<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. ) UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. _
POST-EFFECTIVE AMENDMENT NO. _
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. _
VANGUARD TREASURY FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
P.O. BOX 2600, VALLEY FORGE, PA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER (610) 669-1000
RAYMOND J. KLAPINSKY, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective.
REGISTRANT HAS ELECTED TO REGISTER AN INDEFINITE NUMBER OF SHARES UNDER
THIS REGISTRATION STATEMENT PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY
ACT OF 1940.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VANGUARD TREASURY FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS
<C> <S> <C>
Item 1. Cover Page.................................... Cover Page
Item 2. Synopsis...................................... Highlights
Item 3. Condensed Financial Information............... Financial Highlights
Item 4. General Description of Registrant............. Investment Objective; Investment
Limitations; Investment Policies;
General Information
Item 5. Management of the Fund........................ Directors and Officers; Management of
the Fund; The Vanguard Group
Item 6. Capital Stock and Other Securities............ Opening an Account and Purchasing
Shares; Selling Your Shares; The
Share Price of the Portfolio;
Dividends and Taxes; General
Information
Item 7. Purchase of Securities Being Offered.......... Cover Page; Opening an Account and
Purchasing Shares
Item 8. Redemption or Repurchase...................... Selling Shares
Item 9. Pending Legal Proceedings..................... Not Applicable
<CAPTION>
FORM N-1A LOCATION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
<C> <S> <C>
Item 10. Cover Page.................................... Cover Page
Item 11. Table of Contents............................. Cover Page
Item 12. General Information and History............... Investment Objectives and Policies
Item 13. Investment Objective and Policies............. Investment Objectives and Policies;
Investment Limitations
Item 14. Management of the Fund........................ Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities.................................... Management of the Fund
Item 16. Investment Advisory and Other Services........ Management of the Fund
Item 17. Brokerage Allocation.......................... Not Applicable
Item 18. Capital Stock and Other Securities............ Financial Statements
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................. Purchase of Shares; Redemption of
Shares;
Item 20. Tax Status.................................... Appendix
Item 21. Underwriters.................................. Not Applicable
Item 22. Calculations of Yield Quotations of Money
Market Fund................................... Calculation of Yield.
Item 23. Financial Statements.......................... Financial Statements
</TABLE>
<PAGE> 3
VANGUARD MONEY
MARKET RESERVES
VANGUARD TREASURY
MONEY MARKET PORTFOLIO
Prospectus
December 1, 1996
This prospectus contains financial data for the Portfolios through May 31,
1996.
[A MEMBER OF THE VANGUARD GROUP LOGO]
<PAGE> 4
VANGUARD MONEY MARKET RESERVES,
VANGUARD TREASURY MONEY MARKET PORTFOLIO Money Market Mutual Funds
CONTENTS
Portfolio Expenses 0
Financial Highlights 0
A Word About Risk 0
The Portfolios' Objectives 0
Who Should Invest 0
Investment Policies 0
Investment Limitations 0
Investment Performance 0
Share Price 0
Dividends and Taxes 0
The Funds and Vanguard 0
Investment Adviser 0
General Information 0
Investing with Vanguard 0
Services and Account Features 0
Types of Accounts 0
Distribution Options 0
Buying Shares 0
Redeeming Shares 0
Fund and Account Updates 0
Glossary Inside Back Cover
INVESTMENT OBJECTIVES AND POLICIES
Vanguard Money Market Reserves, Inc. is a diversified, open-end investment
management company that consists of two separate Portfolios: Federal and Prime.
The Treasury Money Market Portfolio is part of Vanguard Treasury Fund, which is
a diversified, open-end investment management company as well.
Each Portfolio seeks to provide current income and to maintain liquidity and
a stable share price of $1.00. Each Portfolio focuses on specific high-quality,
short-term money market instruments, such as securities backed by the full faith
and credit of the U.S. Government, securities issued by U.S. Government
agencies, or obligations issued by corporations and financial institutions.
IT IS IMPORTANT TO NOTE THAT EACH PORTFOLIO SEEKS TO MAINTAIN, BUT DOES NOT
GUARANTEE, A STABLE NET ASSET VALUE OF $1.00 PER SHARE. IN ADDITION, NONE OF THE
PORTFOLIOS' SHARES IS GUARANTEED OR INSURED BY THE FDIC, THE U.S. GOVERNMENT, OR
ITS AGENCIES.
FEES AND EXPENSES
The Portfolios are offered on a no-load basis, which means that you pay no sales
commissions or 12b-1 marketing fees. You will, however, incur expenses for
investment advisory, management, administrative, and distribution services,
which are included in each Portfolio's expense ratio.
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS
Statements of Additional Information (dated December 1, 1996) containing more
information about the Portfolios are, by reference, part of this prospectus and
may be obtained without charge by writing to Vanguard or by calling our Investor
Information Department at 1-800-662-7447.
For investments of $10 million or more, Vanguard Money Market Reserves offers
Prime Portfolio Institutional Shares (available through a separate prospectus).
The Prime Portfolio and the Prime Portfolio Institutional Shares do not have the
same expenses; as a result, the two Portfolios' performance could differ.
WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the objectives, risks, and policies of the three
Portfolios. 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 to decide whether one or more of the Portfolios is the right
investment for you. We suggest that you keep it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE> 5
Portfolio Profile Vanguard Money Market Reserves,
Vanguard Treasury Money Market Portfolio
WHO SHOULD INVEST (page 7)
- - Investors seeking a money market mutual fund as part of a balanced and
diversified investment program.
- - Investors uncomfortable with share-price fluctuations.
- - Investors seeking current income.
- - Investors needing a temporary holding place for a portion of their assets.
WHO SHOULD NOT INVEST
- - Investors seeking growth of their investment over time.
- - Investors looking for a fund that invests in stocks or bonds.
RISKS OF THE PORTFOLIOS (pages 7-10)
Each Portfolio is subject to income risk (the chance that falling short-term
interest rates will cause the Portfolios' income--and thus the Portfolios'
return--to decline). In addition, while the credit quality of all three
Portfolios is expected to be very high, each Portfolio is subject to some degree
of credit risk (the chance that the issuer of a security will be unable to pay
interest and principal in a timely manner). More detailed information about
risk--including risks specific to each Portfolio--is provided beginning on page
8.
DIVIDENDS (page 13)
Dividends are declared daily and paid on the first business day of each month.
INVESTMENT ADVISER (page 14)
Vanguard Fixed Income Group manages each of the three Portfolios.
MINIMUM INITIAL INVESTMENT FOR EACH PORTFOLIO: $3,000; $1,000 for IRAs and
custodial accounts for minors
ACCOUNT FEATURES (pages 00-00)
- - Telephone Redemption
- - Checkwriting
- - Vanguard Direct Deposit Service(sm)
- - Vanguard Automatic Exchange Service(sm)
- - Vanguard Fund Express(R)
- - Vanguard Dividend Express(sm)
AVERAGE ANNUAL TOTAL RETURN--
PERIODS ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
-------------------------------------
<S> <C> <C> <C>
Treasury Money
Market Portfolio* +5.5% +4.3% +5.8%
Lipper U.S. Treasury Money
Market Average +5.2 +4.1 +5.5
Federal Portfolio +5.8% +4.5% +6.0%
Lipper U.S. Government
Money Market Average +5.3 +4.1 +5.5
Prime Portfolio +5.8% +4.6% +6.1%
Lipper Non-Government
Money Market Average +5.4 +4.2 +5.7
</TABLE>
*Formerly known as the U.S. Treasury Portfolio and (prior to 3/13/89) the
Insured Portfolio.
In evaluating past performance, remember that it is not indicative of future
performance. Performance figures include the reinvestment of any dividends. The
returns shown are net of expenses, but they do not reflect income taxes an
investor would have incurred. An investment in a money market fund is neither
insured nor guaranteed by the U.S. Government, and there is no assurance that
the fund will be able to maintain a stable net asset value of $1.00 per share.
1
<PAGE> 6
Portfolio Profile (continued) Vanguard Money Market Reserves,
Vanguard Treasury Money Market Portfolio
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TREASURY
MONEY MARKET* FEDERAL PRIME
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCEPTION DATE: 12/1/96 7/13/81 6/4/75
NET ASSETS AS OF 11/30/95: $2.53 BILLION $2.64 BILLION $19.56 BILLION
EXPENSE RATIO FOR THE YEAR
ENDED 11/30/95: 0.32% 0.32% 0.32%
FEES
LOADS, 12b-1 MARKETING FEES: NONE NONE NONE
SUITABLE FOR IRAS: YES YES YES
NEWSPAPER ABBREVIATION:** VANGXXX VANGFdl VANGPr
VANGUARD FUND NUMBER: 050 033 030
- -------------------------------------------------------------------------------------------------------
</TABLE>
*On 12/1/96, the U.S. Treasury Portfolio (known as the Insured Portfolio prior
to 3/13/89) was reorganized as a separate portfolio of the Vanguard Treasury
Fund and renamed the Treasury Money Market Portfolio.
**Money market portfolios are listed separately from the daily mutual fund
listings.
2
<PAGE> 7
Portfolio Expenses
The examples below are designed to help you understand the various costs you
would bear, directly or indirectly, as an investor in one of the Portfolios.
As noted in this table, you do not pay fees of any kind when you buy, sell,
or exchange shares of any Portfolio:
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases: None
Sales Load Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None
The next table illustrates the operating expenses that you would incur as a
shareholder of each Portfolio. These expenses are deducted from the Portfolio's
income before it is paid to you. Expenses include investment advisory fees as
well as the costs of maintaining accounts, administering the Portfolios,
providing shareholder services, and other activities. The expenses shown in the
table are based upon expenses incurred in the fiscal year ended November 30,
1995 (the expenses for the Treasury Money Market Portfolio are based upon those
of the U.S. Treasury Portfolio for its fiscal year ended November 30, 1995).
PLAIN TALK ABOUT
THE COSTS OF INVESTING
Costs are an important consideration in choosing a mutual fund. That's because
you, as a shareholder, pay the costs of operating a fund, plus any transaction
costs associated with buying, selling, or exchanging shares. These costs can
erode a substantial portion of the gross income a fund achieves. Even seemingly
small differences in fund expenses can, over time, have a dramatic impact on a
fund's performance.
ANNUAL PORTFOLIO OPERATING EXPENSES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TREASURY MONEY FEDERAL PRIME
MARKET PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management and
Administrative Expenses: 0.26% 0.26% 0.26%
Investment Advisory Expenses: 0.01% 0.01% 0.01%
12b-1 Marketing Fees: None None None
Other Expenses
Marketing and Distribution
Costs: 0.03% 0.03% 0.03%
Miscellaneous Expenses
(e.g., Taxes, Auditing): 0.02% 0.02% 0.02%
---- ---- ----
Total Other Expenses: 0.05% 0.05% 0.05%
---- ---- ----
TOTAL OPERATING EXPENSES
(EXPENSE RATIO): 0.32% 0.32% 0.32%
==== ==== ====
</TABLE>
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. For instance, the Prime Portfolio's expense ratio in fiscal year 1995
was 0.32%, or $3.20 per $1,000 of average net assets. The average money market
fund had expenses in 1995 of 0.74%, or $7.40 per $1,000 of average net assets,
according to Lipper Analytical Services, Inc., which reports on the mutual fund
industry.
3
<PAGE> 8
The following example illustrates the hypothetical expenses that you would
incur on a $1,000 investment over various periods. The example assumes (1) that
the Portfolio provides a return of 5% a year and (2) that you redeem your
investment at the end of each period.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Money Market $3 $10 $18 $41
Federal $3 $10 $18 $41
Prime $3 $10 $18 $41
- ------------------------------------------------------------------------------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE, WHICH MAY BE HIGHER OR LOWER THAN
THOSE SHOWN.
4
<PAGE> 9
FINANCIAL HIGHLIGHTS
The following financial highlights tables show the results for a share
outstanding for each of the last ten years ended November 30, 1995 and the six
months ended May 31, 1996. The financial highlights for the fiscal years ended
November 30 were audited by Price Waterhouse LLP, independent accountants. The
information for the six-month period ended May 31, 1996, has not been audited by
independent accountants. You should read this information in conjunction with
each Portfolio's financial statements and accompanying notes, which appear in
Vanguard Money Market Reserves' most recent Annual Report (along with the audit
report from Price Waterhouse) and Semi-Annual Report to shareholders. The Annual
Report and Semi-Annual Report are incorporated by reference in the Statement of
Additional Information and in this prospectus, and contains a more complete
discussion of each Portfolio's performance. You may have the Reports sent to you
without charge by writing to Vanguard or by calling our Investor Information
Department.
PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE
This explanation uses the Treasury Money Market Portfolio as an example. The
Treasury Money Market Portfolio (then known as the U.S. Treasury Portfolio)
began fiscal 1995 with a net asset value (price) of $1.00 per share. During the
year, the Portfolio earned $.053 per share from investment income (interest and
dividends). All of these earnings were returned to shareholders in the form of
dividend distributions. The earnings ($.053 per share) less distributions
($.053 per share) resulted in a share price of $1.00 at the end of the year.
Assuming that the shareholder had reinvested the distribution in the purchase
of more shares, total return from the Portfolio was 5.47% for the year.
As of December 31, 1995, the Portfolio had nearly $2.53 billion in net assets;
an expense ratio of 0.32% ($3.20 per $1,000 of net assets); and net investment
income amounting to 5.33% of its average net assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Six Months TREASURY MONEY MARKET PORTFOLIO*
Ended Year Ended November 30,
5/31/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .025 .053 .036 .028 .036 .058 .077 .085 .068 .058 .060
Net Realized and
Unrealized Gain (Loss)
on Investments -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS .025 .053 .036 .028 .036 .058 .077 .085 .068 .058 .060
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.025) (.053) (.036) (.028) (.036) (.058) (.077) (.085) (.068) (.058) (.060)
Distributions from
Realized Capital Gains -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.025) (.053) (.036) (.028) (.036) (.058) (.077) (.085) (.068) (.058) (.060)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==============================================================================================================================
TOTAL RETURN 2.53% 5.47% 3.63% 2.86% 3.68% 5.94% 8.02% 8.89% 7.02% 5.99% 6.15%
==============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $2,766 $2,527 $2,056 $1,751 $2,321 $2,092 $1,594 $412 $140 $113 $56
Ratio of Expenses to
Average Net Assets .32%** .32% .32% .32% .30% .30% .30% .31%** .70%** .79%** .93%**
Ratio of Net Investment
Income to Average
Net Assets 4.98%** 5.33% 3.59% 2.83% 3.60% 5.76% 7.74% 8.44% 6.85% 5.80% 6.00%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Formerly known as the U.S. Treasury Portfolio and (prior to 3/13/89) the
Insured Portfolio.
**Annualized.
***Insurance premiums represent .40%, .42%, .44%, and .44%.
5
<PAGE> 10
PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE
Refer to the detailed explanation on page 5.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months FEDERAL PORTFOLIO
Ended Year Ended November 30,
5/31/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INVESTMENT OPERATIONS
Net Investment Income .026 .056 .038 .029 .038 .060 .078 .088 .070 .061 .064
Net Realized and
Unrealized Gain (Loss)
on Investments -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS .026 .056 .038 .029 .038 .060 .078 .088 .070 .061 .064
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.026) (.056) (.038) (.029) (.038) (.060) (.078) (.088) (.070) (.061) (.064)
Distributions from
Realized Capital Gains -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.026) (.056) (.038) (.029) (.038) (.060) (.078) (.088) (.070) (.061) (.064)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================================================
TOTAL RETURN 5.14% 5.77% 3.82% 2.98% 3.83% 6.18% 8.14% 9.15% 7.20% 6.25% 6.56%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $2,815 $2,637 $2,196 $1,907 $1,986 $2,000 $1,950 $1,531 $1,214 $839 $545
Ratio of Expenses to
Average Net Assets .32%* .32% .32% .32% .30% .30% .30% .28% .33% .37% .48%
Ratio of Net Investment
Income to Average
Net Assets 5.14%* 5.61% 3.78% 2.94% 3.76% 6.01% 7.90% 8.78% 7.00% 6.10% 6.40%
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months PRIME PORTFOLIO
Ended Year Ended November 30,
5/31/96 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .026 .057 .038 .030 .038 .062 .080 .090 .072 .063 .066
Net Realized and
Unrealized Gain (Loss)
on Investments -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS .026 .057 .038 .030 .038 .062 .080 .090 .072 .063 .066
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.026) (.057) (.038) (.030) (.038) (.062) (.080) (.090) (.072) (.063) (.066)
Distributions from
Realized Capital Gains -- -- -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.026) (.057) (.038) (.030) (.038) (.062) (.080) (.090) (.072) (.063) (.066)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================================================================================
TOTAL RETURN 2.63% 5.82% 3.87% 3.02% 3.89% 6.39% 8.32% 9.40% 7.47% 6.49% 6.78%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $19,880 $18,764 $15,109 $12,367 $12,638 $13,496 $13,579 $11,067 $6,863 $4,088 $2,186
Ratio of Expenses to
Average Net Assets .32%* .32% .32% .32% .30% .30% .30% .28% .33% .37% .48%
Ratio of Net Investment
Income to Average
Net Assets 5.21%* 5.64% 3.84% 2.98% 3.82% 6.20% 8.06% 9.05% 7.28% 6.30% 6.60%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
6
<PAGE> 11
From time to time, the Vanguard Funds advertise yield and total return
figures. Yield is an historical measure of dividend income, and total return is
a measure of past dividend income (assuming that it has been reinvested) plus
any capital appreciation. Neither yield nor total return should be used to
predict the future performance of a fund.
A WORD ABOUT RISK
This prospectus describes the risks you will face as an investor in the Treasury
Money Market, Federal, and Prime Portfolios. It is important to keep in mind one
of the main axioms of investing: 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 one or more of
the Portfolios, you should weigh your desire for income with your need to
protect your investment.
Look for this "warning flag" symbol [WARNING FLAG GRAPHIC] throughout the
prospectus. It is used to mark detailed information about each type of risk that
you, as a shareholder of any of the three Portfolios, may confront.
THE PORTFOLIOS' OBJECTIVES
Each Portfolio seeks to provide current income while maintaining liquidity and a
stable net asset value of $1.00 per share. These objectives are fundamental,
which means that they cannot be changed unless a majority of Portfolio
shareholders vote to do so.
WHO SHOULD INVEST
Any of the Portfolios may be a suitable investment for you if:
- - You wish to add a money market portfolio to your existing holdings, which
could include other cash--as well as stock, bond, and tax-exempt--
investments.
- - You want an investment that does not fluctuate in value.
- - You want current income.
- - You characterize your investment temperament as "very conservative."
- - You want to be able to move your money into stock or bond investments quickly
and without penalty.
Each Portfolio is intended to serve most investors' short-term needs.
However, investors who engage in excessive in-and-out trading activity generate
additional costs that are borne by all of the Portfolio's shareholders. To
minimize such costs, which reduce the ultimate returns achieved by you and other
shareholders, the Portfolios have adopted the following policies:
- - Each of the Portfolios reserves the right to reject any purchase request--
including exchanges from other Vanguard Funds--that
7
<PAGE> 12
it regards as disruptive to the efficient management of the Portfolio.
- - The Portfolios reserve the right to stop offering shares at any time.
INVESTMENT POLICIES
This section explains how the Portfolios' investment adviser pursues the
objectives of income, liquidity, and stability. It also explains several
important risks--income risk, manager risk, and credit risk--faced by Portfolio
shareholders. Unlike the Portfolios' objectives, the Fund's policies are not
fundamental and can be changed by the Funds' Boards of Directors or Trustees
without shareholder approval. However, before making any important change in its
policies, the Funds will give shareholders 30-days notice, in writing.
MARKET EXPOSURE
Each Portfolio invests in very high-quality money market instruments--also known
as cash reserves--that are considered short term (that is, they mature in 13
months or less).
