with its terms. Understanding and following this policy is one of the most important ways we can ensure our clients' interests always come first.
Be sure you are familiar with the following other Vanguard policies that relate to your ethical conduct and personal investment activities:
Standards of Conduct Policy
Conflicts of Interest Policy
Insider Trading Policy
Outside Business Activity Policy
Please also ensure you are familiar with Vanguard's Code of Ethical Conduct.
Policy Requirements
Section 1 – Standards of Business Conduct
Everyone at Vanguard is expected to promote high standards of integrity and manage the company's affairs honestly and ethically. We all have a personal responsibility to conduct ourselves
in a manner that reflects a commitment to ethics and compliance with all applicable laws and regulations. Doing so is part and parcel of Vanguard's mission to "take a stand for all investors, to treat them fairly, and to give them the best chance for investment success."
Putting these values into practice means having and adhering to expected standards of business conduct. The Vanguard policy that explains these standards is the Standards of Conduct Policy, which
is incorporated herein by reference. You must comply with that policy, including the following standards of conduct that are explained therein:
1.Always put Vanguard clients' interests first and treat them fairly.
2.Avoid conflicts of interest.
3.Be candid and clear with clients and provide them with accurate information.
4.Comply with applicable laws, rules, regulations, and policies.
5.Comply with applicable professional standards.
6.Complete mandatory training and regularly certify that you are compliant with our policies.
7.Maintain accurate, timely, and complete business records.
8.Protect against fraud.
9.Lead by example.
10.Speak up.
At Vanguard, you are expected to always do the right thing. It sounds simple and it's usually very clear what doing the right thing entails. But sometimes it isn't. How do you make the best choice when facing difficult or unclear circumstances? How do you navigate an ethical dilemma?
In those situations, you should pause and reflect, and then work through the following "ethical decision-making guide." This guide will help you consider important questions before deciding whether or how to proceed with an action. It is not a substitute for this or any policy, and it may not tell you exactly what to do in every situation, but it can be used as a tool to help guide you when you face an ethical dilemma or a complex situation where the answer might not be clear.
If you're still in doubt as you work through the decision-making guide, err on the side of caution—ask questions, elevate the issue, and enlist the help of others to ensure we reach the right answer every time for Vanguard and our clients.
Speaking Up – As mentioned above, you are encouraged to help protect our clients, crew, and Vanguard by reporting concerns about ethics, financial or business integrity, information security and privacy, workplace practices, or alleged violations of policy, regulation, or law. Indeed, speaking up is one of the most effective ways to help ensure Vanguard maintains its high standards for ethics and compliance. To that end, if you become aware that you or anyone else violated any of the terms of this policy, you must contact Compliance immediately.
Likewise, it is your responsibility to know whether the role you are in is designated as an Access Person, and if so, which Access Person designation applies to you (visit the Appendix A to learn more). It is also your responsibility to know the policies and trading restrictions that apply to you accordingly, and to ask questions if you are unsure.
Section 2 – Personal Investment Activities
Introduction
Vanguard recognizes the importance to crew and contingent workers of being able to manage and develop their own financial resources through long-term investments and strategies. With that in mind, the rules and requirements set forth in this policy have been adopted with the goals of (1) ensuring we comply with all applicable laws and regulations, and (2) avoiding any conflicts of interest, or any appearances of conflicts of interest, between the securities trading that Vanguard undertakes on behalf of Vanguard funds or our clients and the personal securities trading or investing by crew, contingent workers, or their Household or Family Members (defined in Section 4, below). Our industry and Vanguard have implemented certain standards and limitations designed to minimize these conflicts and help ensure that we focus on meeting our duty to clients.
Granted, the rules in this policy are demanding and strict and they may feel like an imposition. But at Vanguard, we take our ethical obligations very seriously, and the rules in this policy are intended to ensure that trading on behalf of Vanguard funds and clients are given priority over trading for your personal accounts, and that trades for your personal accounts do not adversely affect trades for our funds or clients.
Similarly, keep in mind that you must comply with applicable securities laws and must avoid taking personal advantage of your knowledge of securities activity in Vanguard funds or client accounts.
This policy includes specific restrictions on personal investing but cannot anticipate every fact pattern or situation. You should adhere to the spirit, and not just the letter, of this policy.
Compliance will keep all records relating to personal account trading as confidential as necessary. Information will be accessible within Compliance and may be reported to senior management or HR. Records may also need to be made available to Internal Audit and/or any regulator. All non-U.S. crew and contingent workers are required to sign a data consent / data privacy notice.
The Compliance Department reserves the right to monitor any and all investment or trading activity by you or by any Household or Family Member based on any information or system to which it has access.
Checklist
Given the complexity of this policy and the steps you must take to ensure you remain in compliance with it, we have created this brief checklist to help you keep track of your obligations. This is merely a summary, so be sure to comply with the full terms of this policy as well.
Checklist item
I know my Access Person "designation," and I am aware that this policy applies not only to me but also to my Household or Family Members
For the region where I work, I know what brokerage firm I and my Household or Family Members may use to maintain the accounts where I or they hold and trade Reportable Securities
For my Access Person designation, I know the initial and ongoing account and holdings disclosure obligations that apply to me and my Household or Family Members
Where this topic is covered in this policy Subsection 2-A – Who Is Covered Under this Policy
Subsection 2-B – Brokerage Firms You May
Use
Subsection 2-C – Disclosure Obligations
For my Access Person designation, I
know the rules and limitations for transacting securities in my personal accounts and those of my Household or Family Members
Subsections 2-D-1 and 2-D-2 – Investment
and Trading Restrictions
For Fund Access Person and Investment Access Person designations, I know how to seek trade preclearance
I know the penalties and sanctions that may apply for violations of any of the requirements under this policy
I understand the meaning of the defined terms used in this policy
Quick Tip:
Subsection 2-D-3 – How to Seek and Abide by Preclearance Requirements
Section 3 – Penalties and Sanctions
Section 4 – Defined Terms
The rules in this policy cover most of the personal investing situations you are likely to find. Yet it's always possible you will encounter a situation that isn't fully addressed by the rules. If that happens, you need to know what to do. The easiest way to make sure you are making the right decision is to follow these three principles:
1.Know the policy. If you think your situation isn't covered, check again. It never hurts to take a second look at the rules.
2.Seek guidance. Asking questions is always appropriate. Talk with your manager or
contact Compliance if you're not sure about the policy requirements or how they apply to your situation.
3.Use sound judgment. Analyze the situation and weigh the options. Think about how your decision would look to someone outside of Vanguard.
Note for crew in China:
Because you may not have access to MCO, different systems and procedures are in place for you to disclose accounts and holdings. Please consult with your manager or the China Compliance team to learn more.
Subsection 2-A – Who Is Covered Under this Policy
As stated in the introduction to this policy, above, this policy applies to all crew members and contingent workers globally who are in a role that has been designated as an "Access Person" role.
Access Persons are covered – This policy applies to crew and contingent worker Access Persons and, in certain instances, to their Household or Family Members.
oAccess Persons – Please note that the specific trading prohibitions and reporting requirements vary depending on your Access Person "designation," meaning Advisor Access Person, Fund Access Person, or Investment Access Person. To learn the Access Person designation that applies to your role, visit Appendix A. Note further that, regardless of your designation, the Compliance Department has the authority, with appropriate notice to you, to apply to you any or all of the trading restrictions within this policy
oHousehold or Family Members – Certain aspects of this policy apply not only to you but to your Household or Family Members, as well. Why? Doing so is required by applicable law and regulations in many jurisdictions. It is also consistent with industry best practices and helps Vanguard ensure we are effectively monitoring and guarding against conflicts of interest and other issues. See Section 4, below, for the definition of Household or Family Members in the region where you work.
Non-Access Persons are not covered – If the role you are in is not an Access Person role, you do not need to comply with this policy; instead, with regard to your personal investments, you must comply with the Personal Investment Activity Policy for Non-Access Persons (and other applicable policies). Note, however, that in the event a Non-Access Person is a Household or Family Member of an Access Person, then the terms of this policy will apply to the Non-Access Person as a Household or Family Member hereunder and any conflicting terms of this policy will take precedence over the Personal Investment Activity Policy for Non-Access Persons.
Associated Persons also have obligations under other policies and documents – For U.S. crew and contingent workers who are deemed to be Associated Persons (to reiterate, not Access Persons, but Associated Persons) under the FINRA Licensing Policy, you have certain obligations
under this policy and have additional investment-related obligations under the FINRA Licensing Policy and the Securities Account Reporting Obligations for Associated Persons.
Your designation may change – Keep in mind that your Access Person designation may change over time, for instance if you change roles, if there are changes made in your department, or if the Compliance Department determines a designation change is appropriate. You are advised to regularly consult the My Ethics and Compliance Resource Center available on CrewNet to check your designation.
Subsection 2-B – Brokerage Firms You May Use
The terms of Subsection 2-B apply to all Access Person designations.
The following requirements and restrictions on which brokerage firms you may use to hold and transact Reportable Securities apply to you based on whether you are a crew member or contingent worker and where you work:
U.S. Crew:Crew who are Access Persons employed in the U.S., and their Household or Family Members (parts (a) and (b) of that defined term only), must maintain and trade all Reportable Securities in a Vanguard Brokerage Account (VBA). This obligation does not apply to any Household or Family Members covered under part (c) of that defined term. See the Defined Terms in Section 4, below, for all definitions.
Securities or investments that are not "Reportable Securities" may be held in a brokerage account at the firm of your choice.
Employer-sponsored retirement accounts (e.g., 401(k) and 403(b)), 529 college savings plans, and Compliance-approved accounts (e.g., Approved Managed Accounts) may be held in a brokerage account at the firm of your choice. However, if you hold any Reportable Securities through any of those accounts, then such accounts are considered Covered Accounts under this policy and you are required to disclose them to Compliance under Subsection 2-C of this policy.
Newly hired U.S. crew who are Access Persons, and their Household or Family Members (parts (a) and (b) of that defined term only), must transfer any existing applicable Reportable Securities to a VBA by submitting a request or other applicable paperwork with Vanguard and each firm at which you have an existing applicable brokerage account within 60 days of your joining Vanguard. Visit Vanguard.com > Personal Investors > Open an Account to transfer assets from another firm to Vanguard.
For a more detailed list of Securities that must be held in a VBA, as well as
Securities that may be held elsewhere, visit the Appendices C-F.
Ex-U.S. Crew: Crew who are Access Persons employed outside the U.S., and their Household or Family Members, may maintain Reportable Securities (as well as Securities or investments that are not Reportable Securities) in a brokerage account or other type of account at the firm of their choice.
Contingent Workers, Contingent workers who are Access Persons may maintain Reportable
GloballySecurities (as well as Securities or investments that are not Reportable Securities) in a brokerage account at the firm of their choice.
Subsection 2-C – Disclosure Obligations
The terms of this Subsection 2-C apply to all Access Person designations and to all Associated Persons.
This policy requires the disclosure of a variety of account and holdings information to the Compliance Department for monitoring and oversight. This policy requires (1) an initial disclosure of information, and (2) periodic ongoing disclosures. Even if you do not have any personal brokerage
account holdings or do not trade in Reportable Securities, you are still required to complete the necessary initial and periodic disclosures.
1. Initial Disclosure of Accounts and Holdings
Within ten (10) calendar days of joining Vanguard, or if applicable within ten (10) calendar days of moving from a Non-Access Person role at Vanguard into an Access Person role, all Access Persons and Associated Persons must disclose the following to Compliance:
(a)All Covered Accounts and all Reportable Securities held by you or a Household or Family Member;
(b)All Covered Accounts in which you exercise Investment Discretion;
(c)All Covered Accounts over which you exercise control (e.g., agent authority (full or limited), trustee, power of attorney authority, etc.);
(d)All accounts in which you have, or will acquire, Beneficial Ownership of Securities; and
(e)All accounts held by you and any Household or Family Member in which there are college saving plan products (including, in the U.S., 529 plans), annuity products, or other insurance products that, in turn, hold or invest in Vanguard Funds.
This includes Brokerage Accounts held at Vanguard, as well as those held at another financial institution. For clarity, you do not need to disclose an account or submit transaction confirmations or statements if the account does not have the ability to hold Securities – for example, a traditional checking, savings, or deposit account with a bank, credit union, or building society for holding cash would not need to be disclosed.
This information must be current as of no more than 45 calendar days before joining Vanguard.
To make this initial disclosure, you will receive an Initial Certification assignment by email to complete which will include a section to disclose Covered Accounts and all Reportable Securities by including account information in the "Account Attestation" section of the assignment and uploading corresponding account statements via MCO. You must complete and submit the Initial Certification within ten (10) calendar days of receiving it; the failure to do so may be considered a violation of this policy.
Note: We use an application called MyComplianceOffice, or MCO, to help manage this policy. You may use MCO to disclose accounts and holdings, and to secure trading permissions, if those obligations apply to you. Visit My Ethics and Compliance Resource Center on CrewNet for resources on how to access and use MCO
2. Ongoing Disclosure of Accounts, Transactions, and Duplicate Statements
After the Initial Disclosure, Access Persons and Associated Persons may need to disclose account and transaction information to Compliance on a periodic basis regarding Covered Accounts and any transactions in Reportable Securities made by you and your Household or Family Members.
Further, if at any time you or a Household or Family Member subsequently:
open, or intend to open, a Covered Account with a financial institution (e.g., broker, dealer, advisor, or any other professional money manager), or
acquire holdings in Reportable Securities, or
have a preexisting Covered Account (including a Vanguard Brokerage Account) that becomes associated with you or a Household or Family Member (such as through marriage or inheritance or some other life event),
or there becomes an account in which you acquire Beneficial Ownership of Securities, then you must notify Compliance as soon as possible (and in any event within 10 calendar days) and disclose these Covered Accounts and Reportable Securities by listing them and including associated information in the Accounts tab in MCO.