[FLAG EACH PORTFOLIO IS SUBJECT TO INCOME RISK, WHICH IS THE POSSIBILITY
GRAPHIC] THAT A PORTFOLIO'S DIVIDENDS (THAT IS, INCOME) WILL DECLINE BECAUSE
OF FALLING INTEREST RATES. BECAUSE THE PORTFOLIOS' INCOME IS BASED ON
SHORT-TERM INTEREST RATES--WHICH CAN FLUCTUATE SIGNIFICANTLY OVER SHORT
PERIODS--INCOME RISK IS EXPECTED TO BE HIGH FOR ALL THREE PORTFOLIOS.
To illustrate how the yields of short-term securities can fluctuate as
interest rates rise and fall, the following chart shows month-end yields for
short-term securities (as represented by 90-day Treasury bills) and long-term
securities (as represented by 30-year U.S. Treasury bonds) over the past five
years. Note in this illustration how short-term yields tend to fluctuate more
than longer-term yields.
Short-Term and Long-Term Month-End Yields
(1991-1995)
[Graph - Plot Points to come]
These yields reflect past performance and should not be regarded as an
indication of future returns from either Treasury bills or bonds as a whole or
any of the Portfolios in particular.
PLAIN TALK ABOUT
CASH RESERVES
Cash reserves are any investment that can be easily converted into cash with
little or no cost or penalty. A money market mutual fund, a checking account or
certificate of deposit (CD) at a bank, and Treasury bills issued by the U.S.
Government are examples of cash reserves. Keep in mind, however, that each type
varies in its credit quality and its ability to provide a competitive yield.
8
<PAGE> 13
SECURITY SELECTION
Vanguard Fixed Income Group, adviser to the Portfolios, selects high-quality
money market instruments. Each Portfolio focuses on securities of a particular
class of issuer (for example, the U.S. Government, U.S. Government agencies,
financial institutions).
[FLAG EACH PORTFOLIO IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY
GRAPHIC] THAT VANGUARD FIXED INCOME GROUP MAY DO A POOR JOB OF SELECTING
SECURITIES.
The Treasury Money Market Portfolio invests solely in securities whose
interest and principal payments are backed by the full faith and credit of the
U.S. Government. At least 65% of the Portfolio's assets will always be invested
in U.S. Treasury securities. The remainder of the Portfolio's assets may include
securities issued by the U.S. Treasury and other government agencies, such as
the Government National Mortgage Association (GNMA), the Small Business
Administration, and the Federal Financing Bank.
The Federal Portfolio invests in securities whose interest and
principal payments are backed by the full faith and credit of the U.S.
Government or by an agency of the Government (these agency securities are not
backed by the full faith and credit of the U.S. Government). These agencies
include, among others, the Federal Home Loan Bank, the Federal National Mortgage
Association (FNMA), the Tennessee Valley Authority, and the Federal Land Bank.
The Prime Portfolio invests in certificates of deposit, bankers
acceptances, commercial paper, and other money market securities rated Prime-1
by Moody's Investors Services, Inc., or A-1 by Standard & Poor's Corporation.
Securities that are unrated must be issued by a corporation with a debt rating
of Aa3 or better by Moody's or AA- or better by Standard & Poor's. The Prime
Portfolio also invests in short-term corporate, state, and municipal obligations
rated Aa3 or better by Moody's or AA- or better by Standard & Poor's; and
securities that are considered suitable for the Federal Portfolio (see the
previous paragraph).
The Prime Portfolio may also invest in Eurodollar and Yankee
obligations, which are certificates of deposit issued in U.S. dollars by foreign
banks and foreign branches of U.S. banks. Eurodollar and Yankee obligations have
the same risks, such as income risk and credit risk, as U.S. money market
instruments. Other risks of Eurodollar and Yankee obligations include the
possibility that a foreign government will not let U.S. dollar-denominated
assets leave the country; and the possibility that adverse political or economic
developments will affect investments in a foreign country. Before the
Portfolio's adviser selects a Eurodollar or Yankee obligation, however, any
foreign issuer undergoes the same credit-quality analysis and tests of financial
strength as the issuers of domestic securities.
PLAIN TALK ABOUT
Money Market Instruments
The term "money market instruments" refers to a variety of short-term
investments, usually with a maturity of 13 months or less. Some common types are
Treasury bills and notes, which are securities issued by the U.S. Government;
commercial paper, which is a promissory note issued by a large company or
financial firm; bankers acceptances, which are credit instruments guaranteed by
a bank; and negotiable certificates of deposit, which are issued by banks in
large denominations.
PLAIN TALK ABOUT
Credit Quality and Ratings
A money market instrument's credit quality depends upon the issuer's ability to
pay interest on the security and, ultimately, to repay the debt. The lower the
rating by one of the independent bond-rating agencies (for example, Moody's or
Standard & Poor's), the greater the chance (in the rating agency's opinion) the
security's issuer will default, or fail to meet its payment obligations. Direct
U.S. Treasury obligations (that is, securities backed by the U.S. Government)
carry the highest credit ratings. All things being equal, money market
instruments with greater credit risk offer higher yields.
9
<PAGE> 14
PLAIN TALK ABOUT
Repurchase Agreements
A means of investing money for a short period, repurchase agreements are
contracts in which a U.S. commercial bank or securities dealer sells government
securities and agrees to repurchase the securities on a specific date (normally
the next business day) and at a specific price.
PLAIN TALK ABOUT
Derivatives
A derivative is a financial contract whose value, or interest rate, is based on
(or "derived" from) a traditional security (such as a stock or bond), money
market benchmark (such as U.S. Treasury bill rates or Federal Funds Effective
Rate), an asset (such as a commodity like gold), or a market index (such as the
S&P 500 Index).
[FLAG EACH PORTFOLIO IS SUBJECT, TO A LIMITED EXTENT, TO CREDIT RISK, WHICH
GRAPHIC] IS THE POSSIBILITY THAT THE ISSUER OF A SECURITY WILL BE UNABLE TO
REPAY INTEREST AND PRINCIPAL IN A TIMELY MANNER.
The three Portfolios differ mainly in terms of credit risk. In absolute
terms, each Portfolio's credit quality is very high.
In relative terms, the Treasury Money Market Portfolio, which invests
in securities backed by the full faith and credit of the U.S. Government, offers
the lowest credit risk--and generally the lowest yield--of the three Portfolios.
Not all of the securities included in the Federal Portfolio are backed
by the full faith and credit of the U.S. Government, and so the Portfolio's
potential credit risk and yield are somewhat higher than the Treasury Money
Market Portfolio.
While the credit quality of its securities is very high, the Prime
Portfolio invests in money market securities of private financial and
nonfinancial corporations; therefore, it offers the highest credit risk and
generally the highest yield of the three Portfolios.
Bear in mind that, while each Portfolio invests in high-quality money
market instruments, the three Portfolios are not insured or guaranteed by the
FDIC or any other agency of the U.S. Government.
[FLAG THE PRIME AND FEDERAL PORTFOLIOS RESERVE THE RIGHT TO INVEST IN
GRAPHIC] REPURCHASE AGREEMENTS, WHICH ARE SUBJECT TO SPECIFIC RISKS.
Repurchase agreements carry several risks. For instance, if the seller
is unable to repurchase the securities as promised, the Portfolio may experience
a loss when trying to sell the securities itself. Or, if the seller becomes
insolvent, a bankruptcy court may determine that the securities do not belong to
the Portfolio and order that the securities be sold to pay off the seller's
debts. The Portfolio's adviser believes that these risks can be controlled
through careful security selection and monitoring.
[FLAG THE PORTFOLIOS RESERVE THE RIGHT TO INVEST, TO A LIMITED EXTENT, IN
GRAPHIC] FLOATING-RATE SECURITIES, WHICH ARE TRADITIONAL TYPES OF DERIVATIVES.
A floating-rate security's interest rate, as the name implies, is not
set; instead, it fluctuates periodically. Generally, the security's yield is
based on a U.S. dollar-based interest-rate benchmark such as the Federal Funds
Rate, the 90-day Treasury bill rate, or the London Interbank Offered Rate
(LIBOR). These securities reset their yields on a periodic basis (for example,
daily, weekly, or quarterly) and are closely correlated to changes in money
market interest rates.
The Portfolios will not use derivatives for speculative purposes or as
leveraged investments that magnify the risks of an investment.
10
<PAGE> 15
PORTFOLIO TURNOVER
Because of the short-term nature of money market instruments, the turnover rate
for each Portfolio is expected to be high. This high turnover rate should not
increase Portfolio costs, however, since brokerage commissions are not usually
charged for the purchase or sale of money market instruments.
Investment Limitations
To reduce risk and maintain diversification, the Portfolios have adopted limits
on some of their investment policies. Specifically, each Portfolio will not:
- - Invest more than 5% of its assets in the securities of any one issuer,
excluding the U.S. Government.
- - Buy more than 10% of any class of securities of any issuer.
- - Invest more than 25% of its assets in any one industry, excluding
obligations of the U.S. Government, certificates of deposit, and U.S.
bankers acceptances.
- - Borrow money, except for emergency purposes. Amounts borrowed will not
exceed 15% of the Portfolio's net assets.
The limitations listed in this prospectus and in the Statement of
Additional Information are fundamental and may be changed only by approval of a
majority of the Funds' shareholders.
Investment Performance
The Portfolios invest in short-term securities; therefore, their performance is
closely correlated to short-term interest rates. Historically, short-term
interest rates' up-and-down fluctuations have been influenced primarily by
Federal Reserve policy and by market supply and demand.
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 11/30/95
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
TREASURY MONEY MARKET PORTFOLIO* 5.5% 4.0% 4.3% 5.8%
LIPPER U.S. TREASURY MONEY MARKET AVERAGE 5.2% 3.7% 4.1% 5.5%
</TABLE>
* Formerly known as the U.S. Treasury Portfolio and (prior to 3/13/89)
the Insured Portfolio
PLAIN TALK ABOUT
Past Performance
Whenever you see information on a fund's performance, do not consider the
figures to be an indication of the performance you could expect by making an
investment in the fund today. The past is an imperfect guide to the future;
history does not repeat itself in neat, predictable patterns.
11
<PAGE> 16
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED 11/30/95
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
FEDERAL PORTFOLIO 5.8% 4.2% 4.5% 6.0%
LIPPER U.S. GOVERNMENT MONEY MARKET AVERAGE 5.3% 3.7% 4.1% 5.5%
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
PRIME PORTFOLIO 5.8% 4.2% 4.6% 6.1%
LIPPER NON-GOVERNMENT MONEY MARKET AVERAGE 5.4% 3.8% 4.2% 5.7%
</TABLE>
The results shown above represent the Portfolios' "average annual total
return" performance, which assumes that any distributions of dividends were
reinvested for the indicated periods. Also included is comparative information
on industry money market averages. The chart does not make any allowance for
Federal, state, or local income taxes that shareholders must pay on a current
basis.
12
<PAGE> 17
Share Price
Each Portfolio's share price, called its net asset value, is expected to remain
at a constant $1.00. Although the stable share price is not guaranteed, the
Portfolios are managed and securities are purchased to maintain that price.
Dividends and Taxes
Each Portfolio's dividends accrue daily. On the first business day of every
month, the Portfolios distribute to shareholders virtually all of their income
from interest as dividend distributions. As a shareholder, you are entitled to
your share of a Portfolio's income from interest and dividends. You can receive
income distributions in cash, or you may have them automatically reinvested in
more shares of the Portfolio. In either case, distributions that are earned in
December--even if paid to you in January--are taxed as if they had been paid in
December. Vanguard will process your dividend distributions and send you a
statement each year showing the tax status of all of your distributions.
- - The dividends that you receive are taxable to you as ordinary dividend
income whether received in cash or reinvested in additional shares.
- - Distributions of dividends may be subject to state and local taxes as
well. However, depending on your state's tax rules, the portion of a
Portfolio's dividends that come from U.S. Treasury securities and other
"direct" U.S. Treasury obligations may be exempt from state and local
taxes. The Portfolios will notify you each year how much, if any, of
your distribution may qualify for this exemption.
The tax information in this prospectus is provided as general
information. You should consult your own tax adviser about the tax consequences
of an investment in one or more of the Portfolios.
The Funds and Vanguard
Vanguard Treasury Fund and Vanguard Money Market Reserves are members of The
Vanguard Group, a family of more than 30 investment companies with more than 90
distinct investment portfolios and total net assets of more than $200 billion.
All of the Vanguard Funds share in the expenses associated with business
operations, such as personnel, office space, equipment, and advertising.
Vanguard also provides marketing services to the Funds. Although
shareholders do not pay sales commissions or 12b-1 marketing fees, each Fund
pays its allocated share of The Vanguard Group's costs.
A list of each Fund's Directors (or Trustees) and Officers, and their
present positions and principal occupations during the past five years, can be
found in each Fund's Statement of Additional Information.
PLAIN TALK ABOUT
Vanguard's Unique Corporate Structure
The Vanguard Group, Inc. is the only MUTUAL mutual fund company. It is owned
jointly by the Funds it oversees and by the shareholders in those Funds. Other
mutual funds are operated by for-profit management companies that may be owned
by one person, by a group of individuals, or by investors who bought the
management company's publicly traded stock. Because of its structure, Vanguard
operates its Funds at cost. Instead of distributing profits from operations to a
separate management company, Vanguard returns profits to Fund shareholders in
the form of lower operating expenses.
13
<PAGE> 18
PLAIN TALK ABOUT
The Portfolios' Adviser
Vanguard Fixed Income Group provides investment advisory services to some 40
Vanguard Portfolios; as of November 30, 1995, the Group managed some $67 billion
in assets.
The managers responsible for the Portfolios' investments are:
IAN A. MACKINNON, Senior Vice President of Vanguard; 22 years fixed
income investment experience, 16 years primary responsibility for Vanguard's
internal fixed income policy and strategy; B.A. from Lafayette College, M.B.A.
from Pennsylvania State University.
ROBERT F. AUWAERTER, Principal of Vanguard and Portfolio Manager; 18
years fixed income investment experience; B.S., the University of Pennsylvania,
M.B.A., Northwestern University.
JOHN HOLLYER, Principal of Vanguard and Portfolio Manager; 9 years
fixed income investment experience; B.S. from the University of Pennsylvania.
Mr. Auwaerter and Mr. Hollyer manage the Portfolios on a day-to-day
basis. Mr. MacKinnon is responsible for setting the Portfolios' broad investment
policies and for overseeing the Portfolio managers.
Investment Adviser
Vanguard Fixed Income Group, P.O. Box 2600, Valley Forge, PA 19482, provides
advisory services on an at-cost basis to the Treasury Money Market, Federal, and
Prime Portfolios. For the year ended November 30, 1995, the three Portfolios
paid a total of $2,788,000 in investment advisory expenses ($297,000 for the
U.S. Treasury Portfolio, $310,000 for the Federal Portfolio, and $2,181,000 for
the Prime Portfolio). For the six months ended May 31, 1996, the three
Portfolios paid a total of $1,461,000 ($152,000 for the U.S. Treasury Portfolio,
$155,000 for the Federal Portfolio, and $1,154,000 for the Prime Portfolio).
The Group places all orders for purchases and sales for Portfolio
securities, and is directed to get the best available price and most favorable
execution with respect to all transactions.
General Information
Vanguard Money Market Reserves Inc. is organized as a corporation under the laws
of the State of Maryland. Until December 1, 1996, the Treasury Money Market
Portfolio was a Portfolio of Vanguard Money Market Reserves, known as the U.S.
Treasury Portfolio. On that date, the Treasury Money Market Portfolio was
reorganized--through a transfer of assets into a Portfolio of Vanguard Treasury
Fund, a Delaware business trust.
Shareholders of the Funds have rights and privileges similar to those
enjoyed by other corporate shareholders. For example, shareholders will not be
responsible for any liabilities of the trust or corporation. If any matters are
to be voted on by shareholders (such as a change in a fundamental investment
objective or the election of directors or trustees), each share outstanding at
that point would be entitled to one vote. Although the Funds do not usually hold
annual meetings, shareholders may request one under certain circumstances, which
are described in each Fund's Statement of Additional Information.
14
<PAGE> 19
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Investing with Vanguard
Are you looking for the most convenient way to open or add money to a Vanguard
account? Obtain instant access to Fund information? Establish an account for a
minor child or for your retirement savings?
Vanguard can help. Our goal is to make it easy and pleasant for you to
do business with us.
The following sections of the prospectus briefly explain the many
services we offer you as a shareholder of the Treasury Money Market, Federal, or
Prime Portfolios. Booklets providing detailed information are available on the
services marked with a [Book Graphic]. Please call us to request copies.
Services and Account Features
Vanguard offers many services that make it convenient to buy, sell, or exchange
shares.
TELEPHONE REDEMPTIONS Automatically set up for these Portfolios unless you
(SALES AND EXCHANGES) notify us otherwise.
CHECKWRITING Method for drawing money from your account by
writing a check for $250 or more.
VANGUARD DIRECT DEPOSIT Automatic method for depositing your paycheck or
SERVICE U.S. Government payment (including Social Security
[Book Graphic] and Government pension checks) into your account.*
VANGUARD AUTOMATIC EXCHANGE Automatic method for moving a fixed amount of money
SERVICE from one Vanguard Fund account to another.*
[Book Graphic]
VANGUARD FUND EXPRESS Electronic method for buying or selling shares. You
[Book Graphic] can transfer money between your Vanguard Fund
account and an account at your bank, savings and
loan, or credit union on a systematic schedule or
whenever you wish.*
VANGUARD DIVIDEND EXPRESS Electronic method for transferring dividends
[Book Graphic] directly from your Vanguard Fund account to your
bank, savings and loan, or credit union account or
to another Vanguard Fund account.
VANGUARD BROKERAGE SERVICES A cost-effective way to trade stocks, bonds, and
(VBS) options on major exchanges, Nasdaq, and other
[Book Graphic] domestic over-the-counter markets at reduced rates,
and to buy and sell shares of non-Vanguard mutual
funds. Call VBS (1-800-992-8327) for additional
information and the appropriate forms.
*Can be used to invest a fixed amount on a regular basis or to contribute to an
IRA or other retirement plan.
15
<PAGE> 20
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Types of Accounts
INDIVIDUAL OR OTHER ENTITY
Vanguard's account registration form can be used to establish a variety of
non-retirement accounts.
FOR ONE OR MORE PEOPLE To open an account in the name of one
(individual) or more (joint tenants) people.
$3,000 minimum initial investment.
FOR A MINOR CHILD To open an account as an UGMA/UTMA (Uniform
[Book Graphic] Gifts/Transfers to Minors Act). Age of majority
and other transfer requirements are set by
state law. $1,000 minimum initial investment.
FOR HOLDING TRUST ASSETS To invest assets held in an existing trust.
[Book Graphic] $3,000 minimum initial investment.
FOR THIRD-PARTY TRUSTEE To open an account as a retirement trust or
RETIREMENT INVESTMENTS plan based on an existing corporate or
(Vanguard is not the institutional plan. These accounts are
custodian or trustee.) established by the custodian or trustee of the
existing plan.
FOR AN ORGANIZATION To open an account as a corporation,
partnership, or other entity. These accounts
may require a corporate resolution or other
documents to name the individuals authorized
to act. $3,000 minimum initial investment.
RETIREMENT
You establish these accounts with a Vanguard adoption agreement--not a Vanguard
account registration form. You may also need to provide additional
documentation. To request the appropriate adoption agreement and forms, or to
ask questions about investing for retirement, call Investor Information.
FOR AN INDIVIDUAL RETIREMENT To open a retirement account in the name of an
ACCOUNT (IRA) individual. IRAs can be established with a
(Vanguard Fiduciary Trust contribution, a direct rollover from an
Company is the custodian.) employer's plan such as a 401(k), or an asset
transfer or rollover from another financial
institution such as a bank or mutual fund
company. $1,000 minimum initial investment.
FOR A SIMPLIFIED EMPLOYEE To open a retirement account in the name of an
PENSION PLAN ACCOUNT (SEP-IRA) employee. SEPs allow employers to make
(Vanguard Fiduciary Trust deductible contributions directly to IRAs
Company is the custodian.) established by their employees. A SEP can be
established by people who are self-employed,
small-business owners, partnerships, or
corporations.
16
<PAGE> 21
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Types of Accounts (continued)
FOR A QUALIFIED RETIREMENT To open a retirement account that allows
PROGRAM ACCOUNT small-business owners or people who are
(Vanguard Fiduciary Trust self-employed to make tax-deductible retirement
Company can be the custodian.) contributions for themselves and their
employees into Profit-Sharing and Money
Purchase Pension (Keogh) plans.
FOR A 403(b)(7) CUSTODIAL To open a retirement account that allows
ACCOUNT employees of tax-exempt institutions (for
(Vanguard Fiduciary Trust example, schools or hospitals) to make pre-tax
Company is the custodian.) retirement contributions.
Distribution Options
You can receive your dividend distributions in one of two ways:
REINVESTMENT Dividends are reinvested in additional shares
of the Portfolio.
DIVIDENDS in Cash Dividends are paid by check and mailed
to your account's address of record.
To electronically transfer cash dividends to your bank, savings and loan, or
credit union account, or to another Vanguard Fund account, see Vanguard Dividend
Express under "Services and Account Features."
Buying Shares
You buy your Portfolio shares at a net asset value of $1.00 per share. Before it
can begin earning dividends, your investment must be converted to Federal funds,
which usually takes one business day. (Federal funds are Federal Reserve
deposits that banks and other financial institutions "borrow" from one another
to meet short-term cash needs; portfolio advisers must use Federal funds to pay
for the securities they buy.) You begin earning dividends the calendar day after
the Portfolio receives the Federal funds.
The Portfolios are offered on a no-load basis, meaning that you do not
pay sales commissions or 12b-1 marketing fees.
<TABLE>
<CAPTION>
OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
MINIMUM INVESTMENT $3,000 (regular account); $1,000 $100 by mail or exchange; $1,000
(IRAs and custodial accounts for by wire.
minors).
- -------------------------------------------------------------------------------------------------------
BY MAIL Complete and sign the application Mail your check with an
[Envelope Graphic] form. Invest-By-Mail form detached
from your confirmation statement
FIRST-CLASS mail to: to the address listed on the
The Vanguard Group form.
P.O. Box 2600
Valley Forge, PA 19482 Make your check payable to: Make your check payable to:
The Vanguard Group-(appropriate The Vanguard Group-(appropriate
EXPRESS or REGISTERED mail to: Portfolio number; see below). Portfolio number; see below).
The Vanguard Group Treasury Money Market 50 Treasury Money Market 50
455 Devon Park Drive Federal 33 Federal 33
Wayne, PA 19087 Prime 30 Prime 30
All purchases must be made in U.S. All purchases must be made in U.S.
dollars, and checks must be drawn dollars, and checks must be drawn
on U.S. banks. on U.S. banks.
</TABLE>
17
<PAGE> 22
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Buying Shares (continued)
If Vanguard receives your check by 4:00 p.m. Eastern time (the close of trading
on the New York Stock Exchange), your investment is converted to Federal funds
the following business day, and you begin earning dividends the next calendar
day. (For instance, if we received your check before 4:00 p.m. on a Thursday,
your account would be credited Friday, and you would begin earning dividends
Saturday.)
If the check arrives after 4:00 p.m. Eastern time, your account is
credited after two business days, and you begin earning dividends the calendar
day after that. (If we received your check after 4:00 p.m. on a Thursday, your
account would be credited Monday, and you would begin earning dividends
Tuesday.)
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
<TABLE>
<CAPTION>
OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY TELEPHONE Call Vanguard Tele-Account* 24 Call Vanguard Tele-Account* 24
[Phone Graphic] hours a day--or Client Services hours a day--or Client Services
1-800-662-6273 during business hours--to exchange during business hours--to exchange
Vanguard Tele-Account(R) from another Vanguard Fund account from another Vanguard Fund account
1-800-662-2739 with the same registration (name, with the same registration (name,
Client Services address, taxpayer I.D., and account address, taxpayer I.D., and account
type). type).
Use Vanguard Fund Express (see
"Services and Account Features") to
transfer assets from your bank
account. Call Client Services
before your first use to verify
that this option is in place.
*You must obtain a Personal Identification Number through Tele-Account at
least seven days before you request your first exchange.
</TABLE>
If you buy Portfolio shares through an exchange from another Vanguard Fund by
4:00 p.m. Eastern time, your investment does not have to be converted to Federal
funds, and you begin earning dividends the next calendar day.
IMPORTANT NOTE: Once a telephone transaction has been approved by you and a
confirmation number assigned, it cannot be revoked. We reserve the right to
refuse any purchase.
<TABLE>
<CAPTION>
OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY WIRE Call Client Services to arrange Call Client Services to arrange
[Wire Graphic] your wire transactions. your wire transactions.
Wire to:
CoreStates Bank, N.A. Wire transactions are not available Wire transactions are not available
ABA 031000011 for retirement accounts. for retirement accounts.
CoreStates No 01019897
[Temporary Account Number]
Vanguard Treasury Fund OR
Vanguard Money Market Reserves
[Portfolio Name]
[Account Registration]
Attn Vanguard
</TABLE>
18
<PAGE> 23
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Buying Shares (continued)
If you buy Portfolio shares through a Federal funds wire, your investment begins
earning dividends the next calendar day. You can begin earning dividends
immediately if you notify Vanguard by 10:45 a.m. Eastern time that you intend to
make a wire purchase that day.
<TABLE>
<CAPTION>
OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT
- ---------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMATICALLY Vanguard offers a variety of ways
that you can add to your account
automatically. See "Services and
Account Features."
</TABLE>
You can redeem (that is, sell or exchange) shares purchased by check or Vanguard
Fund Express at any time. However, while your redemption request will be
processed as soon as it is received, your redemption proceeds will not be
available until payment for your purchase is collected, which may take up to ten
days.
It is important that you call Vanguard before you invest a large dollar
amount by wire or check. We must consider the interests of all Portfolio
shareholders and so reserve the right to delay or refuse any purchase that will
disrupt the Profolio's operation or performance.
Redeeming Shares
IMPORTANT TAX NOTE: Any sale or exchange of shares in a non-retirement account
could result in a taxable gain or a loss. However, because the Portfolios seek
to maintain a stable net asset value of $1.00 per share, you will not incur a
taxable gain or loss when you sell or exchange shares of these Portfolios.
The ability to redeem (that is, sell or exchange) Portfolio shares by telephone
is automatically established for your account unless you tell us in writing that
you do not want this option.
To protect your account from unauthorized or fraudulent telephone
instructions, Vanguard follows specific security procedures. When we receive a
call requesting an account transaction, we require the caller to provide:
- Portfolio name.
- 10-digit account number.
- Name and address exactly as registered on that account.
- Social Security or Employer Identification number as registered on
that account.
If you call to sell shares, the sale proceeds will be made payable to
you, as the registered shareholder, and mailed to your account's address of
record.
If we follow reasonable security procedures, neither the Portfolio nor
Vanguard will be responsible for the authenticity of transaction instructions
received by telephone. We believe that these procedures are reasonable and that,
if we follow them, you bear the risk of any losses resulting from unauthorized
or fraudulent telephone transactions on your account. However, if we do not
follow these or other reasonable procedures, Vanguard may be liable for any
losses resulting from unauthorized or fraudulent transactions.
HOW TO SELL SHARES
You may withdraw any part of your account, at any time, by selling shares.
One way to sell shares is the checkwriting option (established when you
set up your account or by calling Client Services). Your personalized Vanguard
checks work in much the same way as bank checks, except that Vanguard checks are
considered drafts and cannot be cashed immediately like a bank check.
19
<PAGE> 24
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Redeeming Shares (continued)
When you sell shares by telephone or mail, sale proceeds are normally
mailed within two business days after Vanguard receives your request in good
order. Good order means that the request includes:
- Portfolio name and account number.
- Amount of the transaction (in dollars).
- Signatures of all owners exactly as registered on the account.
- Signature guarantees (if required).
- Any supporting legal documentation that may be required.
- Any certificates you are holding for the account.
Sales or exchange requests received after the close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time) are processed the
next business day.
The Portfolios reserve the right to close any non-retirement or
UGMA/UTMA account whose balance falls below the minimum initial investment. The
Portfolios will deduct a $10 annual fee if your non-retirement account balance
falls below $2,500 or if your UGMA/UTMA account balance falls below $500. The
fee is waived if your total Vanguard account assets are $50,000 or more.
Some written requests require a signature guarantee from a bank, broker, or
other acceptable institution. A notary public cannot provide a signature
guarantee.
HOW TO EXCHANGE SHARES
An exchange is the selling of shares of one Vanguard Fund to purchase shares of
another.
Although we make every effort to maintain the exchange privilege,
Vanguard reserves the right to revise or terminate the exchange privilege, limit
the amount of an exchange, or reject any exchange, at any time, without notice.
Before you exchange into a new Vanguard Fund, be sure to read its
prospectus. For a copy and for answers to questions you might have, call
Investor Information.
<TABLE>
<CAPTION>
SELLING OR EXCHANGING SHARES ACCOUNT TYPE
- --------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE ALL TYPES EXCEPT RETIREMENT:
[Telephone Graphic]
1-800-662-6273 Call Vanguard Tele-Account* 24 hours a day--or
Vanguard Tele-Account Client Services during business hours--to sell
1-800-662-2739 or exchange shares. You can exchange shares
Client Services from any of these Portfolios to open an
account in another Vanguard Fund or to add to
an existing Vanguard Fund account with an
identical registration.
RETIREMENT:
You can exchange--but not sell--shares by
calling Tele-Account or Client Services.
*You must obtain a Personal Identification
Number through Tele-Account at least seven
days before you request your first redemption.
- --------------------------------------------------------------------------------
BY CHECK ALL TYPES EXCEPT RETIREMENT:
You can sell shares by writing a check for
$250 or more.
RETIREMENT:
Checkwriting is not available for retirement
accounts.
</TABLE>
20
<PAGE> 25
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Redeeming Shares (continued)
<TABLE>
<CAPTION>
SELLING OR EXCHANGING SHARES ACCOUNT TYPE
- -------------------------------------------------------------------------------------
<S> <C>
BY MAIL ALL TYPES EXCEPT RETIREMENT:
[Mail Graphic]
FIRST-CLASS mail to: Send a letter of instruction signed by all
The Vanguard Group registered account holders. Include the
Vanguard Treasury Fund OR Portfolio name and account number and (if you
Vanguard Money Market Reserves are selling) a dollar amount OR (if you are
[Portfolio Name] exchanging) the name of the Fund you want to
P.O. Box 1120 exchange into and a dollar amount.
Valley Forge, PA 19482
RETIREMENT:
EXPRESS or REGISTERED mail to:
The Vanguard Group For information on how to request distributions
Vanguard Treasury Fund OR from...
Vanguard Money Market Reserves
[Portfolio Name] - IRAs, call Client Services.
455 Devon Park Drive
Wayne, PA 19087 - SEP-IRAs, 403(b)(7) custodial accounts, and
Profit-Sharing and Money Purchase Pension
(Keogh) Plans, call Individual Retirement
Services at 1-800-662-2003.
Depending on your account registration type,
additional documentation may be required.
- --------------------------------------------------------------------------------
AUTOMATICALLY ALL TYPES EXCEPT RETIREMENT:
Vanguard offers several ways to sell or
exchange shares automatically (see
"Services and Account Features"). Call
Investor Information for the appropriate
booklet and application if you did not
elect a feature when you opened your
account.
</TABLE>
It is important that you call Vanguard before you redeem a large dollar
amount. We must consider the interests of all Portfolio shareholders and so
reserve the right to delay your redemption proceeds--up to seven days--if the
amount will disrupt a Portfolio's operation or performance.
A NOTE ON UNUSUAL CIRCUMSTANCES
Vanguard reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In addition, Vanguard can stop selling
shares or postpone payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the United States
Securities and Exchange Commission. If you experience difficulty making a
telephone redemption during periods of drastic economic or market change, you
can send us your request by regular or express mail. Follow the instructions on
selling or exchanging shares by mail in the "Redeeming Shares" section.
Fund and Account Updates
STATEMENTS AND REPORTS
We will send you clear, concise account and tax statements to help you keep
track of your Portfolio account throughout the year as well as when you are
preparing your income tax returns.
In addition, you will receive semi-annual fund reports about the
Treasury Money Market, Federal, and Prime Portfolios. These comprehensive
reports include an assessment of each Portfolio's performance (and a comparison
to its industry benchmark) as well as a listing of its holdings.
21
<PAGE> 26
Investor Information 1-800-662-7447 Tele-Account 1-800-662-6273
Client Services 1-800-662-2739
Fund and Account Updates (continued)
CONFIRMATION STATEMENT Sent each time you buy, sell or exchange
shares; confirms the date and the amount
of the transaction.
PORTFOLIO SUMMARY Mailed quarterly; shows the market value
of your account at the close of the
statement period, as well as distributions,
purchases, sales, and exchanges for the
current calendar year.
FUND FINANCIAL REPORTS Mailed in January and July for these
Portfolios.
TAX STATEMENTS Generally mailed in January; report
previous year's dividend distributions
as well as distributions from IRAs or
other retirement accounts.
AUTOMATED TELEPHONE ACCESS
VANGUARD TELE-ACCOUNT Toll-free access to Vanguard Fund and
1-800-662-6273 account information--as well as some
Any time, seven days a transactions--through any TouchTone(TM)
week, from anywhere in telephone. Tele-Account provides total
the continental United return, share price, price change, and
States and Canada. yield quotations for all Vanguard Funds;
[Book Graphic] gives your account balances and history
(e.g., last transaction, latest dividend
distribution, redemptions by check during
the last three months); and allows you to
sell or exchange Fund shares.
COMPUTER ACCESS
VANGUARD Online Use your personal computer to learn
KEYWORD: vanguard more about Vanguard Funds and services;
keep in touch with your Vanguard accounts;
map out a long-term investment strategy;
and ask questions, make suggestions, and
send messages to Vanguard. Vanguard Online
is offered through America Online(sm)
(AOL). To establish an AOL account, call
1-800-238-6336.
VANGUARD ON THE Use your personal computer to visit
WORLD WIDE WEB Vanguard's education-oriented website,
http://www.vanguard.com which provides timely news and information
about Vanguard Funds and services; an
online "university" that offers a variety
of mutual fund classes; and easy-to-use,
interactive tools to help you create your
own investment and retirement strategies.
SHARES OF THE PORTFOLIOS MAY ONLY BE SOLD IN THOSE STATES IN WHICH THEY ARE
REGISTERED. THE PORTFOLIOS' SHARES ARE CURRENTLY REGISTERED FOR SALE IN ALL 50
STATES, AND THE PORTFOLIOS INTEND TO MAINTAIN SUCH REGISTRATION.
22
<PAGE> 27
GLOSSARY OF INVESTMENT TERMS
CASH RESERVES
Cash Reserves Cash deposits as well as short-term bank deposits, money market
instruments, and U.S. Treasury bills.
DIVERSIFICATION
Spreading your investments among many issuers (that is, organizations that sell
securities).
DIVIDEND INCOME
Payment to shareholders of income from interest or dividends generated by the
fund's investments.
EXPENSE RATIO
The percentage of a fund's average net assets used to pay its expenses. The
expense ratio includes management fees, administrative fees, and any 12b-1
marketing fees.
FIXED INCOME SECURITIES
Investments, such as bonds, that have a fixed payment schedule. While the level
of income offered by these securities is predetermined, their prices may
fluctuate.
INVESTMENT ADVISER
An organization that makes the day-to-day decisions regarding a portfolio's
investments.
LIQUIDITY
The degree of a security's marketability (that is, how quickly the security can
be sold at a fair price and converted to cash).
MONEY MARKET FUND
A mutual fund that seeks to provide income, liquidity, and a stable share price
by investing in very short-term, liquid investments.
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.
NET ASSET VALUE (NAV)
The market value of a mutual fund's total assets, minus liabilities, divided by
the number of shares outstanding. The value of a single share is called its
share value or share price.
PORTFOLIO DIVERSIFICATION
Holding a variety of securities so that a portfolio's return is not hurt by the
poor performance of a single security.
PRINCIPAL
The amount of your own money you put into an investment.
SECURITIES
Stocks, bonds, money market instruments, and other investment vehicles.
TOTAL RETURN
A percentage change, over a specified time period, in a mutual fund's net asset
value, with the ending net asset value adjusted to account for 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 between its high and low prices.
YIELD
Current income (interest or dividends) earned by an investment, expressed as a
percentage of the investment's price.
<PAGE> 28
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, PA 19482
<TABLE>
<S> <C> <C>
INVESTMENT INFORMATION VANGUARD BROKERAGE ELECTRONIC ACCESS TO THE
DEPARTMENT SERVICES VANGUARD MUTUAL FUND
1-800-662-7447 (SHIP) 1-800-992-8327 EDUCATION AND INFORMATION
TEXT TELEPHONE: For information on trading CENTER
1-800-952-3335 stocks, bonds, and options On America Online(R)
For information on our Funds, at reduced commissions Keyword:vanguard
Funds services and retirement
accounts, requests for VANGUARD TELE-ACCOUNT(R) On the World-Wide Web
literature. 1-800-662-6273 (ON-BOARD) http://www.vanguard.com
For 24-hour automated access
CLIENT SERVICES DEPARTMENT to price and yield information To send e-mail to Vanguard
1-800-662-2739 (CREW) to your account, certain [email protected]
TEXT TELEPHONE: transactions.
1-800-662-2738
For information on your
account, account transactions,
account statements.