For U.S. crew, keep in mind that, as explained in Section 2-B of this policy above, you and your Household or Family Members (parts (a) and (b) of that defined term only) must maintain Reportable Securities in a VBA.
What and how to disclose this information:
For VBAs disclosed by U.S. crew as required under this policy, Compliance will receive transaction confirmations automatically. No additional action by you is needed to disclose transactions of Reportable Securities in VBAs you have disclosed.
For Covered Accounts and holdings of Reportable Securities held outside of Vanguard (including in any account that would require disclosure under Section 2- C(1) of this policy), it is your responsibility to ensure that duplicate statements and transaction confirmations are available to or delivered to Compliance:
oBecause Vanguard has file feed contracts in place with many brokerage firms worldwide, for many Covered Accounts you disclose the holdings and transactions information will be sent to Compliance electronically with no additional action needed by you.
oFor Covered Accounts held at firms where Vanguard does not have a file
feed in place, you must do the following:
Contact the firm where your Covered Account is held and take steps to send duplicate statements and daily transaction confirmations (electronic or paper) to Vanguard. You do this often by making Vanguard Compliance an interested party and having duplicate statements and confirmations sent to the third party scanning service Vanguard uses, called "Earth Class Mail" at this address: Vanguard, c/o TerraNua, 9450 SW Gemini Drive #37880, Beaverton, OR, 97008-7105.
If the firm where your Covered Account is held is not able to send statements and daily transaction confirmations (electronic or paper) to Vanguard, you are required to scan and upload copies into the Trading Documents folder in MCO immediately after you receive them, unless you receive an exemption from this requirement from Compliance. You must ensure the documents you upload clearly show the firm/institution at which the account is held, the account number or ID, the account owner, and the account type.
If Compliance does not receive the information automatically via a file feed, you will receive email notifications on a calendar quarterly basis to complete a Quarterly Securities Transaction Report and thereby disclose Covered Accounts and Reportable Securities, via MCO. You must complete and submit that assignment within 30 calendar days; the failure to do so may be considered a violation of this policy.
On an annual basis (usually in January or February), you will receive an assignment from Compliance in which you must certify, among other things, that all Covered Accounts and Reportable Securities are recorded accurately in MCO.
3. Additional notes related to disclosures under this policy:
For clarity, you do not need to disclose an account or submit transaction confirmations or statements if the account does not have the ability to hold Securities (for example, a traditional checking, savings, or deposit account with a bank, credit union, or building society for holding cash would not need to be disclosed).
As stated above, U.S. crew and contingent workers who are Associated Persons are also required to comply with and are subject to the FINRA Licensing Policy and
Securities Account Reporting Obligations.
The Compliance Department will keep personal trading information confidential, but please note that such information may be accessible to authorized personnel within Compliance and may be reported to or summarized for senior management, HR, or the OGC for investigative purposes. Applicable records may also be provided to internal or external auditors and/or to any regulator if required. All ex-U.S. crew and contingent workers are required to sign a data consent / data privacy notice.
Please note that crew and contingent workers in Australia are required to disclose all transactions in VIA funds in MCO in the same manner as is required for Reportable Securities.
Subsection 2-D – Investment and Trading Restrictions
This Subsection 2-D contains three segments:
Segment 2-D-1 applies to all Access Person designations.
Segment 2-D-2 has terms and requirements that differ based on your Access Person designation.
oSegment 2-D-2(a): Advisor Access Person requirements
oSegment 2-D-2(b): Fund Access Person requirements
oSegment 2-D-2(c): Investment Access Person requirements
Segment 2-D-3 explains how to seek and abide by preclearance requirements, if applicable to your activity.
Segment 2-D-1: Rules and Limitations applicable to all Access Person designations
The terms of this Segment 2-D-1 apply to all Access Person designations.
(a)General Obligations
i)Comply with the law:
(1)You must comply with all applicable securities-related rules and laws.
(2)You may not engage in conduct that is deceitful, fraudulent, or manipulative, or that involves false or misleading statements, in connection with the purchase or sale of a Security by a Vanguard Fund or Vanguard Client account or otherwise.
(3)You may not intentionally, recklessly, or negligently circulate false information or rumors that may affect the securities markets or may be perceived as market manipulation.
ii)Use of Information:
(1)You may not take personal advantage of knowledge of recent, impending, or planned Securities activities of the Vanguard Funds or their investment advisors or any Vanguard Client. You are prohibited from purchasing or selling—directly or indirectly—any Security or Related Security when you know that the Security is being purchased or sold, or considered for purchase or sale, by a Vanguard Fund (with the exception of an index fund) or by a Vanguard Client.
(2)You are subject to and must comply with the Insider Trading Policy and/or any similar policy of the Vanguard affiliate or region for which you work. Each of these policies is considered an integral part of your obligations under this policy. Each policy prohibits you from buying or selling any Security while in possession of material, nonpublic information about the issuer of the Security. The policies also prohibit you from communicating any nonpublic information about any Security or issuer of Securities to third parties.
(3)You must comply with the Confidential Information Policy, including that you may not share information with any third party about any planned, upcoming, or recently executed trading activity by any Vanguard Fund or Vanguard Client unless such information is publicly available through no action by you.
iii)Fund policies and excessive trading:
(1)When purchasing, exchanging, or redeeming shares of a Vanguard Fund, you must adhere to the policies and standards set forth in the fund's prospectus, or offering document, including policies on market-timing and frequent trading.
(2)Excessive trading in Covered Accounts is strongly discouraged. The Compliance Department reserves the right to monitor trading across all of your Covered Accounts, and may conduct scrutiny of any trades in your Covered Accounts where such trading may appear excessive in nature (including, but not limited to, if the number of trades is so frequent as to potentially impact your ability to carry out your assigned responsibilities or the trades involve positions that are disproportionate to your net assets). If Compliance in its sole discretion determines you have engaged in excessive trading, then Compliance may limit the number of trades allowed in your Covered Accounts during a given period. This Section 2-D-1(a)(iii)(2) does not apply to transactions in an Approved Managed Account.
iv)Beneficial ownership and discretion:
(1)The terms and restrictions of this policy apply to all Securities in which you have acquired or will acquire Beneficial Ownership.
(2)You must comply with these investment and trading restrictions with respect to any account you own as well as any account over which you have Investment Discretion or in which you have the authority to transact.
v)No circumvention – You are not permitted to assist, aid, or enable any other person in doing anything that you are prohibited from doing under this policy.
vi)Waivers:
(1)The Chief Compliance Officer may grant exceptions to this policy, including preclearance, other trading restrictions, and certain reporting requirements on a case-by-case basis if it is determined that (1) the proposed conduct involves no opportunity for abuse, (2) the proposed conduct does not conflict with Vanguard's interests, and (3) not granting an exception would result in an unfair or unjust outcome.
(2)The Chief Compliance Officer may waive the applicability of this policy for a contingent worker if the policy's requirements are covered through the applicable service provider's contract with Vanguard.
(b)Rules regarding specific investments or investment types:
i)Use of derivatives:
(1)You and your Household or Family Members may not use a derivative to avoid or circumvent a rule or requirement set forth in this policy. If something is prohibited by these rules, then it is also against these rules to effectively accomplish the same thing by using a derivative. This includes futures, options, and other types of derivatives.
(2)You and your Household or Family Members are permitted to trade futures or options on commodities.
ii)IPOs and ICOs:
(1)You and your Household or Family Members are prohibited from acquiring Securities in an Initial Public Offering (IPO) or Secondary Offering.
(2)You and your Household or Family Members are prohibited from participating in an Initial Coin Offering (ICO).
iii)Private Placements:
(1)You and your Household or Family Members are not permitted to invest in securities offered to potential investors in a Private Placement or other limited investment offering without first obtaining preclearance from Compliance.
(2)You must provide documentation describing the investment (e.g., offering memorandum, subscription documents, etc.) so as to enable Compliance to conduct a thorough review of the investment.
(3)Approval by Compliance may be granted or denied after a review of the facts and circumstances, including whether:
An investment in the securities is likely to result in future conflicts with Vanguard Client accounts.
You are being offered the opportunity due to your employment at, or association with, Vanguard.
(4)If you or your Household or Family Members receive approval to purchase Securities in a Private Placement, you must immediately inform Compliance if that Security goes to public offer or is pending listing on an exchange.
(5)To initiate the process for obtaining preclearance of a Private Placement, complete the Outside Business Activity request form (the form for U.S. crew is in LARS, and for ex-U.S. crew is in MCO).
iv)SPACs – You and your Household or Family Members are prohibited from acquiring a SPAC at any stage of its lifecycle (i.e., pre-IPO, IPO, pre-merger, post-merger).
v)Short-Selling – You are prohibited from selling short any Security that you do not own or from otherwise engaging in short-selling activities.
vi)Limit Orders – Same-day limit orders are permitted; however, good 'til cancelled orders (such as limit orders that stay open over the course of multiple trading days until a security reaches a specified market price) are not permitted.
vii)Digital Currencies and Related Investments – Refer to the Trading and Reporting Requirements for Digital Currency Investments and Activities for details on which digital currency account and product types are permitted, and what must be disclosed, under this policy.
(c)Short term trading in a Vanguard Fund (other than Vanguard ETFs):
i)Compliance may monitor trading in Vanguard Funds, other than Vanguard ETFs, and will review situations where Vanguard Fund shares are redeemed within 30 calendar days of purchase (a "short-term trade"). You may be required to relinquish to Vanguard any profit made on a short-term trade and will be subject to disciplinary action if Compliance determines the short-term trade was detrimental to a Vanguard Fund or a Vanguard Client or that there is a history of frequent trading by you or your Household or Family Members. For purposes of this paragraph:
(1)A redemption includes a redemption by any means, including an exchange out of a Vanguard Fund.
(2)This policy does not cover purchases and redemptions/sales (i) into or out of Vanguard money market funds, Vanguard short-term bond funds, or (ii) through an Automatic Investment Program.
ii)Nothing in this section is intended to replace, nullify, or modify any requirements imposed by a Vanguard Fund.
Segment 2-D-2: Specific Limitations and Prohibitions that Apply Based on Access Person Designation
The terms and requirements of this Segment 2-D-2 are in addition to the terms and requirement of Segment 2-D-1, and you must comply with the portions of this Segment 2-D-2 that apply to your Access Person designation. Note, an Access Person designation can apply to crew members or contingent workers.
Segment 2-D-2(a): Advisor Access Person requirements
The following terms and requirements apply to Advisor Access Persons only and are in addition to the terms and requirements of Segment 2-D-1:
Securities transactions for which you must obtain preclearance (meaning, approval from Compliance before transacting)
None. You are not required to obtain preclearance of any Covered Securities transactions by you or your Household or Family Members, except Private Placements as described above.
Prohibited Securities transactions
In addition to Segment 2-D-1, you are subject to the following restrictions with respect to any transaction in which you will acquire any direct or indirect Beneficial Ownership:
Short-Term Trading. You are prohibited from purchasing and then selling any Covered Security at a profit, as well as selling and then repurchasing a Covered Security at a lower price, within 60 calendar days. A last-in/first-out accounting methodology will be applied to a series of Security purchases when applying this rule. (Note, as stated, this is based on last- in/first-out accounting regardless of how you placed the trade or plan to report it for tax purposes.) If you realize profits on short-term trades, you will be required to relinquish the profits to Vanguard (exclusive of commissions). In addition, the trade will be recorded as a violation of this policy. For example: you would not be permitted to sell a Covered Security at $12 that you purchased within the prior 60 days for $10. Similarly, you would not be permitted to purchase a Covered Security at $10 that you had sold within the prior 60 days for $12.
Short-term trading on options. You may hold options on a Covered Security until you exercise the options or the options expire. However, you may not otherwise close any open positions within 60 calendar days. If you realize profits on such short-term trades, you must relinquish such profits to Vanguard (exclusive of commissions). In addition, the trade will be recorded as a violation of this policy. Note: These types of transactions can have unintended consequences.
For example, your call option could be assigned, causing the underlying Security to be called away within sixty (60) calendar days following the purchase of the Covered Security.
Visit the Appendix C for a table summarizing the trading and reporting requirements for Advisor Access Persons.
Segment 2-D-2(b): Fund Access Person requirements
The following terms and requirements apply to Fund Access Persons only and are in addition to the terms and requirements of Segment 2-D-1:
Securities transactions for which you must obtain preclearance (meaning, approval from Compliance before transacting)
Securities transactions that do not require preclearance
Is preclearance required for trades in an Approved Managed Account?
Yes, you must obtain, for yourself and on behalf of your Household or Family Members, preclearance for any transaction of a Covered Security by you or any Household or Family Member.
See Segment 2-D-3, below, for instructions on how to seek preclearance.
You are not required to obtain preclearance for the following:
Purchases or sales of Vanguard Funds. Purchases or sales where the person requesting preclearance has no direct or indirect influence or control over the account (e.g., you have a trust in your name but you are not the trustee who places the transaction, provided you have granted Investment Discretion to the trustee and there has been no prior communication between you and the trustee regarding the transaction).
Corporate actions in Covered Securities such as stock dividends, stock splits, mergers, consolidations, spin-offs, or other similar corporate reorganizations or distributions. Purchases or sales made as a part of an Automatic Investment Program.