</TABLE>
(C)1996 Vanguard Marketing
Corporation, Distributor
P030N
<PAGE> 29
PART B
VANGUARD TREASURY FUND
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER -- , 1996
This Statement is not a prospectus but should be read in conjunction with
the Fund's current Prospectus (dated December -- , 1996). To obtain the
Prospectus please call the Investor Information Department:
1-800-662-7447
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Limitations.................................................................... 1
Yield and Total Return.................................................................... 3
Calculation of Yield...................................................................... 3
Purchase of Shares........................................................................ 4
Redemption of Shares...................................................................... 4
Shareholder Services...................................................................... 4
Comparative Indexes....................................................................... 5
Management of the Fund.................................................................... 7
Description of Shares and Voting Rights................................................... 9
Financial Statements...................................................................... 9
Appendix--Description of Securities and Ratings........................................... 10
</TABLE>
INVESTMENT LIMITATIONS
The following policies supplement the investment limitations set forth in
the Prospectus. It is a fundamental policy of the Portfolio not to engage in any
of the following activities or business practices. These restrictions may not be
changed with respect to the Portfolio without the approval of a majority of the
outstanding shares (as defined in the Investment Company Act of 1940) of the
Portfolio. The Portfolio may not:
1) purchase securities other than the securities in which the Portfolio is
authorized to invest as set forth in the Prospectus;
2) borrow money in excess of 15% of the total assets of the Portfolio
taken at market value and then only from banks as a temporary measure
for extraordinary or emergency purposes; provided, the Portfolio may
borrow from any existing and future investment company member of The
Vanguard Group of Investment Companies, or its predecessors, through
its interfund lending facility; the Portfolio will not borrow to
increase income (leveraging) but only to facilitate redemption requests
which might otherwise require untimely dispositions of portfolio
securities; the Portfolio will repay all borrowings before making
additional investments and interest paid on such borrowings will reduce
net income;
3) make loans to other persons (except by the purchase of obligations in
which the Portfolio is authorized to invest); provided, the Portfolio
may make loans to any existing and future investment company member of
The Vanguard Group or its predecessors, through its interfund lending
facility; provided further, however, that the Portfolio will not enter
into repurchase agreements if, as a result thereof, more than 10% of
the net assets of the Portfolio (taken at current value) would be
subject to repurchase agreements maturing in more than seven days;
4) purchase the securities of any issuer (other than obligations issued or
guaranteed as to principal and interest by the Government of the United
States, its agencies or instrumentalities) if, as a result, (a) more
than 5% of the Portfolio's total assets (taken at current value) would
be invested in the
1
<PAGE> 30
securities of such issuer, or (b) the Portfolio would hold more than
10% of any class of securities of such issuer (for this purpose, all
debt obligations of an issuer maturing in less than one year are
treated as a single class of securities);
5) write, or invest in, put, call, straddle or spread options or invest in
interests in oil, gas or other mineral exploration or development
programs;
6) purchase securities on margin or sell any securities short;
7) purchase any securities which could cause more than 25% of the value of
the Portfolio's total net assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal business activities in the same industry, provided that there
is no limitation with respect to investments in United States Treasury
Bills, other obligations issued or guaranteed by the Federal
Government, its agencies and instrumentalities or certificates of
deposit or bankers' acceptances of domestic institutions;
8) mortgage, pledge or hypothecate its assets except in an amount up to
15% (10% as long as the Fund's shares are registered for sale in
certain states) of the value of the Portfolio's total assets but only
to secure borrowings for temporary or emergency purposes;
9) engage in the business of underwriting securities issued by other
persons, except to the extent that the Portfolio may technically be
deemed to be an underwriter under the Securities Act of 1933, as
amended, in disposing of investment securities;
10) purchase or otherwise acquire any security if, as a result, more than
10% of its net assets (including any investment in The Vanguard Group,
Inc.) would be invested in securities that are illiquid;
11) purchase or sell real estate, real estate investment trust securities,
commodities, or commodity contracts;
12) invest in companies for the purpose of exercising control;
13) invest in securities of other investment companies, except as may be
acquired as a part of a merger, consolidation or acquisition of assets
approved by the Portfolio's shareholders or otherwise to the extent
permitted by Section 12 of the Investment Company Act of 1940. The
Portfolio will invest only in investment companies which have
investment objectives and investment policies consistent with those of
the Portfolio;
14) issue senior securities.
Notwithstanding these limitations, the Portfolio may own all or any portion
of the securities of, or make loans to, or contribute to the costs or other
financial requirements of, any company which will be: (1) wholly owned by the
Fund and one or more other investment companies, and is (2) primarily engaged in
the business of providing, at-cost, management, administrative, distribution or
related services to the Fund and other investment companies. See "Management of
the Fund."
As an operational policy of the Portfolio, the Portfolio will not in the
aggregate, enter into repurchase agreements maturing in more than seven days,
purchase restricted securities or invest in any other illiquid securities if, as
a result thereof, more than 10% of the net assets of the Portfolio would be
invested in such assets.
Although not fundamental policies subject to shareholder vote, as long as
the Fund's shares are registered for sale in certain states, the Portfolio may
not purchase or retain securities of an issuer if an officer or director of such
issuer is an officer or Trustee of the Fund or its investment adviser and one or
more of such officers or directors (trustees) of the Fund or its investment
adviser owns beneficially more than 1/2% of the shares of securities of such
issuer and all such directors and officers owning more than 1/2% of such shares
or securities together own more than 5% of such shares or securities.
The above-mentioned investment limitations are considered at the time
investment securities are purchased.
2
<PAGE> 31
YIELD AND TOTAL RETURN
The yield of the Portfolio for the 7-day period ended May 31, 1996 is set
forth below. Yields are calculated daily for the Portfolio.
<TABLE>
<S> <C>
Treasury Money Market Portfolio*................................................. --
</TABLE>
The average annual total return of the Portfolio for the one-, five- and
ten-year periods ending May 31, 1996 is set forth below:
<TABLE>
<CAPTION>
1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED
5/31/96 5/31/96 5/31/96
------------ ------------- --------------
<S> <C> <C> <C>
Treasury Money Market Portfolio*......... -- -- --
</TABLE>
- ---------------
*Formerly the U.S. Treasury Portfolio of Vanguard Money Market Reserves, Inc.
Total return is computed by finding the average compounded rates of return
over the periods set forth above that would equate an initial amount invested at
the beginning of the periods to the ending redeemable value of the investment.
CALCULATION OF YIELD
The current yield of the Portfolio is calculated daily on a base period
return of a hypothetical account having a beginning balance of one share for a
particular period of time (generally 7 days). The return is determined by
dividing the net change (exclusive of any capital changes) in such account by
its average net asset value for the period, and then multiplying it by 365/7 to
get the annualized current yield. The calculation of net change reflects the
value of additional shares purchased with the dividends by the Portfolio,
including dividends on both the original share and on such additional shares. An
effective yield, which reflects the effects of compounding and represents an
annualization of the current yield with all dividends reinvested, may also be
calculated for the Portfolio by adding 1 to the net change, raising the sum to
the 365/7 power, and subtracting 1 from the result.
Set forth below is an example, for purposes of illustration only, of the
current and effective yield calculations for the Portfolio for the 7-day base
period ended May 31, 1996.
<TABLE>
<CAPTION>
TREASURY MONEY
MARKET PORTFOLIO
----------------
5/31/96
----------------
<S> <C>
Value of account at beginning of period........................................... $1.00000
Value of same account at end of period*........................................... --
----------------
Net Change in account value....................................................... $ --
Annualized Current Net Yield (Net
Change X 365/7) average net asset value......................................... --
Effective Yield [(Net Change)+1]365/7-1........................................... --
Average Weighted Maturity of Investments.......................................... -- Days
</TABLE>
- ---------------
*Exclusive of any capital changes.
The net asset value of a share of the Portfolio is $1.00 and it is not
expected to fluctuate. However, the yield of the Portfolio will fluctuate. The
annualization of a week's dividend is not a representation by the Portfolio as
to what an investment in the Portfolio will actually yield in the future. Actual
yields will depend on such variables as investment quality, average maturity,
the type of instruments the Portfolio invests in, changes in interest rates on
instruments, changes in the expenses of the Fund and other factors. Yields are
one basis investors may use to analyze the Portfolio of the Fund, and other
investment vehicles; however, yields of other investment vehicles may not be
comparable because of the factors set forth in the preceding sentence,
differences in the time periods compared, and differences in the methods used in
valuing portfolio instruments, computing net asset values and calculating
yields.
3
<PAGE> 32
PURCHASE OF SHARES
The Fund reserves the right in its sole discretion (i) to suspend the
offerings of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum investment for or any other restrictions on initial
and subsequent investments for certain fiduciary accounts or under circumstances
where certain economies can be achieved in sales of the Fund's shares.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges for the Portfolio or postpone
the date of payment (i) during any period that the New York Stock Exchange is
closed, or trading on the Exchange is restricted as determined by the Securities
and Exchange Commission (the "Commission"), (ii) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for the Portfolio to dispose of securities
owned by it, or fairly to determine the value of its assets, and (iii) for such
other periods as the Commission may permit.
The Fund will make an election with the Commission 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 l% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment readily marketable securities or in
cash, as the Trustees may deem advisable; however, payment will be made wholly
in cash unless the Trustees believe that economic or market conditions exist
which would make such a practice detrimental to the best interests of the Fund.
If redemptions are paid in investment securities, such securities will be valued
as set forth in the Prospectus under "The Share Price of the Portfolio" and a
redeeming shareholder would normally incur brokerage expenses if he converted
these securities to cash.
No charge is made by the Fund for redemptions; except for wire withdrawals
in amounts less than $5,000 which will be subject to a maximum charge of $5.00
which will be deducted from the principal in your account. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by each Portfolio.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE The Portfolio's shares may be exchanged without cost
for shares of any open-end Fund currently offering its shares to new investors
in The Vanguard Group ("Vanguard"). A shareholder of any other open-end Fund in
Vanguard may likewise exchange his shares for shares of the Portfolio. Exchange
requests may be made either by mail, telephone or telegraph.
Telephone and telegraph exchanges (referred to as "expedited exchanges")
will be accepted only if the registration of the two accounts is identical.
Requests for expedited exchanges received prior to the close of the New York
Stock Exchange (generally 4:00 P.M. Eastern time) will be processed at the next
determined net asset value after such request is received. Requests received
after the close of the New York Stock Exchange (generally 4:00 P.M. Eastern
time), will be processed on the next business day. NO EXPEDITED EXCHANGES WILL
BE ACCEPTED INTO, OR FROM, VANGUARD BALANCED INDEX FUND, VANGUARD INDEX TRUST,
VANGUARD QUANTITATIVE PORTFOLIOS AND VANGUARD INTERNATIONAL EQUITY INDEX FUND.
Neither the Fund nor Vanguard will be responsible for the authenticity of
exchange instructions received by telephone or telegraph. Expedited exchanges
may also be subject to limitations as to amounts and frequency, and to other
restrictions established by the Board of Trustees to assure that such exchanges
do not disadvantage the Fund and its shareholders. Shareholders may obtain the
terms of these limitations, which may be revised at any time, from Vanguard.
Any such exchange will be based on the respective net asset values of the
shares involved. There are no sales commissions or charges of any kind. Before
making an exchange, a shareholder should consider the investment objectives and
policies of the Portfolio or Fund to be purchased, and other relevant
information (including the minimum initial investment), which can be found in
the prospectus relating to that particular Portfolio or Fund. A prospectus for
any of the Vanguard Funds or Portfolios may be obtained from Vanguard.
4
<PAGE> 33
For Federal income tax purposes an exchange between Funds is a taxable
event and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time, and the
Portfolio or Vanguard Funds may limit or discontinue the offering of its shares
without notice to shareholders.
TRANSFER OF SHARES Fund shares may be transferred to another person by
sending appropriate written instructions to Vanguard. The account must be
clearly identified and include the number of shares to be transferred and the
signatures of all registered owners. The signature on the letter of instructions
or any stock power must be guaranteed. As in the case of withdrawals, the
written request must be received in "Good Order" before any transfer can be
made.
INFORMATION FOR SHAREHOLDERS Following any purchase or redemption, a
shareholder will receive a statement which reflects all activity during the
current calendar year. Each shareholder will also receive a quarterly statement,
which includes a valuation as of the day the statement is prepared.
Shareholders will receive semi-annual financial statements audited at least
annually by independent accountants whose selection is ratified by shareholders.
COMPARATIVE INDEXES
Vanguard may use reprinted material discussing the Vanguard Group, Inc. or
any of the member funds of the Vanguard Group of Investment Companies.
Vanguard Treasury Fund may use one or more of the following unmanaged
indexes for comparative performance purposes:
STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX -- is a well diversified
list of 500 companies representing the U.S. Stock Market.
WILSHIRE 5000 EQUITY INDEX -- consists of more than 6,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
WILSHIRE 4500 EQUITY INDEX -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard and Poor's 500 Index.
RUSSELL 3000 STOCK INDEX -- a diversified portfolio of approximately 3,000
common stocks accounting for over 90% of the market value of publicly traded
stocks in the U.S.
RUSSELL 2000 STOCK INDEX -- a subset of approximately 2,000 of the smallest
stocks contained in the Russell 3000; a widely used benchmark for small
capitalization common stocks.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX -- is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX -- currently includes 71 bonds and 29
preferreds. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.
SALOMON BROTHERS GNMA INDEX -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
SALOMON BROTHERS HIGH-GRADE CORPORATE BOND INDEX -- consists of publicly issued,
non-convertible corporate bonds rated Aa or Aaa. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
LEHMAN LONG-TERM TREASURY BOND -- is composed of all bonds covered by the
Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.
5
<PAGE> 34
MERRILL LYNCH CORPORATE & GOVERNMENT BOND -- consists of over 4,500 U.S.
Treasury, Agency and investment grade corporate bonds.
LEHMAN CORPORATE (BAA) BOND INDEX -- all publicly offered fixed-rate,
nonconvertible domestic corporate bonds rated Baa by Moody's, with a maturity
longer than 1 year and with more than $25 million outstanding. This index
includes over 1,000 issues.
LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX -- is a subset of the Lehman
Corporate Bond Index covering all corporate, publicly issued, fixed-rate,
nonconvertible U.S. debt issues rated at least Baa, with at least $50 million
principal outstanding and maturity greater than 10 years.
BOND BUYER MUNICIPAL INDEX (20 YEAR) BOND -- is a yield index on current coupon
high-grade general obligation municipal bonds.
STANDARD & POOR'S PREFERRED INDEX -- is a yield index based upon the average
yield of four high-grade, non-callable preferred stock issues.
NASDAQ INDUSTRIAL INDEX -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
COMPOSITE INDEX -- 70% Standard & Poor's 500 Index and 30% NASDAQ Industrial
Index.
COMPOSITE INDEX -- 65% Standard & Poor's 500 Index and 35% Lehman Long-Term
Corporate AA or Better Bond Index.
COMPOSITE INDEX -- 65% Lehman Long-Term Corporate AA or Better Bond Index and a
35% weighting in a blended equity composite (75% Standard & Poor's/BARRA Value
Index and 25% Standard & Poor's Utilities Index).
LEHMAN LONG-TERM CORPORATE AA OR BETTER BOND INDEX -- consists of all publicly
issued, fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt rated AA or AAA.
LEHMAN BROTHERS AGGREGATE BOND INDEX -- is a market-weighted index that contains
individually priced U.S. Treasury, agency, corporate, and mortgage pass-through
securities corporate rated Baa- or better. The Index has a market value of over
$4 trillion.
LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX -- is a
market-weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB- or better with maturities
between 1 and 5 years. The index has a market value of over $1.3 trillion.
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX -- is
a market-weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities between 5 and 10
years. The index has a market value of over $600 billion.
LEHMAN BROTHERS MUTUAL FUND LONG (10+) GOVERNMENT/CORPORATE INDEX -- is a
market-weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities greater than 10
years. The index has a market value of over $900 billion.
LIPPER SMALL COMPANY GROWTH FUND AVERAGE -- the average performance of small
company growth funds as defined by Lipper Analytical Services, Inc. Lipper
defines a small company growth fund as a fund that by prospectus or portfolio
practice, limits its investments to companies on the basis of the size of the
company. From time to time, Vanguard may advertise using the average performance
and/or the average expense ratio of the small company growth funds. (This fund
category was first established in 1982. For years prior to 1982, the results of
the Lipper Small Company Growth category were estimated using the returns of the
Funds that constituted the Group at its inception.)
LIPPER BALANCED FUND AVERAGE -- an industry benchmark of average balanced funds
with similar investment objectives and policies, as measured by Lipper
Analytical Services, Inc.
LIPPER NON-GOVERNMENT MONEY MARKET FUND AVERAGE -- an industry benchmark of
average non-government money market funds with similar investment objectives and
policies, as measured by Lipper Analytical Services, Inc.
LIPPER GOVERNMENT MONEY MARKET FUND AVERAGE -- an industry benchmark of average
government money market funds with similar investment objectives and policies,
as measured by Lipper Analytical Services, Inc.
6
<PAGE> 35
LIPPER GENERAL EQUITY FUND AVERAGE -- an industry benchmark of average general
equity funds with similar investment objectives and policies, as measured by
Lipper Analytical Services, Inc.
LIPPER FIXED INCOME FUND AVERAGE -- an industry benchmark of average fixed
income funds with similar investment objectives and policies, as measured by
Lipper Analytical Services, Inc.
MANAGEMENT OF THE FUND
OFFICERS AND TRUSTEES
The Fund's Officers, under the supervision of the Board of Trustees, manage
the day-to-day operations of the Fund. The Trustees, who are elected annually by
shareholders, set broad policies for the Fund. A list of the Trustees and
Officers of the Fund and a brief statement of their present positions and
principal occupations during the past 5 years is set forth below. The mailing
address of the Trustees and Officers of the Fund is Post Office Box 876, Valley
Forge, PA 19482.
JOHN C. BOGLE, Chairman*
Chairman and Director of The Vanguard Group, Inc., and of each of the
investment companies in The Vanguard Group; Director of The Mead
Corporation and General Accident Insurance.
JOHN J. BRENNAN, President and Chief Executive Officer*
President and Chief Executive Officer of The Vanguard Group, Inc. and of
each of the investment companies in The Vanguard Group.
RAYMOND J. KLAPINSKY, Secretary and Trustee*
Senior Vice President and Secretary of The Vanguard Group, Inc.; Secretary
of each of the investment companies in The Vanguard Group.
RALPH K. PACKARD, Trustee*
Senior Vice President & Chief Financial Officer of The Vanguard Group,
Inc., and of each of the investment companies in The Vanguard Group.
MICHAEL S. MILLER, Trustee*
Senior Vice President of The Vanguard Group, Inc. and of each of the
investment companies in The Vanguard Group.
RICHARD F. HYLAND, Treasurer*
Treasurer of The Vanguard Group, Inc. and
of each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller*
Vice President of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
- ---------------
*Officers of the Fund are "interested persons" as defined in the Investment
Company Act of 1940.
THE VANGUARD GROUP
The Fund is a member of The Vanguard Group of Investment Companies. Through
their jointly-owned subsidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund
and the other Funds in the Group obtain at cost virtually all of their corporate
management, administrative and distribution services. Vanguard also provides
investment advisory services on an at-cost basis to certain of the Vanguard
Funds.
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 pays its share of Vanguard's total expenses which are allocated among the
Funds under methods approved by the Board of Directors (Trustees) of each Fund.
In addition, each Fund bears its own direct expenses such as legal, auditing and
custodian fees.
The Fund's Officers are also Officers and employees of Vanguard. No Officer
or employee owns, or is permitted to own, any securities of any external adviser
for the Funds.
7
<PAGE> 36
Vanguard adheres to a Code of Ethics established pursuant to Rule 17j-I
under the Investment Company Act of 1940. The Code is designed to prevent
unlawful practices in connection with the purchase or sale of securities by
persons associated with Vanguard. Under Vanguard's Code of Ethics certain
officers and employees of Vanguard who are considered access persons are
permitted to engage in personal securities transactions. However, such
transactions are subject to procedures and guidelines substantially similar to
those recommended by the mutual fund industry and approved by the U.S.
Securities and Exchange Commission.
Vanguard was established and operates under a Funds' Service Agreement
which was approved by the shareholders of each of the Funds. The amounts of
which each of the Funds 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. At November 30, 1995, the Portfolio
had contributed capital of $-- to Vanguard, representing --% of Vanguard's
capitalization. The Funds' Service Agreement provides as follows: (a) each
Vanguard Fund may invest up to 0.40% of its current assets in Vanguard and (b)
there is no other limitation on the amount that each Vanguard Fund may
contribute to Vanguard's Capitalization.
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. During the
fiscal year ended November 30, 1995 and the six months ended May 31, 1996, the
Portfolio's share of Vanguard's actual net costs of operation relating to
management
and administrative services (including transfer agency) totaled approximately
$3,192,000 and $2,080,000, respectively.
DISTRIBUTION Vanguard provides all distribution and marketing activities
for the Funds in the Group. Vanguard Marketing Corporation, a wholly-owned
subsidiary of Vanguard, acts as Sales Agent for the shares of the Funds, in
connection with any sales made directly to investors in the states of Florida,
Missouri, New York, Ohio, Texas and such other states as it may be required.
The principal distribution expenses are for advertising, promotional
materials and marketing personnel. Distribution services may also include
organizing and offering to the public, from time to time, one or more new
investment companies which will become members of the Group. The Directors and
Officers of Vanguard determine the amount to be spent annually on distribution
activities, the manner and amount to be spent on each Fund, and whether to
organize new investment companies.
One half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon relative net assets. The remaining one
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
distribution expenses of a marketing and promotional nature shall exceed 125% of
average distribution expense rate for the Group, and that no Fund shall incur
annual distribution expenses in excess of 20/100 of 1% of its average month-end
net assets. During the fiscal year ended November 30, 1995 and the six months
ended May 31, 1996, the Portfolio paid approximately $627,000 and $414,000,
respectively of the Group's distribution and marketing expenses or .03 of 1% and
- -- of 1%, respectively of the Portfolio's average month-end net assets.
INVESTMENT ADVISORY SERVICES Vanguard also provides the Fund, Vanguard
Money Market Reserves, Vanguard Municipal Bond Fund, Vanguard Bond Index Fund,
several Portfolios of Vanguard Fixed Income Securities Fund, Vanguard Admiral
Funds, Vanguard California Tax-Free Fund, Vanguard Pennsylvania Tax-Free Fund,
Vanguard Ohio Tax-Free Fund, Vanguard New York Insured Tax-Free Fund, Vanguard
New Jersey Tax-Free Fund, Vanguard Florida Insured Tax-Free Fund, Vanguard Index
Trust, Vanguard Balanced Index Fund, Vanguard Institutional Index Fund, Vanguard
Tax-Managed Fund, several Portfolios of Vanguard Variable Insurance Fund,
Vanguard International Equity Index Fund, Aggressive Growth Portfolio of
Vanguard Horizon Fund, a portion of Vanguard/Windsor II, a portion of
Vanguard/Morgan Growth Fund as well as several indexed separate accounts with
investment advisory services. These services are provided on an at-cost basis
from a money management staff employed directly by Vanguard. The compensation
and other expenses of this staff are paid by the Funds utilizing these services.
During the years ended November 30, 1993, 1994, 1995 and the six months ended
8
<PAGE> 37
May 31, 1996, the Portfolio paid approximately $196,000, $212,000, $297,000 and
$152,000, respectively, of Vanguard's expenses relating to investment advisory
services.
REMUNERATION OF TRUSTEES The Fund pays each Director (Trustee), who is not
also an Officer, an annual fee plus travel and other expenses incurred in
attending Board meetings. The Fund's Officers and employees are paid by Vanguard
which, in turn, is reimbursed by the Fund and each other Fund in the Group, for
its proportionate share of Officers' and employees' salaries and retirement
benefits.
Under its retirement plan, Vanguard contributes annually an amount equal to
10% of each eligible Officer's annual compensation plus 5.7% of that part of an
eligible Officer's compensation during the year, if any, that exceeds the Social
Security Taxable Wage Base then in effect. Under the Thrift Plan, all eligible
Officers are permitted to make pre-tax basic contributions in a maximum amount
equal to 4% of total compensation which are matched by Vanguard on a 100% basis.
DIRECTORS' RETIREMENT FEES A Retirement Plan for Directors has been
implemented to provide a fee to retired Directors equal to $1,000 per year of
service on the Board, up to 15 years of service. This fee will remain in place
subsequent to the Director's retirement for a period of 10 years or until a
retired Director's death.
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Declaration of Trust permits the Trustees to issue an unlimited number
of shares of beneficial interest with a par value of $.001. The Board of
Trustees has the power to designate one or more classes ("Portfolios") of shares
of beneficial interest. Currently the Fund is offering shares of one Portfolio.
The shares of the Portfolio are fully paid and nonassessable, and have no
preference as to conversion, exchange, dividends, retirement or other features.
The shares of the Portfolio have no pre-emptive rights. The shares of the
Portfolio have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held),
then standing in his name on the books of the Fund. On any matter submitted to a
vote of shareholders, all shares of the Fund then issued and outstanding and
entitled to vote, irrespective of the Portfolio or class, shall be voted in the
aggregate and not by Portfolio or class: except (i) when required by the
Investment Company Act of 1940, shares shall be voted by individual Portfolio or
class; and (ii) when the matter does not affect any interest of a particular
Portfolio or class, then only shareholders of the affected class or classes
shall be entitled to vote thereon.
FINANCIAL STATEMENTS
The Portfolio's financial statements for the year ended November 30, 1995,
including the financial highlights for each of the five fiscal years in the
period ended November 30, 1995, appearing in the Vanguard Money Market Reserves
1995 Annual Report to Shareholders, and the report thereon of Price Waterhouse
LLP, independent accountants, also appearing therein, are incorporated by
reference in this Statement of Additional Information. The unaudited financial
statements and financial highlights of the Portfolio for the six months ended
May 31, 1996, as set forth in the Vanguard Money Market Reserves Semi-Annual
Report to Shareholders, are incorporated herein by reference. The Vanguard Money
Market Reserves Annual Report and Semi-Annual Report to Shareholders is enclosed
with this Statement of Additional Information.
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
DESCRIPTION OF U.S. GOVERNMENT SECURITIES
As used in this prospectus, the term "U.S. Government Securities" refers to
a variety of securities which are issued or guaranteed by the United States
Treasury, by various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. The term also refers to "repurchase agreements" collateralized by
such securities.
9
<PAGE> 38
U.S. Treasury Securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and the U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, 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 Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, 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, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, and the Federal National Mortgage Association.
10
<PAGE> 39
PART C
VANGUARD TREASURY FUND
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The Registrant's audited financial statements for the year ended November
30, 1995, including Price Waterhouse LLP's report thereon, and the unaudited
financial statements for the six months ended May 31, 1996, are incorporated by
reference, in the Statement of Additional Information, from the Registrant's
1995 Annual Report and the May 31, 1996 Semi-Annual Report to Shareholders which
has been filed with the Commission. The financial statements included in the
Annual Report and Semi-Annual Report are:
1. Statement of Net Assets as of November 30, 1995 and as of May 31, 1996.
2. Statement of Operations for the year ended November 30, 1995 and for
six months ended May 31, 1996.
3. Statement of Changes in Net Assets for each of the two years in the
period ended November 30, 1995 and the six months ended May 31, 1996.
4. Financial Highlights for each of the five years in the period ended
November 30, 1995 and the six months ended May 31, 1996.
5. Notes to Financial Statements at November 30, 1995 and May 31, 1996.
6. Report of Independent Accountants, December 29, 1995.
(B) EXHIBITS
1a. Certificate of Trust
1b. Certificate of Amendment*
1. Agreement and Declaration of Trust*
2. By-Laws of Registrant*
3. Not Applicable
4. Reference is made to Articles III and VII of the Agreement and
Declaration of Trust dated August 19, 1996 of the Registrant filed
herewith.
5. Not Applicable
6. Not Applicable
7. Reference is made to the section entitled "Management of the Fund" in
the Registrant's Statement of Additional Information
8. Form of Custody Agreement**
9. Form of Vanguard Service Agreement*
10. Opinion of Counsel*
11. Consent of Independent Accountants*
12. Financial Statements -- reference is made to (a) above
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Schedule for Computation of Performance Quotations*
27. Financial Data Schedule*
- ---------------
*Filed herewith
**To be filed by amendment
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is not controlled by or under common control with any person.
The officers of the Registrant, the investment companies in The Vanguard Group
of Investment Companies and The Vanguard Group, Inc. are identical. Reference is
made to the caption "Management of the Fund" in the Prospectus constituting Part
A and in the Statement of Additional Information constituting Part B of this
Registration Statement.
<PAGE> 40
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of August 31, 1996, there were no shareholders of the Treasury Money
Market Portfolio.
ITEM 27. INDEMNIFICATION
Reference is made to Article VII of Registrant's Declaration of Trust.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Investment advisory services are provided to the Registrant on an at-cost
basis by The Vanguard Group, Inc., a jointly-owned subsidiary of the Registrant
and the other Funds in the Group. See the information concerning The Vanguard
Group set forth in Parts A and B.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None
(b) Not Applicable
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company
Act and the rules promulgated thereunder will be maintained in the physical
possession of Registrant; Registrant's Transfer Agent, The Vanguard Group, Inc.
c/o The Vanguard Financial Center, Valley Forge, Pennsylvania 19482; and the
Registrant's Custodian, CoreStates Bank, N.A., Philadelphia, Pa.
ITEM 31. MANAGEMENT SERVICES
Other than the Amended and Restated Funds' Service Agreement with The
Vanguard Group, Inc. which a form of such Agreement is filed herewith as Exhibit
9(c) and described in Part B hereof under "Management of the Fund," the
Registrant is not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge, upon request.
Registrant undertakes to file a post-effective amendment containing
financial statements, which need not be audited, within 4-6 months from
effectiveness under the Securities Act of 1933.
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 11th day of September, 1996.
VANGUARD TREASURY FUND
BY: (Raymond J. Klapinsky)
John C. Bogle*, Chairman
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:
BY: (Raymond J. Klapinsky)
John C. Bogle*, Chairman
BY: (Raymond J. Klapinsky)
John J. Brennan*, President & Chief Executive Officer
BY: (Raymond J. Klapinsky)
Raymond J. Klapinsky, Secretary
BY: (Raymond J. Klapinsky)
Richard F. Hyland*, Treasurer
*By Power of Attorney. See File Number 2-14336, January 23, 1990. Incorporated
by Reference.
<PAGE> 42
VANGUARD TREASURY FUND
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Certificate of Trust................................................................. EX-99.B1A
Certificate of Amendment............................................................. EX-99.B1B
Agreement and Declaration of Trust................................................... EX-99.B1
By-Laws of Registrant................................................................ EX-99.B2
Form of Vanguard Service Agreement................................................... EX-99.B9
Opinion of Counsel................................................................... EX-99.B10
Consent of Independent Accountants................................................... EX-99.B11
Schedule for Computation of Performance Quotations................................... EX-99.B16
Financial Data Schedule.............................................................. EX-27
</TABLE>
<PAGE> 1
EX-99.B1A
CERTIFICATE OF TRUST
OF
VANGUARD TREASURY FUND
a Delaware Business Trust
THIS Certificate of Trust of VANGUARD TREASURY FUND (the
"Trust"), dated as of this 19th day of August, 1996, is being duly executed and
filed, in order to form a business trust pursuant to the Delaware Business Trust
Act (the "Act"), Del. Code Ann. tit. 12, Sections 3801-3820.
1. NAME. The name of the business trust formed hereby is
"VANGUARD TREASURY FUND."
2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will
become, prior to or within 180 days following the first issuance of beneficial
interests, a registered investment company under the Investment Company Act of
1940, as amended. Therefore, in accordance with section 3807(b) of the Act, the
Trust has and shall maintain in the State of Delaware a registered office and a
registered agent for service of process.
(a) REGISTERED OFFICE. The registered office of the
Trust in Delaware is Corporation Service Company, 1013 Centre
Road, Wilmington, Delaware 19805.
(b) REGISTERED AGENT. The registered agent for service
of process on the Trust in Delaware is Corporation Service
Company, 1013 Centre Road, Wilmington, Delaware 19805.
3. LIMITATION OF LIABILITY. Pursuant to section 3804(a) of the
Act, the debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular series of the Trust,
established pursuant to the terms of the Agreement and Declaration of Trust of
the Trust, shall be enforceable against the assets of such series only, and not
against the assets of the Trust generally.
IN WITNESS WHEREOF, the Trustees named below do hereby
<PAGE> 2
execute this Certificate of Trust as of the date first-above written.
- ----------------------------------- -------------------------------------
Raymond J. Klapinsky Michael S. Miller
- -----------------------------------
Ralph K. Packard
-2-
<PAGE> 1
EX-99.B1B
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF TRUST
OF
VANGUARD TREASURY FUND
Pursuant to 12 Del. Code Section 3810 (b) (1) and 12 Del. Code Section 3811 (a)
(2), the undersigned certifies that:
1. The name of the business trust is VANGUARD TREASURY FUND (the
"Business Trust").
2. The amendment to the Certificate of Trust of the Business Trust set
forth below has been duly authorized by the Board of Trustees of the
Business Trust.
The Second Article of the Certificate of Trust is hereby amended to
read as follows:
"(a) REGISTERED OFFICE. The registered office of the Trust in Delaware
is Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805.
(b) REGISTERED AGENT. The registered agent for service of process on
the Trust in Delaware is Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware 19805."
3. Pursuant to 12 Del. Code Section 3810 (b) (1)c, this Certificate of
Amendment to the Certificate of Trust of the Business Trust shall become
effective immediately upon filing with the Office of the Secretary of
State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being a trustee of the Business
Trust, has duly executed this Certificate of Amendment this 28th day of
August, 1996.
-------------------------
Raymond J. Klapinsky
Trustee
<PAGE> 1
EX-99.B1
Effective as of
August 19, 1996
AGREEMENT AND DECLARATION OF TRUST
of
VANGUARD TREASURY FUND
a Delaware Business Trust
Principal Place of Business:
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
<PAGE> 2
AGREEMENT AND DECLARATION OF TRUST
OF
VANGUARD TREASURY FUND
WHEREAS, this AGREEMENT AND DECLARATION OF TRUST is made and
entered into as of the date set forth below by the Trustees named hereunder for
the purpose of forming a Delaware business trust in accordance with the
provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that a Certificate
of Trust be filed with the Office of the Secretary of State of the State of
Delaware and do hereby declare that the Trustees will hold IN TRUST all cash,
securities and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the pro rata benefit of the holders of
Shares in this Trust.
ARTICLE I.
Name and Definitions
Section 1. Name. This trust shall be known as "VANGUARD
TREASURY FUND" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein,
unless otherwise required by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time to
time;
(b) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust;
<PAGE> 3
(c) "Trustees" refers to the persons who have
signed this Agreement and Declaration of Trust, so long as they continue in
office in accordance with the terms hereof, and all other persons who may from
time to time be duly elected or appointed to serve on the Board of Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in their capacity as trustees
hereunder;
(d) "Shares" means the shares of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations,
partnerships, trusts, foundations, plans, associations, joint ventures, estates
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as amended from time to time.
References herein to specific sections of the 1940 Act shall be deemed to
include such Rules and Regulations as are applicable to such sections as
determined by the Trustees or their designees;
(h) The terms "Commission" and "Principal Underwriter" shall
have the respective meanings given them in Section 2(a)(7) and Section
(2)(a)(29) of the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
-2-
<PAGE> 4
(k) The term "Interested Person" has the meaning given it in
Section 2(a)(19) of the 1940 Act;
(l) "Investment Manager" or "Manager" means a party furnishing
services to the Trust pursuant to any contract described in Article IV, Section
7(a) hereof;
(m) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III.
ARTICLE II.
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on
the business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
ARTICLE III.
Shares
Section 1. Division of Beneficial Interest. The beneficial
interest in the Trust shall at all times be divided into an unlimited number of
Shares, with a par value of $ .001 per Share. The Trustees may authorize the
division of Shares into separate Series and the division of Series into separate
classes of Shares. The different Series shall be established and designated, and
the variations in the relative rights and preferences as between the different
Series shall be fixed and determined, by the Trustees. If only one Series shall
be established, the Shares shall have the rights and preferences provided for
herein and in Article III, Section 6 hereof to the extent relevant and not
otherwise provided for herein.
Subject to the provisions of Section 6 of this Article III,
each Share shall have voting rights as provided in Article V hereof, and holders
of the Shares of any Series shall be entitled to receive dividends, when, if and
as declared with respect thereto in the manner provided in Article VI, Section 1
hereof.
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No Share shall have any priority or preference over any other Share of the same
Series with respect to dividends or distributions of the Trust or otherwise. All
dividends and distributions shall be made ratably among all Shareholders of a
Series (or class) from the assets held with respect to such Series according to
the number of Shares of such Series (or class) held of record by such
Shareholders on the record date for any dividend or distribution or on the date
of termination of the Trust, as the case may be. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or any Series. The Trustees may from time to time
divide or combine the Shares of a Series into a greater or lesser number of
Shares of such Series without thereby materially changing the proportionate
beneficial interest of such Shares in the assets held with respect to that
Series or materially affecting the rights of Shares of any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall
be recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each Series.
No certificates evidencing the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the transfer of Shares of each
Series (or class) and similar matters. The record books of the Trust as kept by
the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to the identity of the Shareholders of each Series and as to the
number of Shares of each Series held from time to time by each Shareholder.
Section 3. Investments in the Trust. Investments may be
accepted by the Trust from such Persons, at such times, on such terms, and for
such consideration as the Trustees from time to time may authorize. Each
investment shall be credited to the Shareholder's account in the form of full
and fractional Shares of the Trust, in such Series (or class) as the purchaser
shall select, at the net asset value per Share next determined for such Series
(or class) after receipt of the investment; provided, however, that the Trustees
may, in their sole discretion, impose a sales charge or reimbursement fee upon
investments in the Trust.
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Section 4. Status of Shares and Limitation of Personal
Liability. Shares shall be deemed to be personal property giving only the rights
provided in this instrument and the By-Laws of the Trust. Every Shareholder by
virtue of having become a Shareholder shall be held to have expressly assented
and agreed to the terms hereof. The death of a Shareholder during the existence
of the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but shall
entitle such representative only to the rights of said deceased Shareholder
under this Declaration of Trust. Ownership of Shares shall not entitle a
Shareholder to any title in or to the whole or any part of the Trust Property or
right to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders as partners or joint
venturers. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Shareholder, or
to call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time agree to pay.
Section 5. Power of Board of Trustees to Change Provisions
Relating to Shares. Notwithstanding any other provision of this Declaration of
Trust to the contrary, and without limiting the power of the Board of Trustees
to amend the Declaration of Trust as provided elsewhere herein, the Board of
Trustees shall have the power to amend this Declaration of Trust, at any time
and from time to time, in such manner as the Board of Trustees may determine in
their sole discretion, without the need for Shareholder action, so as to add to,
delete, replace or otherwise modify any provisions relating to the Shares
contained in this Declaration of Trust, provided that before adopting any such
amendment without Shareholder approval the Board of Trustees shall determine
that it is consistent with the fair and equitable treatment of all Shareholders
and that Shareholder approval is not required by the 1940 Act or other
applicable law. If Shares have been issued, Shareholder approval shall be
required to adopt any amendments to this Declaration of Trust which would
adversely affect to a material degree the rights and preferences of the
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Shares of any Series (or class) or to increase or decrease the par value of the
Shares of any Series (or class).
Section 6. Establishment and Designation of Shares. The
establishment and designation of any Series (or class) of Shares shall be
effective upon the adoption by a majority of the Trustees, of a resolution which
sets forth such establishment and designation and the relative rights and
preferences of such Series (or class). Each such resolution shall be
incorporated herein by reference upon adoption.
Shares of each Series (or class) established pursuant to this
Section 6, unless otherwise provided in the resolution establishing such Series,
shall have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All
consideration received by the Trust for the issue or sale of Shares of a Series,
including dividends and distributions paid by, and reinvested in, such Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably be held with respect to that Series for all purposes, subject only
to the rights of creditors, and shall be so recorded upon the books of account
of the Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without limitation, any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in whatever
form the same may be, are herein referred to as "assets held with respect to"
that Series. In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily identifiable as
assets held with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable, and any General Asset so
allocated to a
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particular Series shall be held with respect to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the Shareholders
of all Series for all purposes in absence of manifest error.
(b) Liabilities Held with Respect to a Particular Series. The
assets of the Trust held with respect to each Series shall be charged with the
liabilities of the Trust with respect to such Series and all expenses, costs,
charges and reserves attributable to such Series, and any general liabilities of
the Trust which are not readily identifiable as being held in respect of a
Series shall be allocated and charged by the Trustees to and among any one or
more Series in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs, charges,
and reserves so charged to a Series are herein referred to as "liabilities held
with respect to" that Series. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
holders of all Series for all purposes in absence of manifest error. All Persons
who have extended credit which has been allocated to a particular Series, or who
have a claim or contract which has been allocated to a Series, shall look
exclusively to the assets held with respect to such Series for payment of such
credit, claim, or contract. In the absence of an express agreement so limiting
the claims of such creditors, claimants and contracting parties, each creditor,
claimant and contracting party shall be deemed nevertheless to have agreed to
such limitation unless an express provision to the contrary has been
incorporated in the written contract or other document establishing the
contractual relationship.