Purchases effected upon the exercise of Rights which were issued by an issuer pro rata to all holders of a class of its Securities, to the extent such Rights were acquired from such issuer.
Acquisitions of Covered Securities through gifts or bequests.
Visit the Appendix D for a table summarizing the trading and reporting requirements for Fund Access Persons.
No, you are not required to seek preclearance of a transaction in a Covered Security in an Approved Managed Account so long as you have no prior communication with the portfolio manager of that account in connection with that transaction.
Note, Vanguard PAS accounts generally do not qualify as Approved Managed Accounts because PAS account owners generally retain some level of investment discretion. Further, any
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trades of Covered Securities in a PAS account must be |
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precleared under this policy. |
"Blackout period" |
You may be subject to certain restrictions if you purchase or sell a |
restrictions that may |
Covered Security within seven (7) days before or after a |
apply to personal |
Vanguard Fund purchases or sells the same Covered Security or |
trading in Covered |
a Related Security (the "blackout period"). |
Securities |
Purchasing or selling before a Vanguard Fund: |
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If you purchase a Covered Security within seven days before |
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a Vanguard Fund purchases the same Covered Security or a |
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Related Security, you may be required to hold the Covered |
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Security for 6 months before being permitted to sell the |
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Covered Security for a profit. |
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If you sell a Covered Security within seven days before a |
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Vanguard Fund sells the same Covered Security or a Related |
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Security, you may be required to relinquish to Vanguard any |
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profits earned from your sale of the Covered Security |
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(exclusive of commissions), where profits are calculated |
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based on the price that the Vanguard Fund received for |
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selling the Covered Security or a Related Security. Note: |
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Compliance will review your sale to determine if the |
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relinquishment is required. This decision will be based on |
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several factors, such as your role, access to fund trades, and |
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the Covered Security sold. |
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Purchasing or selling after a Vanguard Fund: |
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In general, you will not receive preclearance to purchase a |
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Covered Security within seven days after a Vanguard Fund |
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trades the same Covered Security or a Related Security. If |
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you execute the transaction without receiving preclearance, |
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you will have violated this policy and must immediately sell |
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the Covered Security and relinquish all profits received from |
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the sale to Vanguard (exclusive of commissions). |
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In general, you will not receive preclearance to sell a Covered |
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Security within seven days after a Vanguard Fund trades the |
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same Covered Security or a Related Security. If you execute |
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the transaction without receiving preclearance, you will have |
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violated this policy and must relinquish to Vanguard the |
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difference (exclusive of commissions) between the sale price |
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you received and the Vanguard Fund's sale price (as long as |
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your sales price is higher), multiplied by the number of shares |
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you sold. |
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In addition to these restrictions, local law may dictate the extent to |
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which any gains must be relinquished. |
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Compliance may exempt from these restrictions certain trades |
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during blackout periods that coincide with trading by certain |
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Vanguard Funds (e.g., index funds). |
Prohibited Securities transactions
The blackout period restrictions set forth above will not apply to a Fund Access Person's sale of stock of any issuer which has a market capitalization that exceeds US$5 billion (or local currency equivalent), provided that the total value of any sales of the Security by the Fund Access Person do not exceed US$10,000 (or local currency equivalent) in any 30-day rolling period. Sales of securities of issuers with market capitalizations below US$5 billion, or that exceed US$10,000 in any 30-day rolling period, will continue to be subject to the blackout periods unless Compliance grants a waiver.
Compliance may waive the blackout period as it applies to the sale of a Covered Security if the Chief Compliance Officer determines its application creates a significant hardship to you (e.g., you need cash for a home purchase or to cover a major medical expense) and, in the opinion of the Chief Compliance Officer, satisfies the requirements for a waiver in the Waivers paragraph of Segment 2-D-1, above. Request and complete a
Hardship Waiver Request Form.
In addition to Segment 2-D-1, you are subject to the following restrictions with respect to any transaction in which you will acquire any direct or indirect Beneficial Ownership:
Futures and Options. You are prohibited from entering into, acquiring, or selling any Futures contract (including single stock futures) or any Option on any Security (including Options on ETFs, Digital Utility Tokens, Digital Security Tokens, and Digital Currencies).
Short-Term Trading. You are prohibited from purchasing and then selling any Covered Security at a profit, as well as selling and then repurchasing a Covered Security at a lower price, within 60 calendar days. A last-in/first-out accounting methodology will be applied to a series of Security purchases when applying this rule. (Note, as stated, this is based on last- in/first-out accounting regardless of how you placed the trade or plan to report it for tax purposes.) If you realize profits on short-term trades, you will be required to relinquish the profits to Vanguard (exclusive of commissions). In addition, the trade will be recorded as a violation of this policy. Example: You are not permitted to sell a security at $12 that you purchased within the prior 60 days for $10. Similarly, you are not permitted to purchase a security at $10 that you sold within the prior 60 days for $12.
Spread Bets. You are prohibited from participating in Spread Betting on Securities, indexes, interest rates, currencies, or commodities.
Segment 2-D-2(c): Investment Access Person requirements
The following terms and requirements apply to Investment Access Persons only and are in addition to the terms and requirements of Segment 2-D-1:
Securities transactions for which you must obtain preclearance (meaning, approval from Compliance before transacting)
Yes, you must obtain, for yourself and on behalf of your Household or Family Members, preclearance for any transaction of (i) a Covered Security, or (ii) a Vanguard ETF, by you or any Household or Family Member.
See Segment 2-D-3, below, for instructions on how to seek preclearance.
Securities transactions that do not require preclearance
Is preclearance required for trades in an Approved Managed Account?
You are not required to obtain preclearance for the following:
Purchases or sales of Vanguard Funds. (Reminder: The purchase or sale of Vanguard ETFs does require preclearance.)
Purchases or sales where the person requesting preclearance has no direct or indirect influence or control over the Covered Security (e.g., you have a trust in your name but you are not the trustee who places the transaction, provided you have granted Investment Discretion to the trustee and there has been no prior communication between you and the trustee regarding the transaction).
Corporate actions in Covered Securities such as stock dividends, stock splits, mergers, consolidations, spin-offs, or other similar corporate reorganizations or distributions. Purchases or sales made as a part of an Automatic Investment Program.
Purchases effected upon the exercise of Rights which were issued by an issuer pro rata to all holders of a class of its Securities, to the extent such Rights were acquired from such issuer.
Acquisitions of Covered Securities through gifts or bequests.
Visit the Appendix for a table summarizing the trading and reporting requirements for Investment Access Persons.
No, you are not required to seek preclearance of a transaction in a Covered Security in an Approved Managed Account so long as you have no prior communication with the portfolio manager of that account in connection with that transaction.
Note, Vanguard PAS accounts generally do not qualify as Approved Managed Accounts because PAS account owners generally retain some level of investment discretion. Further, any trades of Covered Securities (but not trades of Vanguard ETFs) in a PAS account must be precleared under this policy.
"Blackout period" restrictions that may apply to personal trading in Covered Securities
You may be subject to certain restrictions if you purchase or sell a Covered Security within seven (7) days before or after a Vanguard Fund purchases or sells the same Covered Security or a Related Security (the "blackout period").
Purchasing or selling before a Vanguard Fund:
If you purchase a Covered Security within seven days before a Vanguard Fund purchases the same Covered Security or a Related Security, you may be required to hold the Covered Security for 6 months before being permitted to sell the Covered Security for a profit.
If you sell a Covered Security within seven days before a Vanguard Fund sells the same Covered Security or a Related Security, you may be required to relinquish to Vanguard any profits earned from your sale of the Covered Security (exclusive of commissions), where profits are calculated based on the price that the Vanguard Fund received for selling the Covered Security or a Related Security.
Purchasing or selling after a Vanguard Fund:
In general, you will not receive preclearance to purchase a Covered Security within seven days after a Vanguard Fund trades the same Covered Security or a Related Security. If you execute the transaction without receiving preclearance, you will have violated this policy and must immediately sell the Covered Security and relinquish all profits received from the sale to Vanguard (exclusive of commissions).
In general, you will not receive preclearance to sell a Covered Security within seven days after a Vanguard Fund trades the same Covered Security or a Related Security. If you execute the transaction without receiving preclearance, you will have violated this policy and must relinquish to Vanguard the difference (exclusive of commissions) between the sale price you received and the Vanguard Fund's sale price (as long as your sales price is higher), multiplied by the number of shares you sold.
In addition to these restrictions, local law may dictate the extent to which any gains must be relinquished.
Compliance may exempt from these restrictions certain trades during blackout periods that coincide with trading by certain Vanguard Funds (e.g., index funds).
Compliance may waive the blackout period as it applies to the sale of a Covered Security if the Chief Compliance Officer determines its application creates a significant hardship to you (e.g., you need cash for a home purchase or to cover a major medical expense) and, in the opinion of the Chief Compliance Officer, satisfies the requirements for a waiver in the Waivers
Prohibited Securities transactions
paragraph of Segment D-1, above. Request and complete
a Hardship Waiver Request Form.
In addition to Segment 2-D-1, you are subject to the following restrictions with respect to any transaction in which you will acquire any direct or indirect Beneficial Ownership:
Futures and Options. You are prohibited from entering into, acquiring, or selling any Futures contract (including single stock futures) or any Option on any Security (including Options on ETFs, Digital Utility Tokens, Digital Security Tokens, and Digital Currencies).
Short-Term Trading. You are prohibited from purchasing and then selling any Covered Security or a Vanguard ETF at a profit, as well as selling and then repurchasing a Covered Security or a Vanguard ETF at a lower price, within 60 calendar days. A last- in/first-out accounting methodology will be applied to a series of Security purchases when applying this rule. (Note, as stated, this is based on last-in/first-out accounting regardless of how you placed the trade or plan to report it for tax purposes.) If you realize profits on short-term trades, you will be required to relinquish the profits to Vanguard (exclusive of commissions). In addition, the trade will be recorded as a violation of this
policy. Example: You are not permitted to sell a security at $12 that you purchased within the prior 60 days for $10. Similarly, you are not permitted to purchase a security at $10 that you sold within the prior 60 days for $12.
Spread Bets. You are prohibited from participating in Spread Betting on Securities, indexes, interest rates, currencies, or commodities.
Segment 2-D-3: How to Seek and Abide by Preclearance Requirements
If you are required to obtain preclearance of any trade or transaction under this policy, then the terms of this Segment 2-D-3 apply to that trade or transaction.
Preclearance representations.
By seeking preclearance, you will be deemed to be advising and representing to Compliance that you:
Do not possess any material, nonpublic information relating to the security.
Do not use knowledge of any proposed trade or investment program relating to the Vanguard Funds for personal benefit.
Believe the proposed trade is available to any market participant on the same terms.
How do I obtain preclearance?
Preclearance must be obtained via the "Personal Trade Pre-Clearance" path in MCO. Once the required information is submitted, your preclearance request will usually be approved or denied
immediately. Transactions in Covered Securities (including, for Investment Access Persons, transactions in Vanguard ETFs) may not be executed before you receive approval.
As a reminder, preclearance of Private Placements is addressed in Segment 2-D-1 of this policy, above.
Attempting to gain approval after the transaction has occurred is not permitted. Completing a personal trade before receiving approval or after the approval window expires constitutes a violation of this policy. See Section 3 of this policy for more information regarding the sanctions that may be imposed as a result of a violation.
How long is my preclearance approval valid?
In the U.S.: Preclearance approval will expire at the end of the trading day on which it is issued (e.g., if you receive approval for a trade on Monday, it is effective until the market closes on that Monday). Preclearance for permitted limit orders is good for transactions on the same day that approval is granted only. If you receive approval for a limit order, it must be executed or expire at the close of regular trading on the same business day for which approval was granted. If you wish to execute the limit order after the close of regular trading on the day you received approval, you must submit a new preclearance request for the day you wish to execute the trade.
Outside the U.S.: If you receive approval, transactions must be executed no later than the end of trading on the next business day after the preclearance is granted. If the transaction is not placed within that time, you must submit a new request for approval before placing the transaction. If you preclear a limit order, that limit order must either be executed or expire at the end of the next business day. If you want to execute the order after the next business day period expires, you must resubmit your preclearance request.
Section 3 – Penalties and Sanctions
How we enforce this policy
The Compliance Department regularly reviews the forms, reports, and other information it receives. If these reviews turn up information that is incomplete, questionable, or potentially in violation of this policy, the Compliance Department will investigate the matter and may contact you. If it is determined that you or any of your Household or Family Members have violated this policy, the Compliance Department or another appropriate party may take action.
Violations
If the Compliance Department determines that there has been a violation, you may be subject to penalties and sanctions as described in this policy and otherwise as described in 
Action Policy and, for crew and contingent workers in Australia, the Managing Misconduct Policy. The Compliance Department will generally utilize a rolling 24-month period when evaluating whether and how to sanction a violation. Any violation of this policy may result in disciplinary action up to and including termination of employment.
Vanguard takes all policy violations seriously and at times provides the Vanguard Funds' board with a summary of actions taken in response to material violations of this policy and other policies. You should be aware that other securities laws and regulations not addressed by this policy may also apply to you, depending upon your role at Vanguard.
Exceptions
The Chief Compliance Officer or designee retains the discretion to interpret and grant exceptions to this policy and to decide how the rules apply to any given situation for the purpose of protecting the funds and being consistent with the general principles of this policy and the Code of Ethical Conduct.
In cases where exceptions to this policy are noted and you may qualify for them, you need to get prior written approval from the Compliance Department. If you believe that you have a situation that warrants an exception that is not discussed in this policy, you may submit a written request to the Compliance Department, which will consider your request and notify you of the outcome.
Section 4 – Defined Terms
The following definitions apply throughout this policy:
Access Person |
Any person designated as an Investment Access Person, Fund Access |
|
Person, or Advisor Access Person. |
Approved Managed |
An investment account where (i) the account is owned by an investor |
Account |
and overseen by a hired professional money manager, (ii) the investor |
|
has no trading discretion on the account, and (iii) Compliance has |
|
approved it as an Approved Managed Account. |
Associated Person |
Any person who conducts securities business on behalf of Vanguard |
|
Marketing Corporation (VMC). This includes all FINRA-licensed |
|
contingent workers, as well as non-licensed contingent workers who |
|
perform certain operational and administrative functions for VMC. |
Automatic Investment |
A program in which regular periodic purchases (or withdrawals) are |
Program |
made automatically in (or from) Investment accounts, according to a |
|
predetermined schedule and allocation. An Automatic Investment |
|
Program includes a dividend reinvestment plan. |
Bankers' Acceptance |
A time draft drawn on a commercial bank by a borrower usually in |
|
connection with an international commercial transaction. Bankers' |
|
Acceptances are usually guaranteed by the bank. |
Beneficial Ownership |
The opportunity to directly or indirectly—through any contract, |
|
arrangement, understanding, relationship, or otherwise—share at any |
|
time in any economic interest or profit derived from an ownership of or a |
|
transaction in a Security. For clarity, what you are deemed to have |
|
Beneficial Ownership of includes the following: |
|
Any Security owned individually by you. |
|
Any Security owned by a Household or Family Member. |
|
Any Security owned in joint tenancy, as tenants in common, or in |
|
other joint ownership arrangements. |
|
Any Security in which a Household or Family Member has |
|
Beneficial Ownership if the Security is held in a Covered Account |
|
over which you have decision making authority (for example, you |
|
act as a trustee, executor, or guardian or you provide Investment |
|
advice). |
|
Your interest as a general partner or manager/member in |
|
Securities held by a general or limited partnership or limited liability |
|
company. |
|
Your interest as a member of an Investment club or an |
|
organization that is formed for the purpose of investing in a pool of |
|
monies or Securities. |
|
Your ownership of Securities as a trustee of a trust in which either |
|
you or a Household or Family Member has a vested interest in the |
|
principal or income of the trust or your ownership of a vested |
|
interest in a trust. |
|
Securities owned by a corporation which is directly or indirectly |
|
controlled by, or under common control with, such person. |
Bond |
A debt obligation issued by a corporation, government, or government |
|
agency that entails repayment of the principal amount of the obligation at |
|
a future date, usually with interest. |
Certificate |
In Germany, a right or obligation issued by a bank where the payout |
|
profile or benefit of ownership depends upon or is tied to the |
|
performance of an agreed-upon underlying asset or security. |
Certificate of Deposit |
An insured, interest-bearing deposit at a bank that requires the depositor |
(CD) |
to keep the money invested for a specified period. |
Commercial Paper |
A promissory note issued by a large company in need of short-term |
|
financing. |
Covered Account |
Any Vanguard Fund account, any brokerage account, and any other type |
|
of account that holds, or is capable of holding, Reportable Securities. |
Covered Security |
Any Security (including through an IPO), but not including any: |
|
Direct Obligations of a Government; |
|
Bankers' Acceptances, Certificates of Deposit (CD), Commercial |
|
Paper, and High-Quality Short-Term Debt Instruments, including |
|
Repurchase Agreements; |
|
Shares issued by Open-End Funds (although for European |
|
subsidiaries, this is limited to UCITS schemes, a non-UCITS retail |
|
scheme, or another fund subject to supervision under the law of an |
|
European Economic Area (EEA) state which is an index fund or |
|
which requires an equivalent level of risk spreading in their assets); |
|
Life policies; |
|
ETFs; |
|
ETNs; or |
|
Digital Currencies. |
Debenture |
An unsecured debt obligation backed only by the general credit of the |
|
borrower. |
Digital Currency |
A digital asset that: (1) serves solely as a store of value, a medium of |
|
exchange, or a unit of account; (2) is not issued or guaranteed by any |
|
jurisdiction, central bank, or public authority; (3) relies on algorithmic |
|
techniques to regulate the generation of new units of the digital asset; |
|
and (4) has transactions involving the digital asset recorded on a |
|
decentralized network or distributed ledger (e.g., blockchain). Common |
|
examples of a Digital Currency are Bitcoin and Ether. A Digital Currency |
|
is distinguishable from a Digital Security Token or a Digital Utility Token. |
Digital Security Token |
Any digital asset that is not a Digital Currency or Digital Utility Token. In |
|
general, a Digital Security Token may: (1) derive its value primarily from, |
|
or represent an interest in, a separate asset or pool of assets; or (2) |
|
represent an interest in an enterprise or venture. A Digital Security |
|
Token may provide owners or holders with voting rights, rights to |
|
distributions, or other rights associated with ownership. Digital Security |
|
Tokens are generally held for speculative investment purposes and not |
|
to provide holders with access to a particular network, product, or |
|
service. Digital Security Tokens, like other investments, are generally not |
|
used as a medium of exchange. |
|
Note, whether or not an asset is a Digital Security Token depends on |
|
specific facts and circumstances. Merely referring to an asset as a Digital |
|
Currency or Digital Utility Token does not prevent the asset from being a |
|
Digital Security Token. Furthermore, an asset may be a Digital Security |
|
Token even if it has some purported utility. Please contact Compliance if |
|
you have any questions regarding whether an asset is a Digital Security |
|
Token. |
Digital Utility Token |
A digital asset that (1) provides access to a particular network, product, |
|
or service; (2) derives its value primarily from providing access to a |
|
particular network, product, or service; and (3) does not function as a |
|
Digital Currency or Digital Security Token. |
Direct Obligation of a |
A debt that is backed by the full taxing power of any government. These |
Government |
Securities are generally considered to be of the very highest quality. |
ETF or Exchange- |
An investment with characteristics of both mutual funds and individual |
Traded Fund |
stocks. Many ETFs track an index, a commodity, or a basket of assets. |
|
Unlike mutual funds, ETFs can be traded throughout the day. ETFs often |
|
have lower expense ratios but must be purchased and sold through a |
|
broker, which means you may incur commissions. |
ETN or Exchange- |
A senior, unsecured, unsubordinated debt Security issued by a financial |
Traded Note |
institution, whose returns are based on the performance of an underlying |
|
index and backed only by the credit of the issuer. ETNs have a maturity |
|
date, but typically pay no periodic coupon interest and offer no principal |
|
protection. At maturity an ETN investor receives a cash payment linked |
|
to the performance of the corresponding index, less fees. |
Futures / Futures |
A contract to buy or sell specific amounts of a commodity or financial |
Contract |
instrument (such as grain, a currency, including foreign currencies and |
|
Digital Currencies (e.g., Bitcoin), a Digital Security Token, or an index) |
|
for an agreed-upon price at a certain time in the future. Sometimes the |
|
arrangements in a contract prescribe that settlements are made through |
|
cash payments, rather than the delivery of physical goods or Securities; |
|
this is called Contract for Difference. |
High-Quality Short- |
An instrument that has a maturity at issuance of less than 366 days and |
Term Debt Instrument |
is rated in one of the two highest ratings categories by a nationally |
|
recognized statistical rating organization, or an instrument that is unrated |
|
but determined by Vanguard to be of comparable quality. |
Household or Family |
For the U.S., Australia, Canada, China, Hong Kong, and Mexico regions, |
Member (U.S., |
the term "Household or Family Member" includes: |
Australia, Canada, |
a) Your spouse or domestic partner (an unrelated adult with whom |
China, Hong Kong, and |
Mexico) |
you share your home and contribute to each other's support); |
|
b) Any child of yours or of your spouse or domestic partner, provided |
|
that the child resides in the same household as or is financially |
|
dependent upon you; or |
|
c) Any other individual over whose accounts you have control (e.g., |
|
agent authority (full or limited), trustee, power of attorney authority) |
|
and to whose financial support you materially contribute. |
|
For purposes of parts (a) and (b) of this definition, those persons may |
|
not be deemed Household or Family Members under this policy if you |
|
demonstrate, to the satisfaction of the Compliance Department, that you |
|
derive no economic benefit from, and exercise no control over, that |
|
person's accounts. |
Household or Family |
For Europe crew members, the term "Household or Family Member" |
Member (Europe) |
includes your spouse, domestic partner (an unrelated adult with whom |
|
you share your home and contribute to each other's support), and minor |
|
children, as well as relatives whether by blood, adoption, or marriage |
|
(e.g., children, grandchildren, siblings, parents, parents-in-law, |
|
stepchildren) residing in the same household for at least one year prior |
|
to the date of the personal transaction. |
Initial Coin Offering |
An initial offer or sale of Digital Currencies or Digital Security Tokens. |
(ICO) |
Note, whether or not an offering is an ICO depends on specific facts and |
|
circumstances. Please contact Compliance before participating in an |
|
initial offering of a Digital Currency, Digital Security Token, or Digital |
|
Utility Token |
Initial Public Offering |
A corporation's first offering of common stock to the public. |
(IPO) |
|
Investment Contract |
Any contract, transaction, or scheme whereby a person invests money in |
|
a common enterprise and is led to expect profits solely from the efforts of |
|
the promoter or third party. |
Investment Discretion |
The authority an individual may exercise, with respect to investment |
|
control or trading discretion, on another person's account (e.g., executor, |
|
trustee, power of attorney). |
Non-Access Person |
Any person in a role that has not been designated as an Access Person |
|
role. |
Note |
A financial security that generally has a longer term than a bill, but a |
|
shorter term than a Bond. However, the duration of a note can vary |
|
significantly and may not always fall neatly into this categorization. Notes |
|
are similar to Bonds in that they are sold at, above, or below face (par) |
|
value; make regular interest payments; and have a specified term until |
|
maturity. |
Open-End Fund |
A mutual fund that has an unlimited number of shares available for |
|
purchase. |
Option |
The right, but not the obligation, to buy (for a call option) or sell (for a put |
|
option) a specific amount of a given stock, commodity, currency, |
|
including foreign currencies and Digital Currencies (e.g., Bitcoin), index, |
|
or debt, at a specified price (the strike price) during a specified period or |
|
on one particular date. |
Private Placement |
A Security that is not registered or required to be registered under |
|
applicable securities laws. Private Placements are generally sold to a |
|
relatively small number of select investors (as opposed to a public issue, |
|
in which Securities are made available for sale on the open market) in |
|
order to raise capital. Private Placements may include, among others, |
|
interests in hedge funds (including limited partnership interests) and |
|
shares of private companies. Investors in Private Placements are usually |
|
banks, mutual funds, insurance companies, pension funds, hedge funds, |
|
and high net worth individuals. Private Placements are typically held or |
|
maintained outside of Vanguard. |
Related Security |
Any Security or instrument that provides economic exposure to the same |
|
company or entity—provided, however, that equity instruments will |
|
generally not be considered related to fixed income instruments (other |
|
than convertible Bonds) and vice versa. For example, all of the following |
|
instruments would be related to the common Stock of Company X: |
|
Options, Futures, Rights, and Warrants on Company X common Stock; |
|
preferred Stock issued by Company X; and Bonds convertible into |
|
Company X common Stock. Similarly, different Bonds issued by |
|
Company X would be related to one another. |
Reportable Security |
Any Covered Security, ETF, ETN, or Digital Security Token. |
Repurchase Agreement |
An arrangement by which the seller of an asset agrees, at the time of the |
|
sale, to buy back the asset at a specific price and, typically, on a given |
|
date (normally the next day). |
Right |
A Security giving stockholders entitlement to purchase new shares |
|
issued by the corporation issuer at a predetermined price (normally at a |
|
discount to the current market price) in proportion to the number of |
|
shares already owned. Rights are issued only for a short period of time, |
|
after which they expire. |
Secondary Offering |
The sale of new or closely held shares by a company that has already |
|
made an Initial Public Offering. |
Security |
Any Stock, Bond, money market instrument, Note, evidence of |
|
indebtedness, Debenture, Warrant, Option, Right, Investment Contract, |
|
ETF, ETN, Digital Currency that has been deemed to be a security by |
|
the US Securities and Exchange Commission, Certificate, or any other |
|
investment or interest commonly known as a Security. |
SPAC (Special Purpose |
A shell company or company with no commercial operations that is |
Acquisition Company) |
formed strictly to raise capital through an Initial Public Offering (IPO) for |
|
the purpose of acquiring an existing company. |
Spread Betting |
A way of trading that enables you to profit from movements in a wide |
|
range of markets from Securities to currencies, including foreign |
|
currencies and Digital Currencies, Digital Security Tokens, commodities, |
|
and interest rates. Spread betting allows you to trade on whether the |
|
price quoted for these financial instruments will go up or down. |
Stock |
A Security that represents part ownership, or equity, in a corporation. |
|
Each share of stock is a proportional stake in the corporation's assets |
|
and profits, some of which could be paid out as dividends. |
UCITS (Undertakings |
A regulatory framework of the European Commission that creates a |
for the Collective |
harmonized regime throughout Europe for the management and sale of |
Investment of |
mutual funds. UCITS funds can be registered in Europe and sold to |
Transferable |
investors worldwide using unified regulatory and investor protection |
Securities) |
requirements. |
Vanguard Client |
The clients of VGI, or any of the International Subsidiaries, and investors |
|
in the Vanguard Funds, including the Vanguard Funds themselves. |
Vanguard Fund |
Vanguard mutual funds, Vanguard managed funds, Vanguard UCITS |
|
funds, Vanguard ETFs, and any other accounts sponsored or managed |
|
by Vanguard. This includes, but is not limited to, separately managed |
|
accounts and collective trusts. |
Warrant |
An entitlement to purchase a certain amount of common Stock at a set |
|
price (usually higher than the current price) during an extended period of |
|
time. Usually issued with a fixed-income security to enhance its |
|
marketability, a Warrant can be transferred, traded, or exercised by the |
|
holder. |
Policy Compliance
Questions regarding this policy may be submitted to Code_of_Ethics@vanguard.com.