(c) Dividends, Distributions, Redemptions, and Repurchases. No
dividend or distribution including, without limitation, any distribution paid
upon termination of the Trust or of any Series (or class) with respect to, or
any redemption or repurchase of, the Shares of any Series (or class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any Series otherwise have any right or
claim against the assets held with respect to any other Series except to the
extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
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determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders in absence of manifest error.
(d) Voting. All Shares of the Trust entitled to vote on a
matter shall vote without differentiation between the separate Series on a
one-vote-per-Share basis; provided however, if a matter to be voted on affects
only the interests of not all Series (or class of a Series), then only the
Shareholders of such affected Series (or class) shall be entitled to vote on the
matter.
(e) Equality. All the Shares of each Series shall represent an
equal proportionate undivided interest in the assets held with respect to such
Series (subject to the liabilities of such Series and such rights and
preferences as may have been established and designated with respect to classes
of Shares within such Series), and each Share of a Series shall be equal to each
other Share of such Series.
(f) Fractions. Any fractional Share of a Series shall have
proportionately all the rights and obligations of a whole share of such Series,
including rights with respect to voting, receipt of dividends and distributions
and redemption of Shares.
(g) Exchange Privilege. The Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange such Shares for Shares of one or more other Series in accordance with
such requirements and procedures as may be established by the Trustees.
(h) Combination of Series. The Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities held
with respect to any two or more Series into assets and liabilities held with
respect to a single Series.
(i) Elimination of Series. At any time that there are no
Shares outstanding of a Series (or class), the Trustees may abolish such Series
(or class).
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ARTICLE IV.
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15).
Subject to the requirements of Section 16(a) of the 1940 Act, the Board of
Trustees, by action of a majority of the then Trustees at a duly constituted
meeting, may fill vacancies in the Board of Trustees and remove Trustees with or
without cause. Each Trustee shall serve during the continued lifetime of the
Trust until he or she dies, resigns, is declared bankrupt or incompetent by a
court of competent jurisdiction, or is removed. Any Trustee may resign at any
time by written instrument signed by him and delivered to any officer of the
Trust or to a meeting of the Trustees. Such resignation shall be effective upon
receipt unless specified to be effective at some other time. Except to the
extent expressly provided in a written agreement with the Trust, no Trustee
resigning and no Trustee removed shall have any right to any compensation for
any period following his or her resignation or removal, or any right to damages
or other payment on account of such removal. Any Trustee may be removed at any
meeting of Shareholders by a vote of two-thirds of the outstanding Shares of the
Trust. A meeting of Shareholders for the purpose of electing or removing one or
more Trustees may be called (i) by the Trustees upon their own vote, or (ii)
upon the demand of Shareholders owning 10% or more of the Shares of the Trust in
the aggregate.
Section 2. Effect of Death, Resignation, etc. of a Trustee.
The death, declination, resignation, retirement, removal, or incapacity of one
or more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration of
Trust. Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled as provided in Article IV, Section 1, the Trustees in office,
regardless of their number, shall have
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all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration of Trust.
Section 3. Powers. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the Board of
Trustees, and such Board shall have all powers necessary or convenient to carry
out that responsibility including the power to engage in transactions of all
kinds on behalf of the Trust. Trustees, in all instances, shall act as
principals and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts, documents and instruments that they may
consider desirable, necessary or appropriate in connection with the
administration of the Trust. Without limiting the foregoing, the Trustees may:
adopt, amend and repeal By-Laws not inconsistent with this Declaration of Trust
providing for the regulation and management of the affairs of the Trust; elect
and remove such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of two or more Trustees who may exercise the powers
and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing
agent, or both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates for
the determination of Shareholders with respect to various matters; declare and
pay dividends and distributions to Shareholders of each Series from the assets
of such Series; establish from time to time, in accordance with the provisions
of Article III, Section 6 hereof, any Series of Shares, each such Series to
operate as a separate and distinct investment medium and with separately defined
investment objectives and policies and distinct investment purpose; and in
general delegate such authority as they consider desirable to any officer of the
Trust, to any committee of the Trustees and to any
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agent or employee of the Trust or to any such custodian, transfer or shareholder
servicing agent, Investment Manager or Principal Underwriter. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration of Trust,
the presumption shall be in favor of a grant of power to the Trustees and unless
otherwise specified herein or required by the 1940 Act or other applicable law,
any action by the Board of Trustees shall be deemed effective if approved or
taken by a majority of the Trustees then in office or a majority of any duly
constituted committee of Trustees. Any action required or permitted to be taken
at any meeting of the Board of Trustees, or any committee thereof, may be taken
without a meeting if all members of the Board of Trustees or committee (as the
case may be) consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the Board of Trustees, or committee,
except as otherwise provided in the 1940 Act.
Without limiting the foregoing, the Trust shall have power and
authority:
(a) To invest and reinvest cash and cash items, to hold cash
uninvested, and to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, write
options on, lend or otherwise deal in or dispose of contracts for the future
acquisition or delivery of all types of securities, futures contracts and
options thereon, and forward currency contracts of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks, preferred
stocks, negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality or organization, or by any bank or savings institution, or by
any corporation or organization organized under the laws of the United States or
of any state,
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territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, futures contracts and options thereon, and forward currency
contracts, to change the investments of the assets of the Trust; and to exercise
any and all rights, powers, and privileges of ownership or interest in respect
of any and all such investments of every kind and description, including,
without limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons, to exercise any of said rights,
powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, or write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust or any Series;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to execute
and deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Trustees shall deem
proper;
(d) To exercise powers and right of subscription or otherwise
which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating
that it is trust property, whether in bearer, unregistered or other negotiable
form, or in its own name or in the name of a custodian or subcustodian or a
nominee or nominees or otherwise or to authorize the custodian or a subcustodian
or a nominee or nominees to deposit the same in a securities depository, subject
in each case to the applicable provisions of the 1940 Act;
(f) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by
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such corporation or issuer; and to pay calls or subscriptions with respect to
any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) To litigate, compromise, arbitrate, settle or otherwise
adjust claims in favor of or against the Trust or a Series, or any matter in
controversy, including but not limited to claims for taxes;
(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
or Series exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property
such insurance as the Trustees may deem necessary, desirable or appropriate for
the conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust or payment of distributions and principal on
its portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, Investment Manager, principal
underwriters, or independent contractors of the Trust, individually against all
claims and liabilities of every nature arising by reason of holding Shares,
holding, being or having held any such office or position, or by reason of any
action alleged to have been taken or omitted by any such Person as Trustee,
officer, employee, agent, Investment Manager, Principal Underwriter, or
independent contractor, including any
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action taken or omitted that may be determined to constitute negligence, whether
or not the Trust would have the power to indemnify such Person against
liability; and
(m) To adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
The Trust shall not be limited to investing in obligations
maturing before the possible termination of the Trust or one or more of its
Series. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall not
be required to obtain any court order to deal with any assets of the Trust or
take any other action hereunder.
Section 4. Payment of Expenses by the Trust. Subject to the
provisions of Article III, Section 6(b), the Trustees are authorized to pay or
cause to be paid out of the principal or income of the Trust or Series, or
partly out of the principal and partly out of income, and to charge or allocate
the same to, between or among such one or more of the Series that may be
established or designated pursuant to Article III, Section 6, all expenses,
fees, charges, taxes and liabilities incurred or arising in connection with the
Trust or Series, or in connection with the management thereof, including, but
not limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, Investment Manager, Principal
Underwriter, auditors, counsel, custodian, transfer agent, Shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur.
Section 5. Ownership of Assets of the Trust. Title to all of
the assets of the Trust shall at all times be considered as vested in the Trust,
except that the Trustees shall have power to cause legal title to any Trust
Property to be held by or in the name of one or more of the Trustees, or in the
name of the
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Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. Upon the resignation, incompetency, bankruptcy, removal,
or death of a Trustee he or she shall automatically cease to have any such title
in any of the Trust Property, and the title of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered. The Trustees may determine that the Trust or the
Trustees, acting for and on behalf of the Trust, shall be deemed to hold
beneficial ownership of any income earned on the securities owned by the Trust,
whether domestic or foreign.
Section 6. Service Contracts.
(a) The Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series with any Person; and any
such contract may contain such other terms as the Trustees may determine,
including without limitation, authority for the Investment Manager to determine
from time to time without prior consultation with the Trustees what investments
shall be purchased, held, sold or exchanged and what portion, if any, of the
assets of the Trust shall be held uninvested and to make changes in the Trust's
investments, and such other responsibilities as may specifically be delegated to
such Person.
(b) The Trustees may also, at any time and from time to time,
contract with any Persons, appointing such Persons exclusive or nonexclusive
distributor or Principal Underwriter for the Shares of one or more of the Series
or other securities to be issued by the Trust. Every such contract may contain
such other terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time
to time, to contract with any Persons, appointing such Person(s) to serve as
custodian(s), transfer agent and/or shareholder servicing agent for the Trust or
one or more of its Series. Every such contract shall comply with such terms as
may be required by the Trustees.
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(d) The Trustees are further empowered, at any time and from
time to time, to contract with any Persons to provide such other services to the
Trust or one or more of the Series, as the Trustees determine to be in the best
interests of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, Manager, adviser, Principal Underwriter,
distributor, or affiliate or agent of or for any Person with
which an advisory, management or administration contract, or
Principal Underwriter's or distributor's contract, or
transfer, shareholder servicing or other type of service
contract may be made, or that
(ii) any Person with which an advisory, management or
administration contract or Principal Underwriter's or
distributor's contract, or transfer, shareholder servicing or
other type of service contract may be made also has an
advisory, management or administration contract, or principal
underwriter's or distributor's contract, or transfer,
shareholder servicing or other service contract, or has other
business or interests with any other Person,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
applicable requirements of the 1940 Act.
ARTICLE V.
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article
III, Sections 5 and 6(d), the Shareholders shall have right to vote only (i) for
the election or removal of Trustees as
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provided in Article IV, Section 1, and (ii) with respect to such additional
matters relating to the Trust as may be required by the applicable provisions of
the 1940 Act, including Section 16(a) thereof, and (iii) on such other matters
as the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger.
Section 2. Voting Power and Meetings. Meetings of the
Shareholders may be called by the Trustees for the purposes described in Section
1 of this Article V. A meeting of Shareholders may be held at any place
designated by the Trustees. Written notice of any meeting of Shareholders shall
be given or caused to be given by the Trustees by delivering personally or
mailing such notice not more than ninety (90), nor less than ten (10) days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust, a written waiver thereof, executed before or
after the meeting by such Shareholder or his or her attorney thereunto
authorized and filed with the records of the meeting, or actual attendance at
the meeting of Shareholders in person or by proxy, shall be deemed equivalent to
such notice.
Section 3. Quorum and Required Vote. Except when a larger
quorum is required by the applicable provisions of the 1940 Act, the presence in
person or by proxy of a majority of the Shares entitled to vote on a matter
shall constitute a quorum at a Shareholders' meeting. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question of adjourning a meeting to another date and
time, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original meeting
without further notice. Subject to the
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provisions of Article III, Section 6(d) and the applicable provisions of the
1940 Act, when a quorum is present at any meeting, a majority of the Shares
voted shall decide any questions except only a plurality vote shall be necessary
to elect Trustees.
Section 4. Action by Written Consent. Any action taken by
Shareholders may be taken without a meeting if all the holders of Shares
entitled to vote on the matter are provided with not less than 7 days written
notice thereof and written consent to the action is filed with the records of
the meetings of Shareholders by the holders of the number of shares that would
be required to approve the matter as provided in Article V, Section 3. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, the Trustees may fix a time, which shall be not more than ninety (90)
nor less than ten (10) days before the date of any meeting of Shareholders, as
the record date for determining the Shareholders having the right to notice of
and to vote at such meeting and any adjournment thereof, and in such case only
Shareholders of record on such record date shall have such right,
notwithstanding any transfer of shares on the books of the Trust after the
record date. For the purpose of determining the Shareholders who are entitled to
receive payment of any dividend or of any other distribution, the Trustees may
fix a date, which shall be before the date for the payment of such dividend or
distribution, as the record date for determining the Shareholders having the
right to receive such dividend or distribution. Nothing in this Section shall be
construed as precluding the Trustees from setting different record dates for
different Series.
ARTICLE VI.
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their
absolute discretion, may prescribe
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and shall set forth in the By-laws or in a duly adopted resolution of the
Trustees such bases and time for determining the per Share net asset value of
the Shares of any Series and the declaration and payment of dividends and
distributions on the Shares of any Series, as they may deem necessary or
desirable.
Section 2. Redemptions and Repurchases. The Trust shall
purchase such Shares as are offered by any Shareholder for redemption, upon
receipt by the Trust or a Person designated by the Trust that the Trust redeem
such Shares or in accordance with such procedures for redemption as the Trustees
may from time to time authorize; and the Trust will pay therefor the net asset
value thereof, in accordance with the By-Laws and the applicable provisions of
the 1940 Act. Payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request for redemption
is received in proper form. The obligation set forth in this Section 2 is
subject to the provision that in the event that any time the New York Stock
Exchange (the "Exchange") is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets held with respect to such Series or during
any other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid in cash
or wholly or partly in kind in accordance with Rule 18f-1 under the 1940 Act if
the Trustees determine that such payment is advisable in the interest of the
remaining Shareholders of the Series of which the Shares are being redeemed.
Subject to the foregoing, the selection and quantity of securities or other
property so paid or delivered as all or part of the redemption price shall be
determined by or under authority of the Trustees. In no case shall the Trust be
liable for any delay of any corporation or other Person in transferring
securities selected for delivery as all or part of any payment in kind.
Section 3. Redemptions at the Option of the Trust. The Trust
shall have the right, at its option, upon 30 days
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<PAGE> 21
notice to the affected Shareholder at any time to redeem Shares of any
Shareholder at the net asset value thereof as described in Section 1 of this
Article VI: (i) if at such time such Shareholder owns Shares of any Series
having an aggregate net asset value of less than a minimum value determined from
time to time by the Trustees; or (ii) to the extent that such Shareholder owns
Shares of a Series equal to or in excess of a maximum percentage of the
outstanding Shares of such Series determined from time to time by the Trustees;
or (iii) to the extent that such Shareholder owns Shares equal to or in excess
of a maximum percentage, determined from time to time by the Trustees, of the
outstanding Shares of the Trust.
Section 4. Transfer of Shares. The Trust shall transfer shares
held of record by any Person to any other Person upon receipt by the Trust or a
Person designated by the Trust of a written request therefore in such form and
pursuant to such procedures as may be approved by the Trustees.
ARTICLE VII.
Compensation and Limitation of Liability
Section 1. Compensation of Trustees. The Trustees as such
shall be entitled to reasonable compensation from the Trust, and they may fix
the amount of such compensation from time to time. Nothing herein shall in any
way prevent the employment of any Trustee to provide advisory, management,
legal, accounting, investment banking or other services to the Trust and to be
specially compensated for such services by the Trust.
Section 2. Indemnification and Limitation of Liability. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee, and, subject to the provisions of the Bylaws, the Trust out of
its assets may indemnify and hold harmless each and every Trustee and officer of
the Trust from and against any and all claims, demands, costs, losses, expenses,
and damages whatsoever arising out of or related to such Trustee's performance
of his or her duties as a Trustee or officer of the
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<PAGE> 22
Trust; provided that nothing herein contained shall indemnify, hold harmless or
protect any Trustee or officer from or against any liability to the Trust or any
Shareholder to which he or she would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued, executed or done by
or on behalf of the Trust or the Trustees or any of them in connection with the
Trust shall be conclusively deemed to have been issued, executed or done only in
or with respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond
or Surety. The exercise by the Trustees of their powers hereunder shall be
binding upon everyone interested in or dealing with the Trust. A Trustee shall
be liable to the Trust and to any Shareholder solely for his or her own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
Section 4. Insurance. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee or officer in connection with any claim,
action, suit or proceeding in which he or she becomes involved by virtue of his
or her capacity or former capacity with the Trust, whether or not the Trust
would have the power to indemnify him or her against such liability under the
provisions of this Article.
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<PAGE> 23
ARTICLE VIII.
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees.
No Person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees or
to see to the application of any payments made or property transferred to the
Trust or upon its order.
Section 2. Termination of Trust or Series. Unless terminated
as provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by the Trustees upon 60 days prior written
notice to the Shareholders. Any Series may be terminated at any time by the
Trustees upon 60 days prior written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may
be), after paying or otherwise providing for all charges, taxes, expenses and
liabilities held, severally, with respect to each Series (or the applicable
Series, as the case may be), whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets held,
severally, with respect to each Series (or the applicable Series, as the case
may be), to distributable form in cash or shares or other securities, and any
combination thereof, and distribute the proceeds held with respect to each
Series (or the applicable Series, as the case may be), to the Shareholders of
that Series, as a Series, ratably according to the number of Shares of that
Series held by the several Shareholders on the date of termination.
Section 3. Merger and Consolidation. The Trustees may cause
(i) the Trust or one or more of its Series to the extent consistent with
applicable law to be merged into or consolidated with another Trust, series or
Person, (ii) the Shares of the Trust or any Series to be converted into
beneficial interests in another business trust (or series thereof), (iii) the
Shares to be exchanged for assets or property under or pursuant to any
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<PAGE> 24
state or federal statute to the extent permitted by law or (iv) a sale of assets
of the Trust or one or more of its Series. Such merger or consolidation, Share
conversion, Share exchange or sale of assets must be authorized by vote as
provided in Article V, Section 3 herein; provided that in all respects not
governed by statute or applicable law, the Trustees shall have power to
prescribe the procedure necessary or appropriate to accomplish a sale of assets,
Share exchange, merger or consolidation including the power to create one or
more separate business trusts to which all or any part of the assets,
liabilities, profits or losses of the Trust may be transferred and to provide
for the conversion of Shares of the Trust or any Series into beneficial
interests in such separate business trust or trusts (or series thereof).
Section 4. Amendments. This Declaration of Trust may be
restated and/or amended at any time by an instrument in writing signed by a
majority of the Trustees then holding office. Any such restatement and/or
amendment hereto shall be effective immediately upon execution and approval. The
Certificate of Trust of the Trust may be restated and/or amended by a similar
procedure, and any such restatement and/or amendment shall be effective
immediately upon filing with the Office of the Secretary of State of the State
of Delaware or upon such future date as may be stated therein.
Section 5. Filing of Copies, References, Headings. The
original or a copy of this instrument and of each restatement and/or amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such restatements and/or
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on a
copy certified by an officer of the Trust to be a copy of this instrument or of
any such restatements and/or amendments. In this instrument and in any such
restatements and/or amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as amended or affected by any such restatements and/or
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or
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<PAGE> 25
effect of this instrument. Whenever the singular number is used herein, the same
shall include the plural; and the neuter, masculine and feminine genders shall
include each other, as applicable. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
Section 6. Applicable Law. This Agreement and Declaration of
Trust is created under and is to be governed by and construed and administered
according to the laws of the State of Delaware and the Delaware Business Trust
Act, as amended from time to time (the "Act"). The Trust shall be a Delaware
business trust pursuant to such Act, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
business trust.
Section 7. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration of Trust are severable,
and if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other applicable laws
and regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration of Trust; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration of Trust in any jurisdiction.
Section 8. Business Trust Only. It is the intention of the
Trustees to create a business trust pursuant to the Act, and thereby to create
only the relationship of trustee and beneficial owners within the meaning of
such Act between the Trustees and each Shareholder. It is not the intention of
the
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<PAGE> 26
Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, joint venture, or any form of legal
relationship other than a business trust pursuant to such Act. Nothing in this
Declaration of Trust shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint stock
association.