Please be aware of and comply with any supplemental policies that may apply to your role, department, or geographic region. Check with your manager for more information.
If you believe you may have breached this policy, you should immediately report it to your manager, notify the policy contact for your region, and work with them to take swift corrective action. Alternatively, you may report concerns regarding this policy via the Anonymous Reporting channel that Vanguard has arranged for your region. You are expected to cooperate with any research or investigation into conduct regarding this policy.
The Compliance Department is the owner of this policy. Any violations or potential violations of this policy may be investigated by the Compliance Department, and if it is determined that there has been a violation, you may be subject to penalties and sanctions as described in the Disciplinary Action Policy and, for crew and contingent workers in Australia, the Managing Misconduct Policy. Any violation of this policy may result in disciplinary action up to and including termination of employment.
Refer to the Policy Disclaimer Statement for more information.
Code of Ethics
Personal investing
Gifts and entertainment Outside activities
Client confidentiality
2 August 2021
The reputation of a thousand years may be determined by the conduct of one hour.
– Ancient proverb
A message from our CEO
Jean M. Hynes
Chief Executive Officer
Our ability to thrive as an organization is driven by our shared values, and integrity is at the top of the list. This is reflected in our commitment to the “Client, Firm, Self” framework, through which all of our decisions should be viewed if we are to earn and maintain the trust of our clients.
Each and every one of us has a role to play in sustaining our clients’ trust. We must test every decision we make, no matter how small, against our fiduciary obligations and our high ethical standards. If there is the slightest doubt about
whether a decision is in the best interests of our clients, then bring it to someone’s attention — your manager, the Legal and Compliance team, or any of my direct reports. But don’t just let it go. This is what it means to be a fiduciary: complete dedication to conscientious stewardship of client assets.
To support this mandate, our Code of Ethics sets out standards for our personal conduct, including personal investing, acceptance of gifts and entertainment, outside activities, and client confidentiality. Please take the time to read the Code, familiarize yourself with the rules, and determine what you need to do to comply with them.
Remember, too, that while our Code of Ethics is reviewed and updated regularly, no set of rules can address every possible circumstance. And so I ask you to remain vigilant, exercise good judgment, ask for help when you need it, consider
not just the letter but the spirit of the laws that govern our industry, and do your part to safeguard our clients’ trust.
Sincerely,
Jean M. Hynes
Chief Executive Officer
Contents
Standards of conduct
Our standards of conduct are straightforward and essential. Any transaction or activity that violates either of the standards of conduct below is prohibited, regardless of whether it meets the technical rules found elsewhere in the Code of Ethics.
|
1. |
We act as fiduciaries to our clients. Each of us must put our clients’ interests above our own and must not take advantage of our management of clients’ assets for our own benefit. Our firm’s policies and procedures implement these principles with respect to our conduct of the firm’s business. This Code of Ethics implements the same principles with respect to our personal conduct. The procedures set forth in the Code govern specific transactions, but each of us must be mindful at all times that our behavior, including our personal investing activity, must meet our fiduciary obligations to our clients. |
|
2. |
We act with integrity and in accordance with both the letter and the spirit of the law. Our business is highly regulated, and we are committed as a firm to compliance with those regulations. Each of us must also recognize our obligations as individuals to understand and obey the laws that apply to us in the conduct of our duties. They include laws and regulations that apply specifically to investment advisors, as well as more broadly applicable laws ranging from the prohibition against trading on material nonpublic information and other forms of market abuse to anticorruption statutes such as the US Foreign Corrupt Practices Act and the UK Bribery Act. The firm provides training on their requirements. Each of us must take advantage of these resources to ensure that our own conduct complies with the law. |
Who is subject to the Code of Ethics?
Our Code of Ethics applies to all employees of Wellington Management and its affiliates around the world. Its restrictions on personal investing also apply to temporary personnel (including co-ops and interns) and consultants whose tenure with Wellington Management exceeds 90 days and who are deemed by the Chief Compliance Officer to have access to nonpublic investment research, client holdings, or trade information.
All Wellington Management personnel receive a copy of the Code of Ethics (and any amendments) and must certify, upon joining the firm and annually thereafter, that they have read and understood it and have complied with its requirements.
Adherence to the Code of Ethics is a basic condition of employment. Failure to adhere to our Code of Ethics may result in disciplinary action, including termination of employment.
If you have any doubt as to the appropriateness of any activity, believe that you have violated the Code, or become aware of a violation of the Code by another individual, you should consult the manager of the Code of Ethics Team, Chief Compliance Officer, General Counsel, or Chair of the Ethics Committee. You also have the right to report violations of law or regulation directly to relevant governmental agencies. You do not need the firm’s prior authorization to make any such report or disclosures and are not required to notify the firm that you have done so.
For additional information regarding our Code of Ethics Policy refer to the Guide to Our Policy document available on the firm’s Intranet.
Personal investing
As fiduciaries, each of us must avoid taking personal advantage of our knowledge of investment activity in client accounts. Although our Code of Ethics sets out a number of specific restrictions on personal investing designed to reflect this principle, no set of rules can anticipate every situation. Each of us must adhere to the spirit, and not just the letter, of our Code in meeting this fiduciary obligation to our clients.
Which types of investments and related activities are prohibited?
Our Code of Ethics prohibits the following personal investments and investment-related activities:
|
• |
Purchasing or selling the following: |
|
– |
Initial public offerings (IPOs) of any securities |
|
– |
Securities of an issuer being bought or sold on behalf of clients until one trading day after such buying or selling is completed or canceled |
|
|
– |
Securities of an issuer that is the subject of a new, changed, or reissued but unchanged action recommendation from a global industry research or fixed income credit analyst until two business days following issuance or reissuance of the recommendation |
|
|
– |
Securities of an issuer that is mentioned at the Morning Meeting or the Early Morning Meeting until two business days following the meeting |
|
|
– |
Securities that are the subject of a firmwide restriction |
|
– |
Options with an expiration date that is within 60 calendar days of the transaction date (excluding shares of exchange-traded funds (ETFs)) |
|
|
– |
Securities of broker/dealers (or their affiliates) that the firm has approved for execution of client trades |
|
– |
Securities of any securities market or exchange on which the firm trades on behalf of clients |
|
• |
Purchasing an equity security (excluding ETFs) if your aggregate ownership of the equity security exceeds 0.05% of the total shares outstanding of the issuer |
|
Short-term tradingYou are prohibited from taking a profit from any trading activity within a 60-calendar day window on any security that requires preclearance. For example, if you buy shares of stock(or options on such shares) and then sell those shares within 60 days at a profit, an exception will be identified and any gain from the transactions must be surrendered. Gains are calculated based on a last in, first out (LIFO) method for purposes of this restriction. This short-term trading rule does not apply to securities exempt from the Code’s preclearance requirements.Taking a profit from any trading activity within a 60-calendar day window
|
• |
Using a derivative instrument to circumvent a restriction in the Code of Ethics |
|
WHICH INVESTMENT ACCOUNTS MUST BE REPORTED?
You are required to report any investment account over which you exercise investment discretion or from which any of the following individuals enjoy economic benefits: (i) your spouse, domestic partner, or minor children, and (ii) any other dependents living in your household,
AND
that holds or is capable of holding any of the following covered investments:
|
• |
Shares of stocks, ADRs, or other equity securities (including any security convertible into equity securities) |
|
|
• |
Bonds or notes (other than sovereign government bonds issued by Canada, France, Germany, Italy, Japan, the United Kingdom, or the United States, as well as bankers’ acceptances, CDs, commercial paper, and high-quality, short-term debt instruments) |
|
|
• |
Interest in a variable annuity product in which the underlying assets are held in a subaccount managed by Wellington Management |
|
|
• |
Shares of exchange-traded funds (ETFs) |
|
• |
Shares of closed-end funds |
|
• |
Interest in private placement securities (other than Wellington Management sponsored products) |
|
• |
Shares of funds managed by Wellington Management (other than money market funds) Please see Appendix A for a detailed summary of reporting requirements by security type. |
|
For purposes of the Code of Ethics, these investment accounts are referred to as reportable accounts. Examples of common account types include brokerage accounts, retirement accounts, employee stock compensation plans, and transfer agent accounts. Reportable accounts also include those from which you or an immediate family member may benefit indirectly, such as a family trust or family partnership, and accounts in which you have a joint ownership interest, such as a joint brokerage account.
Accounts not requiring reporting
You do not need to report the following accounts via the Code of Ethics System since the administrator will provide the Code of Ethics Team with access to relevant holdings and transaction information:
|
• |
Accounts maintained within the Wellington Retirement and Pension Plan or similar firm-sponsored retirement or benefit plans identified by the Ethics Committee |
|
|
• |
Accounts maintained directly with Wellington Trust Company or other Wellington Management Sponsored Products |
|
Although these accounts do not need to be reported, your investment activities in these accounts must comply with the standards of conduct embodied in our Code of Ethics.
Managed account exemptions
An account from which you or immediate family members could benefit financially, but over which neither you nor they have any investment discretion or influence (a managed account), may be exempted from the Code of Ethics’ personal investing requirements upon written request and approval. An example of a managed account would be a professionally advised account about which you will not be consulted or have any input on specific transactions placed by the investment manager prior to their execution.
Designated Brokers for US Reportable Accounts
US-based reportable accounts must be held at one or more of the brokers on the Designated Brokers List. This requirement does not apply to managed accounts that are exempt from certain provisions of the Code of Ethics, employee stock purchase and stock option plans and other accounts (including pension, retirement and compensation accounts) required to be held at a specific broker.
New employees must transfer all reportable accounts to a Designated Broker within 45 days from the start of their employment.
WHAT ARE THE REPORTING Responsibilities for ALL PERSONNEL?
Initial and annual holdings reports
Non-volitional transactions include:Investments made through automatic dividend reinvestment or rebalancing plans and stock purchase plan acquisitionsTransactions that result from corporate actions applicable to all similar security holders (such as splits, tender offers, mergers, and stock dividends)You must disclose all reportable accounts and all covered investments you hold within 10 calendar days after you begin employment at or association with Wellington Management. You will be required to review and update your holdings and securities account
information annually thereafter.
For initial holdings reports, holdings information must be current as of a date no more than 45 days prior to the date you became covered by the Code of Ethics.
Please note that you cannot make personal trades until you have filed an initial holdings report via the Code of Ethics System on the Intranet.
For subsequent annual reports, holdings information must be current as of a date no more than 45 days prior to the date the report is submitted. Please note that your annual holdings report must account for both volitional and non-volitional transactions.
At the time you file your initial and annual reports, you will be asked to confirm that you have read and understood the Code of Ethics and any amendments.
Quarterly transactions reports
You must submit a quarterly transaction report no later than 30 calendar days after quarter-end via the Code of Ethics System on the Intranet, even if you did not make any personal trades during that quarter. In the reports, you must either confirm that you did not make any personal trades (except for those resulting from non-volitional events) or provide information regarding all volitional transactions in covered investments.
Duplicate statements and trade confirmations
For each of your reportable accounts, you are required to provide duplicate statements and duplicate trade confirmations to Wellington Management.
WHAT ARE THE PRECLEARANCE Responsibilities for ALL PERSONNEL?
Preclearance of publicly traded securities
You must receive clearance before buying or selling stocks, bonds, options, and most other publicly traded securities (excluding ETFs) in any reportable account. A full list of the categories of publicly traded securities requiring preclearance, and of certain exceptions to this requirement, is included in Appendix A. Transactions in accounts that are not reportable accounts do not require preclearance or reporting.
Preclearance requests must be submitted online via the Code of Ethics System, which is accessible through the Intranet. If clearance is granted, the approval will be effective for a period of 24 hours. If you preclear a transaction and then place a limit order with your broker, that limit order must either be executed or expire
at the end of the 24-hour period. If you want to execute the order after the 24-hour period expires, you must resubmit your preclearance request.
Please note that preclearance approval does not alter your responsibility to ensure that each personal securities transaction complies with the general standards of conduct, the reporting requirements, the restrictions on short-term trading, or the special rules for investment professionals set out in our Code of Ethics .
Caution on short sales, margin transactions, and options
You may engage in short sales and margin transactions and may purchase or sell options (excluding options on ETFs) provided you receive preclearance and meet all other applicable requirements under our Code of Ethics (including the additional rules for investment professionals described on page 7). Please note, however, that these types of transactions can have unintended consequences. For example, any sale by your broker to cover a margin call or to buy in a short position will be in violation of the Code unless precleared. Likewise, any volitional sale of securities acquired at the expiration of a long call option will be in violation of the Code unless precleared. You are responsible for ensuring any subsequent volitional actions relating to these types of transactions meet the requirements of the Code.
Preclearance of private placement securities
You cannot invest in securities offered to potential investors in a private placement without first obtaining prior approval. Approval may be granted after a review of the facts and circumstances, including whether:
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an investment in the securities is likely to result in future conflicts with client accounts (e.g., upon a future public offering), and |
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you are being offered the opportunity due to your employment at or association with Wellington Management. |
Investments in our own privately offered investment vehicles (our Sponsored Products), including collective investment funds and common trust funds maintained by Wellington Trust Company, na, our hedge funds, and our non-US domiciled funds, have been approved under the Code and therefore do not require the submission of a Private Placement Approval Form.
WHAT ARE THE ADDITIONAL REQUIREMENTS FOR
INVESTMENT PROFESSIONALS?
If you are a portfolio manager, research analyst, or other investment professional who has portfolio management responsibilities for a client account (e.g., designated portfolio manager, backup portfolio manager, investment team member), or who otherwise has direct authority to make decisions to buy or sell securities in a client account (referred to here as an investment professional), you are required to adhere to additional rules and restrictions on your personal securities transactions. However, as no set of rules can anticipate every situation, you must remember to place our clients’ interests first whenever you transact in securities that are also held in client accounts you manage.
The following provisions of the code are intended to allow investment professionals to make long-term investments in securities. However, you may not be able to sell personal investments for extended periods of time and therefore should consider the liquidity, tax planning, market, and similar risks associated with making personal investments in securities of an issuer that are or may be held in client accounts.
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INVESTMENT PROFESSIONAL BLACKOUT PERIODS — You cannot buy or sell a security (excluding shares of exchange-traded funds (ETFs)) for a period of 14 calendar days before or after any transaction in the same issuer by a client account for which you serve as an investment professional. In addition, you may not sell personal holdings in a security of the same issuer (excluding ETFs) that is held by a client account for which you serve as an investment professional until the later of the following periods: (i) one calendar year from the date of your last purchase and (ii) 90 calendar days after all of your client accounts liquidate all holdings of the same issuer. |
If you anticipate receiving a cash flow or redemption request in a client portfolio that will result in the purchase or sale of securities that you also hold in your personal account, you should take care to avoid transactions
in those securities in your personal account in the days leading up to the client transactions. However, unanticipated cash flows and redemptions in client accounts and unexpected market events do occur from time to time, and a personal trade made in the prior 14 days should never prevent you from buying or selling a security in a client account if the trade would be in the client’s best interest. If you find yourself in that situation and need to buy or sell a security in a client account within the 14 calendar days following your personal transaction in a security of the same issuer, you should attempt to notify the Code of Ethics Team or your local Compliance Officer in advance of placing the trade. If you are unable to reach any of those individuals and the trade is time sensitive, you should proceed with the client trade and notify the Code of Ethics Team promptly after submitting it.
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SHORT SALES BY AN INVESTMENT PROFESSIONAL— An investment professional may not personally take a short position in a security of an issuer in which he or she holds a long position in a client account. |
Gifts and entertainment
Our guiding principle of “client, firm, self” also governs the receipt of gifts and entertainment from clients, consultants, brokers/dealers, research providers, vendors, companies in which we may invest, and others with whom the firm does business. As fiduciaries to our clients, we must always place our clients’ interests first and cannot allow gifts or entertainment opportunities to influence the actions we take on behalf of our clients. In keeping with this standard, you must follow several specific requirements:
ACCEPTING GIFTS — You may only accept gifts of nominal value, which include logoed items, flower arrangements, gift baskets, and food, as well as other gifts with an approximate value of less than US$100 or the local equivalent per year from a single source. You may not accept a gift of cash, including a cash equivalent such as a gift card, regardless of the amount. If you receive a gift that violates the Code, you must return the gift or consult with the Chief Compliance Officer to determine appropriate action under the circumstances.
ACCEPTING BUSINESS MEALS — Business meals are permitted provided that neither the cost nor the frequency is excessive and there is a legitimate business purpose. If the host is a broker/dealer or research provider, the host must be reimbursed for the full amount of your proportionate share of the total cost of the meal if the approximate value of the meal is more than US$100 or the local equivalent.
ACCEPTING ENTERTAINMENT OPPORTUNITIES — The firm recognizes that participation in entertainment opportunities with representatives from organizations with which the firm does business, such as consultants, broker/dealers, research providers, vendors, and companies in which we may invest, can help to further legitimate business interests. However, participation in such entertainment opportunities should be infrequent and is subject to the following conditions:
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A representative of the hosting organization must be present; |
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The primary purpose of the event must be to discuss business or to build a business relationship; |
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You must receive prior approval from your business manager; |
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If the host is a broker/dealer or research provider, the host must be reimbursed for the full amount of the entertainment opportunity; and |
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For all other entertainment opportunities, the host must be reimbursed for the full face value of any entertainment ticket(s) if: |
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the entertainment opportunity requires a ticket with a face value of more than US$200 or the local equivalent, or is a high-profile event (e.g., a major sporting event), |
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you wish to accept more than one ticket, or |
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the host has invited numerous Wellington Management representatives. |
Business managers must clear their own participation under the circumstances described above with the Chief Compliance Officer or Chair of the Ethics Committee.
Please note that even if you pay for the full face value of a ticket, you may attend the event only if the host is present.
LODGING AND AIR TRAVEL — You may not accept a gift of lodging or air travel in connection with any entertainment opportunity. If you participate in an entertainment opportunity for which lodging or air travel is paid for by the host, you must reimburse the host for the equivalent cost, as determined by Wellington Management’s travel manager.
SOLICITING GIFTS, ENTERTAINMENT OPPORTUNITIES, OR CONTRIBUTIONS — In your capacity as an employee of the firm, you may not solicit gifts, entertainment opportunities, or charitable or political contributions for yourself, or on behalf of clients, prospects, or others, from brokers, vendors, clients, or consultants with whom the firm conducts business or from companies in which the firm may invest.
SOURCING ENTERTAINMENT OPPORTUNITIES — You may not request tickets to entertainment events from the firm’s Trading department or any other Wellington Management department, or employee, nor from any broker, vendor, company in which we may invest, or other organization with which the firm conducts business.
Outside activities
While the firm recognizes that you may engage in business or charitable activities in your personal time, you must take steps to avoid conflicts of interest between your private interests and our clients’ interests. As a result, all significant outside business or charitable activities (e.g., additional employment, consulting work, directorships or officerships) must be approved by your business manager and by the Chief Compliance Officer, General Counsel, or Chair of the Ethics Committee prior to the acceptance of such a position (or if you are new, upon joining the firm). Approval will be granted only if it is determined that the activity does not
present a significant conflict of interest. Directorships in public companies (or companies reasonably expected to become public companies) will generally not be authorized, while service with charitable organizations generally will be permitted.
Client confidentiality
Any nonpublic information concerning our clients that you acquire in connection with your employment at the firm is confidential. This includes information regarding actual or contemplated investment decisions, portfolio composition, research recommendations, and client interests. You should not discuss client business, including the existence of a client relationship, with outsiders unless it is a necessary part of your job responsibilities.
How we enforce our Code of Ethics
Legal and Compliance is responsible for monitoring compliance with the Code of Ethics. Members of Legal and Compliance will periodically request certifications and review holdings and transaction reports for potential violations. They may also request additional information or reports.
It is our collective responsibility to uphold the Code of Ethics. In addition to the formal reporting requirements described in this Code of Ethics, you have a responsibility to report any violations of the Code. If you have any doubt as to the appropriateness of any activity, believe that you have violated the Code, or become aware of a violation of the Code by another individual, you should consult the manager of the Code of Ethics Team, Chief Compliance Officer, General Counsel, or Chair of the Ethics Committee.
Potential violations of the Code of Ethics will be investigated and considered by representatives of Legal and Compliance and/or the Ethics Committee. All violations of the Code of Ethics will be reported to the Chief
Compliance Officer. Violations are taken seriously and may result in sanctions or other consequences, including:
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referral to your business manager and/or senior management |
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reversal of a trade or the return of a gift |
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disgorgement of profits or of the value of a gift |
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a limitation or restriction on personal investing |
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termination of employment |
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referral to civil or criminal authorities |
If you become aware of any potential conflicts of interest that you believe are not addressed by our Code of Ethics or other policies, please contact the Chief Compliance Officer, the General Counsel, or the manager of the Code of Ethics Team.
Exceptions from the Code of Ethics
The Chief Compliance Officer may grant an exception from the Code, including preclearance, other trading restrictions, and certain reporting requirements on a case-by-case basis if it is determined that the proposed conduct involves no opportunity for abuse and does not conflict with client interests. Exceptions are expected to be rare.
Closing
As a firm, we seek excellence in the people we employ, the products and services we offer, the way we meet our ethical and fiduciary responsibilities, and the working environment we create for ourselves. Our Code of Ethics embodies that commitment. Accordingly, each of us must take care that our actions fully meet the high standards of conduct and professional behavior we have adopted. Most importantly, we must all remember “client, firm, self” is our most fundamental guiding principle.
APPENDIX A
Preclearance and Reporting of Securities Transactions Required:Bonds and notes (other than direct obligations of the US government or the governments of Canada, France, Germany, Italy, Japan, or the United Kingdom, as well as bankers’ acceptances, CDs, commercial paper, and high-quality, short-term debt instruments)Stock (common and preferred) or other equity securities, including any security convertible into equity securitiesAll Closed-end fundsUnit investment trustsAmerican Depositary ReceiptsOptions on securities (but not their non-volitional exercise or expiration), excluding ETFsWarrantsRights
Prohibited Investments and Activities:Initial public offerings (IPOs) of any securitiesSingle-stock futuresSingle-Stock ETFs (including Leveraged Single-Stock ETFs, Inverse Single-Stock ETFs, and Hedged Single-Stock ETFsSecurities or financial instruments whose performance is derived from the performance of a security covered by our Code of Ethics (e.g. single stock ETFs and single stock futures)Options expiring within 60 days of purchase, excluding ETFsSecurities being bought or sold on behalf of clients until one trading day after such buying or selling is completed or canceledSecurities of an issuer that is the subject of a new, changed, or reissued but unchanged actionrecommendation from a global industry research or fixed income credit analyst until two business days following issuance or reissuance of the recommendationSecurities of an issuer that is mentioned at the Morning Meeting or the Early Morning Meeting until two business days following the meetingSecurities on the firmwide restricted listProfiting from any short-term (i.e., within 60 days) trading activitySecurities of broker/dealers or their affiliates with which the firm conducts businessSecurities of any securities market or exchange on which the firm tradesUsing a derivative instrument to circumvent the requirements of the Code of EthicsPurchasing an equity security if your aggregate ownership of the equity security exceeds 0.05% of the total shares outstanding of the issuer, excluding ETFs
No Preclearance or Reporting Required:Open-end investment funds not managed by Wellington Management1Interests in a variable annuity product in which the underlying assets are held in a fund not managed by Wellington ManagementDirect obligations of the US government (including obligations issued by GNMA and PEFCO) or the governments of Canada, France, Germany, Italy, Japan, or the United KingdomCashMoney market instruments or other short-term debt instruments rated P-1 or P-2, A-1 or A-2, or their equivalents2Bankers’ acceptances, CDs, commercial paperWellington Trust Company PoolsWellington Sponsored Hedge FundsSecurities futures and options on direct obligations of the US government or the governments of Canada,France, Germany, Italy, Japan, or the United Kingdom, and associated derivativesOptions, forwards, and futures on commodities and foreign exchange, and associated derivativesTransactions in approved managed accounts
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Reporting of Securities Transactions Required (no need to preclear and not subject to the 60-day holding period): |
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Open-end investment funds managed by Wellington Management1 (other than money market funds) |
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Interests in a variable annuity or insurance product in which the underlying assets are held in a fund managed by Wellington Management |
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Futures and options on securities indices |
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Shares of exchange-traded funds (ETFs) |
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Gifts of securities to you or a reportable account |
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Gifts of securities from you or a reportable account |
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Non-volitional transactions (splits, tender offers, mergers, stock dividends, dividend reinvestments, etc.) |
This appendix is current as of 21 September 2022 and may be amended at the discretion of the Ethics Committee.
1A list of funds advised or subadvised by Wellington Management (“Wellington-Managed Funds”) is available online via the Code of Ethics System. However, you remain responsible for confirming whether any particular investment represents a Wellington-Managed Fund.
2If the instrument is unrated, it must be of equivalent duration and comparable quality.
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v3.22.4
| Label |
Element |
Value |
| Risk Return Abstract |
rr_RiskReturnAbstract |
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| Registrant Name |
dei_EntityRegistrantName |
VANGUARD WELLESLEY INCOME FUND
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| Prospectus Date |
rr_ProspectusDate |
Jan. 31, 2023
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| Retail | Vanguard Wellesley Income Fund |
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| Risk Return Abstract |
rr_RiskReturnAbstract |
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| Risk/Return [Heading] |
rr_RiskReturnHeading |
<span style="color:#000000;font-family:Arial;font-size:13pt;font-weight:bold;">Fund Summary</span>
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| Objective [Heading] |
rr_ObjectiveHeading |
<span style="color:#000000;font-family:Arial;font-size:10pt;font-weight:bold;">Investment Objective</span>
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| Objective, Primary [Text Block] |
rr_ObjectivePrimaryTextBlock |
The Fund seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation.
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| Expense [Heading] |
rr_ExpenseHeading |
<span style="color:#000000;font-family:Arial;font-size:10pt;font-weight:bold;">Fees and Expenses</span>
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| Expense Narrative [Text Block] |
rr_ExpenseNarrativeTextBlock |
The following table describes the fees and expenses you may pay if you buy, hold, and sell Investor Shares or Admiral Shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.