Section 9. Use of the Name "The Vanguard Group, Inc.". The
name "The Vanguard Group, Inc." and any variants thereof and all rights to the
use of the name "The Vanguard Group, Inc." or any variants thereof shall be the
sole and exclusive property of The Vanguard Group, Inc. ("VGI"). VGI has
permitted the use by the Trust of the identifying word "Vanguard" and the use of
the name "Vanguard" as part of the name of the Trust and the name of any Series
of Shares. Upon the Trust's withdrawal from the Amended and Restated Funds'
Service Agreement among the Trust, the other investment companies within the
Vanguard Group of Investment Companies and VGI, and upon the written request of
VGI, the Trust and any Series of Shares thereof shall cease to use or in any way
to refer to itself as related to "The Vanguard Group, Inc." or any variant
thereof.
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<PAGE> 27
IN WITNESS WHEREOF, the Trustees named below do hereby make
and enter into this Declaration of Trust as of the 19th day of August, 1996.
- ------------------------------- --------------------------------
Raymond J. Klapinsky Michael S. Miller
- -------------------------------
Ralph K. Packard
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS
100 Vanguard Boulevard
Malvern, PA 19355
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<PAGE> 28
TABLE OF CONTENTS
Page
----
ARTICLE I. Name and Definitions........................................... 1
Section 1. Name................................................. 1
Section 2. Definitions.......................................... 1
(a) The Trust................................................ 1
(b) Trust Property........................................... 1
(c) Trustees................................................. 2
(d) Shares................................................... 2
(e) Shareholder.............................................. 2
(f) Person................................................... 2
(g) 1940 Act................................................. 2
(h) Commission and Principal Underwriter..................... 2
(i) Declaration of Trust..................................... 2
(j) By-Laws.................................................. 2
(k) Interested Person........................................ 3
(l) Investment Manager....................................... 3
(m) Series................................................... 3
ARTICLE II. Purpose of Trust.............................................. 3
ARTICLE III. Shares....................................................... 3
Section 1. Division of Beneficial Interest.......................... 3
Section 2. Ownership of Shares...................................... 4
Section 3. Investments in the Trust................................. 4
Section 4. Status of Shares and Limitation of Personal
Liability............................................. 5
Section 5. Power of Board of Trustees to Change
Provisions Relating to Shares......................... 5
Section 6. Establishment and Designation of Shares.................. 6
(a) Assets Held with Respect to a Particular Series.......... 6
(b) Liabilities Held with Respect to a
Particular Series..................................... 7
(c) Dividends, Distributions, Redemptions, and
Repurchases........................................... 7
(d) Voting................................................... 8
(e) Equality................................................. 8
(f) Fractions................................................ 8
(g) Exchange Privilege....................................... 8
(h) Combination of Series.................................... 8
(i)
<PAGE> 29
Page
----
(i) Elimination of Series..................................... 8
ARTICLE IV. The Board of Trustees.......................................... 9
Section 1. Number, Election and Tenure................................ 9
Section 2. Effect of Death, Resignation, etc.
of a Trustee........................................... 9
Section 3. Powers..................................................... 10
Section 4. Payment of Expenses by the Trust........................... 14
Section 5. Ownership of Assets of the Trust........................... 14
Section 6. Service Contracts.......................................... 15
ARTICLE V. Shareholders' Voting Powers and Meetings........................ 16
Section 1. Voting Powers.............................................. 16
Section 2. Voting Power and Meetings.................................. 17
Section 3. Quorum and Required Vote................................... 17
Section 4. Action by Written Consent.................................. 18
Section 5. Record Dates............................................... 18
ARTICLE VI. Net Asset Value, Distributions, and Redemptions................ 18
Section 1. Determination of Net Asset Value, Net
Income, and Distributions.............................. 18
Section 2. Redemptions and Repurchases................................ 19
Section 3. Redemptions at the Option of the Trust..................... 19
Section 4. Transfer of Shares......................................... 20
.
ARTICLE VII. Compensation and Limitation of Liability...................... 20
Section 1. Compensation of Trustees................................... 20
Section 2. Indemnification and Limitation of Liability................ 20
Section 3. Trustee's Good Faith Action, Expert
Advice, No Bond or Surety.............................. 21
Section 4. Insurance.................................................. 21
ARTICLE VIII. Miscellaneous................................................ 22
Section 1. Liability of Third Persons Dealing
with Trustees.......................................... 22
Section 2. Termination of Trust or Series............................. 22
Section 3. Merger and Consolidation................................... 22
Section 4. Amendments................................................. 23
Section 5. Filing of Copies, References, Headings..................... 23
Section 6. Applicable Law............................................. 24
(ii)
<PAGE> 30
Page
----
Section 7. Provisions in Conflict with Law or Regulations............. 24
Section 8. Business Trust Only........................................ 24
Section 9. Use of the Name "The Vanguard Group, Inc."................. 25
(iii)
<PAGE> 1
EX-99.B2
BY-LAWS
OF
VANGUARD TREASURY FUND
ARTICLE I
FISCAL YEAR AND OFFICES
SECTION 1. FISCAL YEAR. Unless otherwise provided by
resolution of the Board of Trustees, the fiscal year of the Trust shall begin on
the 1st day of December and end on the last day of November.
SECTION 2. DELAWARE OFFICE. The Board of Trustees shall
establish a registered office in the State of Delaware and shall appoint as the
Trust's registered agent for service of process in the State of Delaware an
individual resident of the State of Delaware or a Delaware corporation or a
foreign corporation authorized to transact business in the State of Delaware; in
each case the business office of such registered agent for service of process
shall be identical with the registered Delaware office of the Trust.
SECTION 3. OTHER OFFICES. The Board of Trustees may at any
time establish branch or subordinate offices at any place or places where the
Trust intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of the shareholders for
the election of trustees shall be held in such place as shall be fixed by
resolution of the Board of Trustees and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETINGS. An Annual Meeting of shareholders
will not be held unless the Investment Company Act of 1940 requires the election
of trustees to be acted upon.
SECTION 3. SPECIAL MEETINGS. Special Meetings of the
shareholders may be called at any time by the President, or by a majority of the
Board of Trustees, and shall be called by the Secretary upon written request of
the holders of shares entitled to cast not less than ten percent of all the
votes entitled to be cast at such meeting provided that (a) such request shall
state the purposes of such meeting and the matters proposed to be acted on and
(b) the shareholders requesting such meeting shall have paid to the Trust the
reasonable estimated cost of preparing and
<PAGE> 2
mailing the notice thereof, which the Secretary shall determine and specify to
such shareholders. No special meeting need be called upon the request of
shareholders entitled to cast less than a majority of all votes entitled to be
cast at such meeting to consider any matter which is substantially the same as a
matter voted on at any meeting of the shareholders held during the preceding
twelve months. The foregoing provisions of this section 3 notwithstanding a
special meeting of shareholders shall be called upon the request of the holders
of at least ten percent of the shares entitled to vote for the purpose of
consideration removal of a director from office as provided in section 16(c) of
the Investment Company Act of 1940.
SECTION 4. NOTICE. Not less than ten, nor more than ninety
days before the date of every Annual or Special Shareholders Meeting, the
Secretary shall cause to be mailed to each shareholder entitled to vote at such
meeting at his (her) address (as it appears on the records of the Trust at the
time of mailing) written notice stating the time and place of the meeting and,
in the case of a Special Meeting of Shareholders, shall be limited to the
purposes stated in the notice. Notice of adjournment of a shareholders meeting
to another time or place need not be given, if such time and place are announced
at the meeting.
SECTION 5. RECORD DATE FOR MEETINGS. Subject to the provisions
of the Declaration of Trust, the Board of Trustees may fix in advance a date not
more than ninety, nor less than ten days, prior to the date of any annual or
special meeting of the shareholders as a record date for the determination of
the shareholders entitled to receive notice of, and to vote at any meeting and
any adjournment thereof; and in such case such shareholders and only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to receive notice of and to vote at such meeting and any adjournment
thereof as the case may be, notwithstanding any transfer of any stock on the
books of the Trust after any such record date fixed as aforesaid.
SECTION 6. QUORUM. At any meeting of shareholders, the
presence in person or by proxy of the holders of record of a majority of the
shares issued and outstanding and entitled to vote there shall constitute a
quorum for the transaction of any business at the meeting, except as otherwise
provided by the Investment Company Act of 1940 or in the Trust's Declaration of
Trust. If, however, such quorum shall not be present or represented at any
meeting of the shareholders, the holders of a majority of the shares present or
in person or by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented to a date not more than 120 days
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<PAGE> 3
after the original record date. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 7. VOTING. Each shareholder shall have one vote for
each full share and a fractional vote for each fractional share of stock having
voting power held by such shareholder on the record date set pursuant to Section
5 on each matter submitted to a vote at a meeting of shareholders. Such vote may
be made in person or by proxy. At all meetings of the shareholders, a quorum
being present, all matters shall be decided by majority vote of the shares of
beneficial interest entitled to vote held by shareholders present in person or
by proxy, unless the question is one for which by express provision of the laws
of the State of Delaware, the Investment Company Act of 1940, as from time to
time amended, or the Declaration of Trust, a different vote is required, in
which case such express provision shall control the decision of such question.
At all meetings of shareholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
Chairman of the meeting.
SECTION 8. INSPECTORS. At any election of trustees, the Board
of Trustees prior thereto may, or, if they have not so acted, the Chairman of
the meeting may appoint one or more inspectors of election who shall first
subscribe an oath of affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken.
SECTION 9. STOCK LEDGER AND LIST OF SHAREHOLDERS. It shall be
the duty of the Secretary or Assistant Secretary of the Trust to cause an
original or duplicate share ledger to be maintained at the office of the Trust's
transfer agent. Such share ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection.
SECTION 10. ACTION WITHOUT MEETING. Any action to be taken by
shareholders may be taken without a meeting if (a) all shareholders entitled to
vote on the matter consent to the action in writing, and (b) all shareholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent, and (c) the written consents are filed with the
records of the meetings of shareholders. Such consent shall be treated for all
purposes as a vote at a meeting.
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<PAGE> 4
ARTICLE III
TRUSTEES
SECTION 1. GENERAL POWERS. The business of the Trust shall be
managed under the direction of its Board of Trustees, which may exercise all
powers of the Trust, except such as are by statute, or the Declaration of Trust,
or by these Bylaws conferred upon or reserved to the shareholders.
SECTION 2. NUMBER AND TERM OF OFFICE. The number of trustees
which shall constitute the whole Board shall be determined from time to time by
the Board of Trustees, but shall not be fewer than the minimum number permitted
by applicable laws, nor more than fifteen. Each trustee elected shall hold
office until his successor is elected and qualified. Trustees need not be
shareholders.
SECTION 3. ELECTIONS. Provided a quorum is present, the
trustees shall be elected by the vote of a plurality of the shares present in
person or by proxy, except that any vacancy on the Board of Trustees may be
filled by a majority vote of the Board of Trustees, although less than a quorum,
subject to the requirements of Section 16(a) of the Investment Company Act of
1940.
SECTION 4. PLACE OF MEETING. Meetings of the Board of
Trustees, regular or special, may be held at any place as the Board may from
time to time determine.
SECTION 5. QUORUM. At all meetings of the Board of Trustees,
one-third of the entire Board of Trustees shall constitute a quorum for the
transaction of business provided that in no case may a quorum be less than two
persons. The action of a majority of the trustees present at any meeting at
which a quorum is present shall be the action of the Board of Trustees unless
the concurrence of a greater proportion is required for such action by the
Investment Company Act of 1940, these Bylaws or the Declaration of Trust. If a
quorum shall not be present at any meeting of trustees, the trustees present
thereat may by a majority vote adjourn the meeting from time to time without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of
Trustees may be held without additional notice at such time and place as shall
from time to time be determined by the Board of Trustees provided that notice of
any change in the time or place of such meetings shall be sent promptly to each
trustee
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<PAGE> 5
not present at the meeting at which such change was made in the manner provided
for notice of special meetings.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Trustees may be called by the President on one day's notice to each trustee;
Special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two trustees.
SECTION 8. TELEPHONE MEETING. Members of the Board of Trustees
or a committee of the Board of Trustees may participate in a meeting by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
SECTION 9. INFORMAL ACTIONS. Any action required or permitted
to be taken at any meeting of the Board of Trustees or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
SECTION 10. COMMITTEES. The Board of Trustees may by
resolution passed by a majority of the entire Board appoint from among its
members an Executive Committee and other committees composed of two or more
directors, and may delegate to such committees, in the intervals between
meetings of the Board of Trustees, any or all of the powers of the Board of
Trustees in the management of the business and affairs of the Trust.
SECTION 11. ACTION OF COMMITTEES. In the absence of an
appropriate resolution of the Board of Trustees, each committee may adopt such
rules and regulations governing its proceedings, quorum and manner of acting as
it shall deem proper and desirable, provided that the quorum shall not be less
than two trustees. The committees shall keep minutes of their proceedings and
shall report the same to the Board of Trustees at the meeting next succeeding,
and any action by the committee shall be subject to revision and alteration by
the Board of Trustees, provided that no rights of third persons shall be
affected by any such revision or alteration. In the absence of any member of
such committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Trustees to act in the
place of such absent member.
SECTION 12. COMPENSATION. Any trustee, whether or not he is a
salaried officer or employee of the Trust, may be compensated for his services
as trustee or as a member of a committee of trustees, or as Chairman of the
Board or chairman of
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<PAGE> 6
a committee by fixed periodic payments or by fees for attendance at meetings or
by both, and in addition may be reimbursed for transportation and other
expenses, all in such manner and amounts as the Board of Trustees may from time
to time determine.
ARTICLE IV
NOTICES
SECTION 1. FORM. Notices to shareholders shall be in writing
and delivered personally or mailed to the shareholders at their addresses
appearing on the books of the Trust. Notices to trustees shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
trustees at their addresses appearing on the books of the Trust. Notice by mail
shall be deemed to be given at the time when the same shall be mailed. Subject
to the provisions of the Investment Company Act of 1940, notice to trustees need
not state the purpose of a regular or special meeting.
SECTION 2. WAIVER. Whenever any notice of the time, place or
purpose of any meeting of shareholders, trustees or a committee is required to
be given under the provisions of the Declaration of Trust or these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of shareholders in person
or by proxy, or at the meeting of Trustees or a committee in person, shall be
deemed equivalent to the giving of such notice to such persons.
ARTICLE V
OFFICERS
SECTION 1. EXECUTIVE OFFICERS. The officers of the Trust shall
be chosen by the Board of Trustees and shall include a President, a Secretary
and a Treasurer. The Board of Trustees may, from time to time, elect or appoint
a Controller, one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The Board of Trustees, at its discretion, may also appoint a
director as Chairman of the Board who shall perform and execute such executive
and administrative duties and powers as the Board of Trustees shall from time to
time prescribe. The same person may hold two or more offices, except that no
person shall be both President and Vice-President and no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the Declaration
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<PAGE> 7
of Trust or these Bylaws to be executed, acknowledged or verified by two or more
officers.
SECTION 2. ELECTION. The Board of Trustees shall choose a
President, a Secretary and a Treasurer.
SECTION 3. OTHER OFFICERS. The Board of Trustees from time to
time may appoint such other officers and agents as it shall deem advisable, who
shall hold their offices for such terms and shall exercise powers and perform
such duties as shall be determined from time to time by the Board. The Board of
Trustees from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
SECTION 4. COMPENSATION. The salaries or other compensation of
all officers and agents of the Trust shall be fixed by the Board of Trustees,
except that the Board of Trustees may delegate to any person or group of persons
the power to fix the salary or other compensation of any subordinate officers or
agents appointed pursuant to Section 3 of this Article V.
SECTION 5. TENURE. The officers of the Trust shall serve at
the pleasure of the Board of Trustees. Any officer or agent may be removed by
the affirmative vote of a majority of the Board of Trustees whenever, in its
judgment, the best interests of the Trust will be served thereby. In addition,
any officer or agent appointed pursuant to Section 3 may be removed, either with
or without cause, by any officer upon whom such power of removal shall have been
conferred by the Board of Trustees. Any vacancy occurring in any office of the
Trust by death, resignation, removal or otherwise shall be filled by the Board
of Trustees, unless pursuant to Section 3 the power of appointment has been
conferred by the Board of Trustees on any other officer.
SECTION 6. PRESIDENT. The President shall be the Chief
Executive Officer of the Trust and shall see that all orders and resolutions of
the Board are carried into effect. The President shall also be the Chief
Administrative Officer of the Trust and shall perform such other duties and have
such other powers as the Board of Trustees may from time to time prescribe.
SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board,
if one shall be chosen, shall perform and execute such executive duties and
administrative powers as the Board of Trustees shall from time to time
prescribe.
SECTION 8. VICE-PRESIDENT. The Vice-Presidents, in order of
their seniority, shall, in the absence or disability of the President, perform
the duties and exercise the powers of the
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<PAGE> 8
President and shall perform such other duties as the Board of Trustees or the
President may from time to time prescribe.
SECTION 9. SECRETARY. The Secretary shall attend all meetings
of the Board of Trustees and all meetings of the shareholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. He shall give, or cause to be given, notice of meetings of the
shareholders and of the Board of Trustees, shall have charge of the records of
the Trust, including the stock books, and shall perform such other duties as may
be prescribed by the Board of Trustees or Chief Executive Officer, under whose
supervision he shall be. He shall keep in safe custody the seal of the Trust
and, when authorized by the Board of Trustees, shall affix and attest the same
to any instrument requiring it. The Board of Trustees may give general authority
to any other officer to affix the seal of the Trust and to attest the affixing
by his signature.
SECTION 10. ASSISTANT SECRETARIES. The Assistant Secretaries
in order of their seniority, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties as the Board of Trustees shall prescribe.
SECTION 11. TREASURER. The Treasurer, unless another officer
has been so designated, shall be the Chief Financial Officer of the Trust. He
shall have general charge of the finances and books of account of the Trust.
Except as otherwise provided by the Board of Trustees, he shall have general
supervision of the funds and property of the Trust and of the performance by the
custodian of its duties with respect thereto. He shall render to the Board of
Trustees, whenever directed by the Board, an account of the financial condition
of the Trust and of all his transactions as Treasurer. He shall cause to be
prepared annually a full and correct statement of the affairs of the Trust,
including a balance sheet and a statement of operations for the preceding fiscal
year. He shall perform all the acts incidental to the office of Treasurer,
subject to the control of the Board of Trustees.
SECTION 12. ASSISTANT TREASURER. The Assistant Treasurer shall
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties as the Board of
Trustees may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
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SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose
of this Article, "agent" means any person who is or was a Trustee or officer of
this Trust and any person who, while a trustee or officer of this Trust, is or
was serving at the request of this Trust as a Trustee, director, officer,
partner, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise; "Trust" includes any
domestic or foreign predecessor entity of this Trust in a merger, consolidation,
or other transaction in which the predecessor's existence ceased upon
consummation of the transaction; "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative; and "expenses" includes without limitation attorney's fees and
any expenses of establishing a right to indemnification under this Article.
SECTION 2. ACTIONS OTHER THAN BY TRUST. This Trust shall
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of this Trust) by
reason of the fact that such person is or was an agent of this Trust, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if it is determined that
person acted in good faith and reasonably believed: (a) in the case of conduct
in his official capacity as an agent of the Trust, that his conduct was in the
Trust's best interests and (b) in all other cases, that his conduct was at least
not opposed to the Trust's best interests and (c) in the case of a criminal
proceeding, that he had no reasonable cause to believe the conduct of that
person was unlawful. The termination of any proceeding by judgment, order or
settlement shall not of itself create a presumption that the person did not meet
the requisite standard of conduct set forth in this Section. The termination of
any proceeding by conviction, or a plea of nolo contendere or its equivalent, or
an entry of an order of probation prior to judgment, creates a rebuttable
presumption that the person did not meet the requisite standard of conduct set
forth in this Section.