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| Shareholder Fees Caption [Text] |
rr_ShareholderFeesCaption |
<span style="color:#000000;font-family:Arial;font-size:8.5pt;font-weight:bold;">Shareholder Fees</span>
<br/><span style="color:#000000;font-family:Arial;font-size:8.5pt;margin-left:0%;">(Fees paid directly from your investment)</span>
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| Operating Expenses Caption [Text] |
rr_OperatingExpensesCaption |
<span style="color:#000000;font-family:Arial;font-size:8.5pt;font-weight:bold;">Annual Fund Operating Expenses</span>
<br/><span style="color:#000000;font-family:Arial;font-size:8.5pt;margin-left:0%;">(Expenses that you pay each year as a percentage of the value of your investment)</span>
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| Portfolio Turnover [Heading] |
rr_PortfolioTurnoverHeading |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">Portfolio Turnover</span>
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| Portfolio Turnover [Text Block] |
rr_PortfolioTurnoverTextBlock |
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in more taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the previous expense examples, reduce the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 58% of the average value of its portfolio.
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| Portfolio Turnover, Rate |
rr_PortfolioTurnoverRate |
58.00%
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| Expense Example [Heading] |
rr_ExpenseExampleHeading |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">Examples</span>
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| Expense Example Narrative [Text Block] |
rr_ExpenseExampleNarrativeTextBlock |
The following examples are intended to help you compare the cost of investing in the Fund's Investor Shares or Admiral Shares with the cost of investing in other mutual funds. They illustrate the hypothetical expenses that you would incur over various periods if you were to invest $10,000 in the Fund's shares. These examples assume that the shares provide a return of 5% each year and that total annual fund operating expenses remain as stated in the preceding table. You would incur these hypothetical expenses whether or not you were to redeem your investment at the end of the given period. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
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| Strategy [Heading] |
rr_StrategyHeading |
<span style="color:#000000;font-family:Arial;font-size:10pt;font-weight:bold;">Principal Investment Strategies</span>
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| Strategy Narrative [Text Block] |
rr_StrategyNarrativeTextBlock |
The Fund invests approximately 60% to 65% of its assets in investment-grade fixed income securities that the advisor believes will generate a reasonable level of current income, including corporate, U.S. Treasury, and government agency bonds, as well as mortgage-backed securities. The remaining 35% to 40% of Fund assets are invested in common stocks of companies that have a history of above-average dividends or expectations of increasing dividends.
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| Risk [Heading] |
rr_RiskHeading |
<span style="color:#000000;font-family:Arial;font-size:10pt;font-weight:bold;">Principal Risks</span>
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| Risk Narrative [Text Block] |
rr_RiskNarrativeTextBlock |
The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money, and the level of risk may vary based on market conditions. However, because fixed income securities such as bonds usually are less volatile than stocks and because the Fund invests more than half of its assets in fixed income securities, the Fund’s overall level of risk is expected to be low to moderate.• With approximately 60% to 65% of its assets allocated to bonds, the Fund is proportionately subject to the following bond risks: interest rate risk, which is the chance that bond prices overall will decline because of rising interest rates; income risk, which is the chance that the Fund's income will decline because of falling interest rates; credit risk, which is the chance that a bond issuer will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline; liquidity risk, which is the chance that the Fund may not be able to sell a security in a timely manner at a desired price; and call risk, which is the chance that during periods of falling interest rates, issuers of callable bonds may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. The Fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund's income. Such redemptions and subsequent reinvestments would also increase the Fund's portfolio turnover rate. For mortgage-backed securities, this risk is known as prepayment risk.• With approximately 35% to 40% of its assets allocated to stocks, the Fund is proportionately subject to the following stock risks: stock market risk, which is the chance that stock prices overall will decline; and investment style risk, which is the chance that returns from mid- and large-capitalization dividend-paying value stocks will trail returns from the overall stock market. Mid- and large-cap stocks each tend to go through cycles of doing better—or worse—than other segments of the stock market or the stock market in general. These periods have, in the past, lasted for as long as several years. Historically, mid-cap stocks have been more volatile in price than large-cap stocks. The stock prices of mid-size companies tend to experience greater volatility because, among other things, these companies tend to be more sensitive to changing economic conditions.• Manager risk, which is the chance that poor security selection will cause the Fund to underperform relevant benchmarks or other funds with a similar investment objective.An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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| Risk Lose Money [Text] |
rr_RiskLoseMoney |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">The Fund is subject to the risks associated with the stock and bond markets, any of which could cause an investor to lose money, and the level of risk may vary based on market conditions.</span>
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| Risk Not Insured Depository Institution [Text] |
rr_RiskNotInsuredDepositoryInstitution |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;font-weight:bold;">An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.</span>
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| Bar Chart and Performance Table [Heading] |
rr_BarChartAndPerformanceTableHeading |
<span style="color:#000000;font-family:Arial;font-size:10pt;font-weight:bold;">Annual Total Returns</span>
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| Performance Narrative [Text Block] |
rr_PerformanceNarrativeTextBlock |
The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund's Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the share classes presented compare with those of a composite bond/stock index and other relevant market indexes, which have investment characteristics similar to those of the Fund. The Wellesley Income Composite Index is weighted 65% in the Bloomberg U.S. Credit A or Better Bond Index and 35% in the FTSE High Dividend Yield Index. Keep in mind that the Fund's past performance (before and after taxes) does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447.
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| Performance Information Illustrates Variability of Returns [Text] |
rr_PerformanceInformationIllustratesVariabilityOfReturns |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">The following bar chart and table are intended to help you understand the risks of investing in the Fund. The bar chart shows how the performance of the Fund's Investor Shares has varied from one calendar year to another over the periods shown. The table shows how the average annual total returns of the share classes presented compare with those of a composite bond/stock index and other relevant market indexes, which have investment characteristics similar to those of the Fund. The Wellesley Income Composite Index is weighted 65% in the Bloomberg U.S. Credit A or Better Bond Index and 35% in the FTSE High Dividend Yield Index.</span>
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| Performance Availability Phone [Text] |
rr_PerformanceAvailabilityPhone |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">800-662-7447</span>
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| Performance Availability Website Address [Text] |
rr_PerformanceAvailabilityWebSiteAddress |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;font-style:italic;">vanguard.com/performance</span>
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| Performance Past Does Not Indicate Future [Text] |
rr_PerformancePastDoesNotIndicateFuture |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;"> Keep in mind that the Fund's past performance (before and </span><span style="color:#000000;font-family:Arial;font-size:9.5pt;">after taxes) does not indicate how the Fund will perform in the future.</span>
|
| Bar Chart [Heading] |
rr_BarChartHeading |
<span style="font-family:Arial;font-size:8pt;font-weight:bold;">Annual Total Returns — Vanguard Wellesley Income Fund Investor Shares</span>
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| Bar Chart Closing [Text Block] |
rr_BarChartClosingTextBlock |
During the periods shown in the bar chart, the highest and lowest returns for a calendar quarter were:
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| Performance Table Heading |
rr_PerformanceTableHeading |
<span style="font-family:Arial;font-size:8.5pt;font-weight:bold;">Average Annual Total Returns for Periods Ended December 31, 2022</span>
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| Performance Table Uses Highest Federal Rate |
rr_PerformanceTableUsesHighestFederalRate |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">When after-tax returns are calculated, it is </span><span style="color:#000000;font-family:Arial;font-size:9.5pt;">assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. </span>
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| Performance Table Not Relevant to Tax Deferred |
rr_PerformanceTableNotRelevantToTaxDeferred |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">not relevant for a </span><span style="color:#000000;font-family:Arial;font-size:9.5pt;">shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. </span>
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| Performance Table One Class of after Tax Shown [Text] |
rr_PerformanceTableOneClassOfAfterTaxShown |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">Please note that after-tax returns are shown only for the Investor </span><span style="color:#000000;font-family:Arial;font-size:9.5pt;">Shares and may differ for each share class. After-tax returns are </span>
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| Performance Table Explanation after Tax Higher |
rr_PerformanceTableExplanationAfterTaxHigher |
<span style="color:#000000;font-family:Arial;font-size:9.5pt;">Also, figures captioned </span><span style="color:#000000;font-family:Arial;font-size:9.5pt;font-style:italic;">Return After Taxes on Distributions and Sale of Fund Shares</span><span style="color:#000000;font-family:Arial;font-size:9.5pt;"> may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.</span>
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| Performance Table Closing [Text Block] |
rr_PerformanceTableClosingTextBlock |
Actual after-tax returns depend on your tax situation and may differ from those shown in the preceding table. When after-tax returns are calculated, it is assumed that the shareholder was in the highest individual federal marginal income tax bracket at the time of each distribution of income or capital gains or upon redemption. State and local income taxes are not reflected in the calculations. Please note that after-tax returns are shown only for the Investor Shares and may differ for each share class. After-tax returns are not relevant for a shareholder who holds fund shares in a tax-deferred account, such as an individual retirement account or a 401(k) plan. Also, figures captioned Return After Taxes on Distributions and Sale of Fund Shares may be higher than other figures for the same period if a capital loss occurs upon redemption and results in an assumed tax deduction for the shareholder.
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| Retail | Vanguard Wellesley Income Fund | Investor Shares |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| Purchase Fee |
rr_MaximumCumulativeSalesChargeOverOther |
none
|
| Sales Charge (Load) Imposed on Purchases |
rr_MaximumSalesChargeImposedOnPurchasesOverOfferingPrice |
none
|
| Sales Charge (Load) Imposed on Reinvested Dividends |
rr_MaximumSalesChargeOnReinvestedDividendsAndDistributionsOverOther |
none
|
| Redemption Fee |
rr_RedemptionFeeOverRedemption |
none
|
| Account Service Fee Per Year (for certain fund account balances below $1,000,000) |
rr_MaximumAccountFee |
$ 20
|
| Management Fees |
rr_ManagementFeesOverAssets |
0.22%
|
| 12b-1 Distribution Fee |
rr_DistributionAndService12b1FeesOverAssets |
none
|
| Other Expenses |
rr_OtherExpensesOverAssets |
0.01%
|
| Total Annual Fund Operating Expenses |
rr_ExpensesOverAssets |
0.23%
|
| 1 Year |
rr_ExpenseExampleYear01 |
$ 24
|
| 3 Years |
rr_ExpenseExampleYear03 |
74
|
| 5 Years |
rr_ExpenseExampleYear05 |
130
|
| 10 Years |
rr_ExpenseExampleYear10 |
$ 293
|
| 2013 |
rr_AnnualReturn2013 |
9.19%
|
| 2014 |
rr_AnnualReturn2014 |
8.07%
|
| 2015 |
rr_AnnualReturn2015 |
1.28%
|
| 2016 |
rr_AnnualReturn2016 |
8.08%
|
| 2017 |
rr_AnnualReturn2017 |
10.20%
|
| 2018 |
rr_AnnualReturn2018 |
(2.57%)
|
| 2019 |
rr_AnnualReturn2019 |
16.39%
|
| 2020 |
rr_AnnualReturn2020 |
8.45%
|
| 2021 |
rr_AnnualReturn2021 |
8.50%
|
| Annual Return 2022 |
rr_AnnualReturn2022 |
(9.05%)
|
| Highest Quarterly Return, Label |
rr_HighestQuarterlyReturnLabel |
<span style="color:#000000;font-family:Arial;font-size:8pt;margin-left:0.0pt;">Highest</span>
|
| Highest Quarterly Return, Date |
rr_BarChartHighestQuarterlyReturnDate |
Jun. 30, 2020
|
| Highest Quarterly Return |
rr_BarChartHighestQuarterlyReturn |
8.44%
|
| Lowest Quarterly Return, Label |
rr_LowestQuarterlyReturnLabel |
<span style="color:#000000;font-family:Arial;font-size:8pt;margin-left:0.0pt;">Lowest</span>
|
| Lowest Quarterly Return, Date |
rr_BarChartLowestQuarterlyReturnDate |
Mar. 31, 2020
|
| Lowest Quarterly Return |
rr_BarChartLowestQuarterlyReturn |
(7.42%)
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(9.05%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
3.95%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
5.62%
|
| Retail | Vanguard Wellesley Income Fund | Admiral Shares |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| Purchase Fee |
rr_MaximumCumulativeSalesChargeOverOther |
none
|
| Sales Charge (Load) Imposed on Purchases |
rr_MaximumSalesChargeImposedOnPurchasesOverOfferingPrice |
none
|
| Sales Charge (Load) Imposed on Reinvested Dividends |
rr_MaximumSalesChargeOnReinvestedDividendsAndDistributionsOverOther |
none
|
| Redemption Fee |
rr_RedemptionFeeOverRedemption |
none
|
| Account Service Fee Per Year (for certain fund account balances below $1,000,000) |
rr_MaximumAccountFee |
$ 20
|
| Management Fees |
rr_ManagementFeesOverAssets |
0.16%
|
| 12b-1 Distribution Fee |
rr_DistributionAndService12b1FeesOverAssets |
none
|
| Other Expenses |
rr_OtherExpensesOverAssets |
none
|
| Total Annual Fund Operating Expenses |
rr_ExpensesOverAssets |
0.16%
|
| 1 Year |
rr_ExpenseExampleYear01 |
$ 16
|
| 3 Years |
rr_ExpenseExampleYear03 |
52
|
| 5 Years |
rr_ExpenseExampleYear05 |
90
|
| 10 Years |
rr_ExpenseExampleYear10 |
$ 205
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(9.01%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
4.02%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
5.69%
|
| Retail | Vanguard Wellesley Income Fund | Return After Taxes on Distributions | Investor Shares |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(10.88%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
2.18%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
3.92%
|
| Retail | Vanguard Wellesley Income Fund | Return After Taxes on Distributions and Sale of Fund Shares | Investor Shares |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(4.52%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
2.65%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
3.95%
|
| Retail | Vanguard Wellesley Income Fund | Wellesley Income Composite Index (reflects no deduction for fees, expenses, or taxes) |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(9.60%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
3.26%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
5.19%
|
| Retail | Vanguard Wellesley Income Fund | Bloomberg U.S. Aggregate Bond Index (reflects no deduction for fees, expenses, or taxes) |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(13.01%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
0.02%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
1.06%
|
| Retail | Vanguard Wellesley Income Fund | Dow Jones U.S. Total Stock Market Float Adjusted Index (reflects no deduction for fees, expenses, or taxes) |
|
|
| Risk Return Abstract |
rr_RiskReturnAbstract |
|
| 1 Year |
rr_AverageAnnualReturnYear01 |
(19.53%)
|
| 5 Years |
rr_AverageAnnualReturnYear05 |
8.65%
|
| 10 Years |
rr_AverageAnnualReturnYear10 |
12.03%
|
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| X |
- DefinitionIf the Fund has annual returns for at least one calendar year, provide a bar chart showing the Fund's annual total returns for each of the last 10 calendar years (or for the life of the Fund if less than 10 years), but only for periods subsequent to the effective date of the Fund's registration statement. Present the corresponding numerical return adjacent to each bar. If the Fund's fiscal year is other than a calendar year, include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart. Following the bar chart, disclose the Fund's highest and lowest return for a quarter during the 10 years or other period of the bar chart. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
-Subparagraph ii
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| X |
- DefinitionIf the Fund has annual returns for at least one calendar year, provide a bar chart showing the Fund's annual total returns for each of the last 10 calendar years (or for the life of the Fund if less than 10 years), but only for periods subsequent to the effective date of the Fund's registration statement. Present the corresponding numerical return adjacent to each bar. If the Fund's fiscal year is other than a calendar year, include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart. Following the bar chart, disclose the Fund's highest and lowest return for a quarter during the 10 years or other period of the bar chart. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
-Subparagraph ii
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- DefinitionDistribution [and/or Service] (12b-1) Fees" include all distribution or other expenses incurred during the most recent fiscal year under a plan adopted pursuant to rule 12b-1 [17 CFR 270.12b-1]. Under an appropriate caption or a subcaption of "Other Expenses," disclose the amount of any distribution or similar expenses deducted from the Fund's assets other than pursuant to a rule 12b-1 plan. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection table
-Paragraph 1
-Subparagraph 9
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- DefinitionHeading for Expense Example. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 4
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- DefinitionThe Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 1
-Subparagraph 1
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- DefinitionThe Example assumes that you invest $10,000 in the Fund for the time periods indicated and then you redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return per year and that the Fund's operating expenses remained the same. Although your actual costs may be higher or lower. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 4
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- DefinitionThe Example assumes that you invest $10,000 in the Fund for the time periods indicated and then you redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return per year and that the Fund's operating expenses remained the same. Although your actual costs may be higher or lower. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 1
-Subparagraph 2
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- DefinitionThe Example assumes that you invest $10,000 in the Fund for the time periods indicated and then you redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return per year and that the Fund's operating expenses remained the same. Although your actual costs may be higher or lower. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 1
-Subparagraph 2
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| X |
- DefinitionThe Example assumes that you invest $10,000 in the Fund for the time periods indicated and then you redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return per year and that the Fund's operating expenses remained the same. Although your actual costs may be higher or lower. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 1
-Subparagraph 2
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| X |
- DefinitionRisk/Return Summary Fee Table Includes the following information, in plain English under rule 421(d) under the Securities Act, after Item 2 Fees and expenses of the Fund This table describes the fees and expenses that you may pay if you buy and hold shared of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $[_____] in [name of fund family] funds. Shareholder Fees (fees paid directly from your investment) Example This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then you redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return per year and that the Fund's operating expenses remained the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be You would pay the following expenses if you did not redeem your shares The Example does not reflect sales charges (loads) on reinvested dividends [and other distributions]. If these sales charges (loads) were included, your costs would be higher. Portfolio Turnover The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was __% of the average value of its whole portfolio. Instructions. A.3.instructions.6 New Funds. For purposes of this Item, a "New Fund" is a Fund that does not include in Form N-1A financial statements reporting operating results or that includes financial statements for the Fund's initial fiscal year reporting operating results for a period of 6 months or less. The following Instructions apply to New Funds. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 1
-Subparagraph d
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- DefinitionThis table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the tables and examples below. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $[ ] in [name of fund family] funds. More information about these and other discounts is available from your financial intermediary and in [identify section heading and page number] of the Fund's prospectus and [identify section heading and page number] of the Fund's statement of additional information Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 1
-Subparagraph b
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- DefinitionTotal Annual Fund Operating Expenses. If the Fund is a Feeder Fund, reflect the aggregate expenses of the Feeder Fund and the Master Fund in a single fee table using the captions provided. In a footnote to the fee table, state that the table and Example reflect the expenses of both the Feeder and Master Funds. If the prospectus offers more than one Class of a Multiple Class Fund or more than one Feeder Fund that invests in the same Master Fund, provide a separate response for each Class or Feeder Fund. Base the percentages of "Annual Fund Operating Expenses" on amounts incurred during the Fund's most recent fiscal year, but include in expenses amounts that would have been incurred absent expense reimbursement or fee waiver arrangements. If the Fund has changed its fiscal year and, as a result, the most recent fiscal year is less than three months, use the fiscal year prior to the most recent fiscal year as the basis for determining "Annual Fund Operating Expenses." Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 3
-Subparagraph d
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| X |
- DefinitionIf the Fund has annual returns for at least one calendar year, provide a bar chart showing the Fund's annual total returns for each of the last 10 calendar years (or for the life of the Fund if less than 10 years), but only for periods subsequent to the effective date of the Fund's registration statement. Present the corresponding numerical return adjacent to each bar. If the Fund's fiscal year is other than a calendar year, include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart. Following the bar chart, disclose the Fund's highest and lowest return for a quarter during the 10 years or other period of the bar chart. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
-Subparagraph ii
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| X |
- DefinitionIf the Fund has annual returns for at least one calendar year, provide a bar chart showing the Fund's annual total returns for each of the last 10 calendar years (or for the life of the Fund if less than 10 years), but only for periods subsequent to the effective date of the Fund's registration statement. Present the corresponding numerical return adjacent to each bar. If the Fund's fiscal year is other than a calendar year, include the year-to-date return information as of the end of the most recent quarter in a footnote to the bar chart. Following the bar chart, disclose the Fund's highest and lowest return for a quarter during the 10 years or other period of the bar chart. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
-Subparagraph ii
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| X |
- DefinitionManagement Fees include investment advisory fees (including any fees based on the Fund's performance), any other management fees payable to the investment adviser or its affiliates, and administrative fees payable to the investment adviser or its affiliates that are not included as "Other Expenses." Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 3
-Subparagraph a
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| X |
- DefinitionInclude the caption "Maximum Account Fees" only if the Fund charges these fees. A Fund may omit other captions if the Fund does not charge the fees or expenses covered by the captions. Disclose account fees that may be charged to a typical investor in the Fund; fees that apply to only a limited number of shareholders based on their particular circumstances need not be disclosed. Include a caption describing the maximum account fee (e.g., "Maximum Account Maintenance Fee" or "Maximum Cash Management Fee"). State the maximum annual account fee as either a fixed dollar amount or a percentage of assets. Include in a parenthetical to the caption the basis on which any percentage is calculated. If an account fee is charged only to accounts that do not meet a certain threshold (e.g., accounts under $5) Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 1
-Subparagraph c
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| X |
- DefinitionMaximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price). If a sales charge (load) is imposed on shares purchased with reinvested capital gains distributions or returns of capital, include the bracketed words in the third caption. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection table
-Paragraph 1
-Subparagraph 1
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- DefinitionMaximum Deferred Sales Charge (Load) (as a percentage of ____) A.3.instructions.2.a.i "Maximum Deferred Sales Charge (Load)" includes the maximum total deferred sales charge (load) payable upon redemption, in installments, or both, expressed as a percentage of the amount or amounts stated in response to Item 7(a), except that, for a sales charge (load) based on net asset value at the time of purchase, show the sales charge (load) as a percentage of the offering price at the time of purchase. A Fund may include in a footnote to the table, if applicable, a tabular presentation showing the amount of deferred sales charges (loads) over time or a narrative explanation of the sales charges (loads) (e.g., __% in the first year after purchase, declining to __% in the __ year and eliminated thereafter). A.3.instructions.2.a.ii If more than one type of sales charge (load) is imposed (e.g., a deferred sales charge (load) and a front-end sales charge (load)), the first caption in the table should read "Maximum Sales Charge (Load)" and show the maximum cumulative percentage. Show the percentage amounts and the terms of each sales charge (load) comprising that figure on separate lines below. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection table
-Paragraph 1
-Subparagraph 1
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- DefinitionMaximum Sales Charge (Load) Imposed on Reinvested Dividends[and other Distributions] (as a percentage of ____) Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection table
-Paragraph 1
-Subparagraph 3
| Name: |
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| X |
- DefinitionInvestment Objectives/Goals. Disclose the Fund's investment objectives or goals. A Fund also may identify its type or category (e.g., that it is a Money Market Fund or a balanced fund). Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 2
-Subsection a
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| X |
- DefinitionInvestment Objectives/Goals. Disclose the Fund's investment objectives or goals. A Fund also may identify its type or category (e.g., that it is a Money Market Fund or a balanced fund). Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 2
-Subsection a
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| X |
- DefinitionAnnual Fund Operating Expenses (ongoing expenses that you pay each year as a percentage of the value of your investment) Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection table
-Paragraph 1
-Subparagraph 7
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| X |
- Definition"Other Expenses" include all expenses not otherwise disclosed in the table that are deducted from the Fund's assets or charged to all shareholder accounts. The amount of expenses deducted from the Fund's assets are the amounts shown as expenses in the Fund's statement of operations (including increases resulting from complying with paragraph 2(g) of rule 6-07 of Regulation S-X [17 CFR 210.6-07]). "Other Expenses" do not include extraordinary expenses as determined under generally accepted accounting principles (see Accounting Principles Board Opinion No. 30). If extraordinary expenses were incurred that materially affected the Fund's "Other Expenses," disclose in a footnote to the table what "Other Expenses" would have been had the extraordinary expenses been included. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 3
-Subparagraph c
-Clause i
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| X |
- DefinitionRisk/Return Bar Chart and Table. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
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| X |
- DefinitionIf the Fund has annual returns for at least one calendar year, provide a table showing the Fund's (A) average annual total return; (B) average annual total return (after taxes on distributions); and (C) average annual total return (after taxes on distributions and redemption). A Money Market Fund should show only the returns described in clause (A) of the preceding sentence. All returns should be shown for 1-, 5-, and 10- calendar year periods ending on the date of the most recently completed calendar year (or for the life of the Fund, if shorter), but only for periods subsequent to the effective date of the Fund's registration statement. The table also should show the returns of an appropriate broad-based securities market index as defined in Instruction 5 to Item 22(b)(7) for the same periods. A Fund that has been in existence for more than 10 years also may include returns for the life of the Fund. A Money Market Fund may provide the Fund's 7-day yield ending on the date of the most recent calendar year or disclose a toll-free (or collect) telephone number that investors can use to obtain the Fund's current 7-day yield. For a Fund (other than a Money Market Fund or a Fund described in General Instruction C.3.(d)(iii)), provide the information in the following table with the specified captions AVERAGE ANNUAL TOTAL RETURNS (For the periods ended December 31, _____) Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 2
-Subparagraph iii
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| X |
- DefinitionDisclose the portfolio turnover rate provided in response to Item 14(a) for the most recent fiscal year (or for such shorter period as the Fund has been in operation). Disclose the period for which the information is provided if less than a full fiscal year. A Fund that is a Money Market Fund may omit the portfolio turnover information required by this Item. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 5
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| X |
- DefinitionThis element represents the rate of portfolio turnover presented as a percentage (SEC Form N-1A 2006-09-14 A.3.example.3 Portfolio Turnover A.3.instructions.5 Portfolio Turnover). Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 3
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| X |
- DefinitionDisclose the portfolio turnover rate provided in response to Item 14(a) for the most recent fiscal year (or for such shorter period as the Fund has been in operation). Disclose the period for which the information is provided if less than a full fiscal year. A Fund that is a Money Market Fund may omit the portfolio turnover information required by this Item. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection example
-Paragraph 3
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| X |
- DefinitionThe date of the prospectus. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 1
-Subsection a
-Paragraph 3
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| X |
- Definition"Redemption Fee" (as a percentage of amount redeemed, if applicable) If the Fund is an Exchange-Traded Fund and issues or redeems shares in creation units of not less than 25,000 shares each, exclude any fees charged for the purchase and redemption of the Fund's creation units. "Redemption Fee" includes a fee charged for any redemption of the Fund's shares, but does not include a deferred sales charge (load) imposed upon redemption. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 3
-Subsection instructions
-Paragraph 2
-Subparagraph b
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| X |
- DefinitionNarrative Risk Disclosure. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 1
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- DefinitionSummarize the principal risks of investing in the Fund, including the risks to which the Fund's portfolio as a whole is subject and the circumstances reasonably likely to affect adversely the Fund's net asset value, yield, and total return. Unless the Fund is a Money Market Fund, disclose that loss of money is a risk of investing in the Fund. If the Fund is a Money Market Fund, include the following statement: "You could lose money by investing in the Fund." Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 1
-Subparagraph i
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 1
-Subparagraph ii
-Clause A
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 1
-Subparagraph ii
-Clause B
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Form
-Number N-1A
-Chapter A
-Section 4
-Subsection b
-Paragraph 1
-Subparagraph ii
-Clause C
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