SECTION 3. ACTIONS BY THE TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be made a party to any
proceeding by or in the right of this Trust to procure a judgment in its favor
by reason of the fact that that person is or was an agent of this Trust, against
expenses actually and reasonably incurred by that person in connection with the
defense or settlement of that action if that person acted in good faith, in a
manner that person believed to be in the best interests of this Trust and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances.
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SECTION 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any
provision to the contrary contained herein, there shall be no right to
indemnification for 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 agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this
Article:
(a) In respect of any proceeding as to which that person
shall have been adjudged to be liable on the basis
that personal benefit was improperly received by him,
whether or not the benefit resulted from an action
taken in the person's official capacity; or
(b) In respect of any proceeding as to which that person
shall have been adjudged to be liable in the
performance of that person's duty to this Trust,
unless and only to the extent that the court in which
that action was brought shall determine upon
application that in view of all the relevant
circumstances of the case, that person is fairly and
reasonably entitled to indemnity for the expenses
which the court shall determine; however, in such
case, indemnification with respect to any proceeding
by or in the right of the Trust or in which liability
shall have been adjudged by reason of the disabling
conduct set forth in the preceding paragraph shall be
limited to expenses; or
(c) Of amounts paid in settling or otherwise disposing of
a proceeding, with or without court approval, or of
expenses incurred in defending a proceeding which is
settled or otherwise disposed of without court
approval, unless the required approval set forth in
Section 6 of this Article is obtained.
SECTION 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this Trust has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in Sections 2 or 3 of this Article before
the court or other body before whom the proceeding was brought, the agent shall
be indemnified against expenses actually and reasonably incurred by the agent in
connection therewith, provided that the Board of Trustees, including a majority
who are disinterested, non-party Trustees, also determines that based upon a
review of the facts,
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<PAGE> 11
the agent was not liable by reason of the disabling conduct referred to in
Section 4 of this Article.
SECTION 6. REQUIRED APPROVAL. Except as provided in Section 5
of this Article, any indemnification under this Article shall be made by this
Trust only if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article and is not prohibited from indemnification because of the disabling
conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who
are not parties to the proceeding and are not
interested persons of the Trust (as defined in the
Investment Company Act of 1940);
(b) A written opinion by an independent legal counsel; or
(c) The shareholders; however, shares held by agents who
are parties to the proceeding may not be voted on the
subject matter under this Sub-Section.
SECTION 7. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this Trust before the final disposition of the
proceeding if (a) receipt of a written affirmation by the agent of his good
faith belief that he has met the standard of conduct necessary for
indemnification under this Article and a written undertaking by or on behalf of
the agent, such undertaking being an unlimited general obligation to repay the
amount of the advance if it is ultimately determined that he has not met those
requirements, and (b) a determination that the facts then known to those making
the determination would not preclude indemnification under this Article.
Determinations and authorizations of payments under this Section must be made in
the manner specified in Section 6 of this Article for determining that the
indemnification is permissible.
SECTION 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
Trustees and officers of this Trust or any subsidiary hereof may be entitled by
contract or otherwise.
SECTION 9. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Sections 5 or 6 in any
circumstances where it appears:
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<PAGE> 12
(a) That it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a
resolution of the shareholders, or an agreement in
effect at the time of accrual of the alleged cause of
action asserted in the proceeding in which the
expenses were incurred or other amounts were paid
which prohibits or otherwise limits indemnification;
or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a
settlement.
SECTION 10. INSURANCE. Upon and in the event of a
determination by the Board of Trustees of this Trust to purchase such insurance,
this Trust shall purchase and maintain insurance on behalf of any agent or
employee of this Trust against any liability asserted against or incurred by the
agent or employee in such capacity or arising out of the agent's or employee's
status as such to the fullest extent permitted by law.
SECTION 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article
does not apply to any proceeding against any Trustee, investment manager or
other fiduciary of an employee benefit plan in that person's capacity as such,
even though that person may also be an agent of this Trust as defined in Section
1 of this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
SHARES OF BENEFICIAL INTEREST
SECTION 1. CERTIFICATES. A certificate or certificates
representing and certifying the class and the full, but not fractional, number
of shares of beneficial interest owned by each shareholder in the Trust shall
not be issued except as the Board of Trustees may otherwise determine from time
to time. Any such certificate issued shall be signed by facsimile signature or
otherwise by the President or a Vice-President and counter-signed by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
SECTION 2. SIGNATURE. In case any officer who has signed any
certificate ceases to be an officer of the Trust before the certificate is
issued, the certificate may nevertheless be issued by the Trust with the same
effect as if
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the officer had not ceased to be such officer as of the date of its issue.
SECTION 3. RECORDING AND TRANSFER WITHOUT CERTIFICATES. The
Trust shall have the full power to participate in any program approved by the
Board of Trustees providing for the recording and transfer of ownership of the
Trust's shares by electronic or other means without the issuance of
certificates.
SECTION 4. LOST CERTIFICATES. The Board of Trustees may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust alleged to have been stolen, lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to have been stolen, lost or destroyed, or
upon other satisfactory evidence of such theft, loss or destruction and may in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such stolen, lost or destroyed certificate or certificates, or his
legal representative, to give the Trust a bond with sufficient surety, to the
Trust to indemnify it against any loss or claim that may be made by reason of
the issuance of a new certificate.
SECTION 5. TRANSFER OF SHARES. Transfers of shares of
beneficial interest of the Trust shall be made on the books of the Trust by the
holder of record thereof (in person or by his attorney thereunto duly authorized
by a power of attorney duly executed in writing and filed with the Secretary of
the Trust) (i) if a certificate or certificates have been issued, upon the
surrender of the certificate or certificates, properly endorsed or accompanied
by proper instruments of transfer, representing such shares, or (ii) as
otherwise prescribed by the Board of Trustees. Every certificate exchanged,
surrendered for redemption or otherwise returned to the Trust shall be marked
"Canceled" with the date of cancellation.
SECTION 6. REGISTERED SHAREHOLDERS. The Trust shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by applicable law or the Declaration of Trust.
SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board of
Trustees may, from time to time, appoint or remove transfer agents and or
registrars of the Trust, and they may appoint the same person as both transfer
agent and registrar. Upon any such
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appointment being made, all certificates representing shares of beneficial
interest thereafter issued shall be countersigned by such transfer agent and
shall not be valid unless so countersigned.
SECTION 8. STOCK LEDGER. The Trust shall maintain an original
stock ledger containing the names and addresses of all shareholders and the
number and class of shares held by each shareholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within reasonable time for visual inspection.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. CUSTODIANSHIP. Except as otherwise provided by
resolution of the Board of Trustees, the Trust shall place and at all times
maintain in the custody of a custodian (including any sub-custodian for the
custodian) all funds, securities and similar investments owned by the Trust.
Subject to the approval of the Board of Trustees, the custodian may enter into
arrangements with securities depositories, provided such arrangements comply
with the provisions of the Investment Company Act of 1940 and the rules and
regulations promulgated thereunder.
SECTION 2. EXECUTION OF INSTRUMENTS. All deeds, documents,
transfers, contracts, agreements and other instruments requiring execution by
the Trust shall be signed by the President or a Vice President.
SECTION 3. NET ASSET VALUE. The net asset value per share
shall be determined separately as to each class of the Trust's shares, by
dividing the sum of the total market value of the class's investments and other
assets, less any liabilities, by the total outstanding shares of such class,
subject to the Investment Company Act of 1940 and any other applicable Federal
securities law or rule or regulation currently in effect.
ARTICLE IX
AMENDMENTS
The Board of Trustees shall have the power to make, alter and
repeal the Bylaws of the Trust.
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EX-99.B9
SECOND AMENDED AND RESTATED FUNDS' SERVICE AGREEMENT
This second Amended and Restated Funds' Service Agreement, made as of
the 10th day of May, 1993 (the "Agreement"), between and among the 33 investment
companies registered under the Investment Company Act of 1940 ("1940 Act"),
whose names are set forth on the signature page of this Agreement, which
together with any additional investment companies which may become a party to
this Agreement pursuant to Section 5.4 are collectively called the "Funds"; and
The Vanguard Group, Inc., a Pennsylvania corporation ("Service Company").
Whereas, each of the Funds has heretofore determined (as evidenced by,
among many documents, prior versions* of this Agreement (the "Prior
Agreements"), and by prospectuses and proxy statements of the Funds related
thereto): (i) to manage and perform the corporate management, administrative and
share distribution functions required for its continued operation, (ii) to
create a structure which enhances the independence of the Funds from the
providers of external services, (iii) to share, on an equitable and fair basis,
with all of the other Funds the expenses of establishing the means to accomplish
these objectives at the lowest reasonable cost; and
Whereas, each of the Funds: (i) has heretofore determined that these
objectives can best be accomplished by establishing a company: (a) to be
wholly-owned by the Funds; (b) to provide corporate management, administrative,
and distribution services, and upon the reasonable request of any Fund to
provide other service to such Fund at cost; (c) to employ the executive,
managerial, administrative, secretarial and clerical personnel necessary or
appropriate to perform such services; and (d) to acquire such assets and to
obtain such facilities and equipment as are necessary or appropriate to carry
out such services, and to make those assets available to the Funds; and (ii)
since May 1, 1975 (or the commencement of its operations after this date) has
utilized Service Company, pursuant to the provisions of the Prior Agreements;
and
Whereas, each of the Funds recognizes that it may, from time to time,
be in the best interests of the Funds (i) for Service Company to provide similar
services to investment companies other than the Funds, (ii) for the Funds to
organize, from time to time, new investment companies which are intended to
become parties to this Agreement; and, (iii) for Service Company to engage in
business activities (directly or through subsidiaries), supportive of the Funds'
operations as investment companies; and
Whereas, each of the Funds desires to enter into a completely
integrated Seconded Amended and Restated Funds' Service Agreement with the other
Funds to set forth the current terms and provisions of the relationships which
the Funds have determined to establish;
Now, Therefore, each Fund agrees with each and all of the other Funds,
and with Service Company, as follows:
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*Funds' Service Agreement dated May 1, 1975; an Amended and Restated Funds'
Service Agreement dated October 1, 1977; and an Amended and Restated Funds'
Service Agreement dated May 10, 1993, as thereafter amended.
<PAGE> 2
1. CAPITALIZATION AND ASSETS OF SERVICE COMPANY
1.1 Capital and Assets. To provide the Service Company with the cash
and with the office space, facilities and equipment necessary for it to
discharge its responsibilities hereunder, each Fund agrees:
A. To make cash investments in the Service Company as provided
in Sections 1.2, 1.3 and 1.4.
B. To assign and transfer to Service Company on and after May
1, 1975 any and all right, title and interest which the Funds may have
in any office facilities and equipment necessary for it to discharge
its responsibilities and in any other assets which Service Company may
develop or acquire, subject only to the rights reserved in Section 1.6
(concerning certain major assets). Section 5.2 (concerning rights upon
withdrawal) and Section 5.3 (concerning rights upon termination) of the
Agreement.
1.2 Cash Investments in Service Company. To provide Service Company
with such cash as may be necessary or appropriate from time to time to
accomplish the purposes of the Funds and to discharge its responsibilities
hereunder, each Fund agrees to purchase, for cash, shares of common stock of
Service Company ("Shares") or such other securities of Service Company
(hereafter referred to as "other securities") upon the favorable vote of the
holders of a majority of the Shares adopting a resolution setting forth the
terms and provisions of the purchase. Provided, however, that:
A. Without the consent of all of the Funds, the date for the
purchase of Shares or other securities shall not be less than 15 days
following the date on which the resolution is approved by shareholders.
B. The cash purchase price to be paid by any Fund for the
Shares or other securities, expressed as a percentage of the total
purchase price for the additional securities to be paid by all of the
Funds shall not exceed the percentage which the then current net assets
of the Fund bears to the aggregate current net assets of all of the
Funds as of the most recent month-end preceding the purchase date.
1.3 Periodic Adjustments of Cash Investments. To maintain and
re-establish periodically a fair and proportionate ratio of cash investments by
each Fund in the Service Company as compared to its then current net assets,
each Fund agrees to purchase from one or more of the other Funds, or to sell one
or more of the Funds, sufficient Shares or other securities to re-establish the
ratio.
A. Such purchases and sales shall be made (1) as of the last
business day of any month upon the addition or withdrawal of any Fund
as a party to this Agreement, provided that if the addition or
withdrawal of a Fund creates no material disparity in the ratios (as
determined by the Service Company's Board of Directors), and no Fund
requests that an adjustment be made, the adjustment may be deferred
until the close of the Service Company's fiscal year; (2) in connection
with additional investments pursuant to Section 1.2; and (3) annually
as of the close of the Service Company's fiscal year, on a date fixed
by Service Company's Board of Directors within 90 days after the close
of the fiscal year unless there is no material disparity in the ratios
(as determined by the Service Company's Board of Directors) and no Fund
requests that an adjustment be made.
<PAGE> 3
B. The cash purchases and sale price of the Share or other
securities shall be for each Fund (1) in the case of Shares, the fair
market value of Shares determined in accord with generally accepted
accounting principles and procedures established by the Board of
Directors of Service Company; and (2) in the case of debt securities,
the face value thereof.
C. Unless specifically required by applicable law, the
issuance and transfer of Shares or other securities of Service Company,
and the cash investments of the Funds in Service Company, may be
evidenced by proper records of Service Company; and, no certificates
need be issued.
1.4 Limitation Upon Funds' Obligations to Make Cash Investments or
Purchases. Notwithstanding the provisions of Sections 1.1, 1.2 and 1.3, above,
no Fund shall be obligated to purchase Shares or other securities of Service
Company if, as a result of such purchase the Fund would thereby have invested in
cash a total of more than 0.40% of its then current net assets in Shares or
other securities of Service Company.
1.5 Restrictions on Transfer of Shares or Other Securities. Each Fund
agrees that it will not, without the written consent of all other parties to
this Agreement, transfer or dispose of or encumber any of its Shares or other
securities of Service Company except as provided in this Agreement, and that, if
issued, each certificate for Shares or other securities of Service Company will
be stamped with a legend referring to this restriction.
1.6 Assets of Service Company.The Funds agree that Service Company may
acquire, by purchase or lease, office space, furniture, equipment, supplies,
files, records, computer hardware and software, and other assets necessary or
appropriate for the discharge of the Service Company's responsibilities
hereunder. Each of the Funds hereby assigns and transfers to Service Company any
and all right, title and interest that it may have or hereafter acquire in any
such assets, subject to the rights of each Fund (A) to receive the then fair
value of such assets upon the purchase or sale of Shares pursuant to this
Agreement, (B) to the continued use of such assets in the administration of the
business affairs of a Fund so long as the Fund remains a party to this
Agreement.
1.7 Borrowing by Service Company. The Funds agree that Service Company
may borrow money, and may issue a note or other security in connection with such
borrowing, as long as such borrowing, is in connection with the discharge of
Service Company's responsibilities hereunder and is undertaken in accord with
procedures approved by the Service Company's Board of Directors.
II. SERVICES TO BE OBTAINED INDEPENDENTLY BY EACH FUND
2.1 Services and Expenses. Each Fund shall, at its own expense, obtain
from Service Company or an outside vendor (as that Fund's Board of Directors
shall determine):
A. Services of an independent public accountant.
B. Services of outside legal counsel.
C. Transfer agency services, including "shareholder services."
D. Custodian, registrar and dividend disbursing services.
<PAGE> 4
E. Brokerage fees, commissions and transfer taxes in
connection with the purchase and sale of securities for its investment
portfolio.
F. Investment advisory services.
G. Taxes and other fees applicable to its operations.
H. Costs incident to its annual or special meetings of
shareholders, including but not limited to legal and accounting fees,
and the preparation, printing and mailing of proxy materials.
I. Directors' fees.
J. Costs incurred in the continued maintenance of its
corporate existence, including reports to shareholders and government
agencies, and the expenses, if any, attributable to the registration of
the Fund's shares with Federal and state regulatory authorities.
K. And, in general and except as provided in Section 3.2(B),
any other costs directly attributable to and identified with a
particular Fund or Funds rather than all Funds which are parties to
this Agreement.
2.2 Disbursement of Payment for These Services. Notwithstanding the
provisions of Section 2.1 above, Service Company may, as agent for any Fund,
disburse to third parties payments for any of the foregoing services or
expenses. Each Fund shall reimburse Service Company promptly for such
disbursements made on behalf of the Fund.
III. SERVICES PROVIDED BY AND EXPENSES OF SERVICE COMPANY
3.1 Services to be Provided to Funds. Service Company shall with
respect to each Fund, subject to the direction and control of the Board of
Directors and officers of the Fund:
A. Manage, administer and/or conduct the general business
activities of the Fund.
B. Provide the personnel and obtain the office space,
facilities and equipment necessary to perform such general business
activities under the direction of the Funds' executive officers (who
may also be officers of Service Company) who will have the full
responsibility for the general management of these functions.
C. Establish wholly-owned subsidiaries, and supervise the
management and operations of such subsidiaries, as are necessary or
appropriate to carry on or support the business activities of the Fund;
and authorize such subsidiaries to perform such other functions for the
Funds, including organizing new investment companies which are intended
to become parties to this Agreement pursuant to Section 5.4, as Service
Company's Board of Directors shall determine.
No provisions hereof shall prohibit the Service Company from performing
such additional services to the Fund as the Fund's Board of Directors
may appropriately request and which two-thirds of the shareholders of
the Service Company shall approve.
3.2 Expenses of Operation of Service Company. Each of the Funds agrees
to pay to the Service Company, within 10 days after the last business day of
each month or at such other
<PAGE> 5
time as agreed to by the Fund and the Service Company, the Fund's portion of the
actual cost of operation (determined in accord with generally accepted
accounting principles) of Service Company for each monthly period, or for such
other period as is agreed upon, during which the Fund is a party to this
Agreement.
A. Corporate Management and Administrative Expenses. A Fund's
portion of the cost of operation of Service Company shall mean its
share of the direct and indirect expenses of Service Company's
providing corporate management and administrative services, including
distribution services of an administrative nature, as allocated among
the Funds with allocation of indirect costs based on one or more of the
following methods of allocation:
(1) Net Assets: The proportionate allocation of
expenses based upon the value of each Fund's net assets,
computed as a percentage of the value of total net assets of
all Funds receiving services from Service Company, determined
at the end of the last preceding monthly period.
(2) Personnel Time: The proportionate allocation of
expenses based upon a summary by each Fund of the time spent
by each employee who works directly on the affairs of one or
more of the Funds, computed as a percentage of the total time
spent by such employee on the affairs of all of the Funds.
(3) Shareholder Accounts: The proportionate
allocation of expenses based upon the number of each Fund's
shareholder accounts and transaction activity in those
accounts, measured over a period of time, relative to the
total number of shareholder accounts and transaction activity
in those accounts for all Funds receiving number of portfolio
transactions for all Funds receiving services from the Service
Company during such period.
(4) Such other methods of allocation as may be
approved by the Board of Directors of the Service Company
based upon its determination that the allocation method is
fair to each Fund in view of (i) the nature, amount and
purpose of the expenditure, (ii) the benefits, if any, to be
derived directly by each Fund relative to the benefits derived
by other Funds, (iii) the need or desirability for the Funds
as a group to provide competitive investment programs and
services at competitive prices for the group to survive and
grow, (iv) the benefits which each Fund derives by being a
member of a strong Fund group, and (v) such other factors as
the Board considers relevant to the specific expenditure and
allocation.
B. Distribution Expenses. Each of the Funds expressly agrees
to pay to Service Company, as requested, the Fund's portion of the
actual cost of distributing shares of the Funds, which shall mean its
share of all of the direct and indirect expenses of a marketing and
promotional nature including, but not limited to, advertising, sales
literature and sales personnel, as well as expenditures on behalf of
any newly organized registered investment company which is to become a
party of this Agreement pursuant to Section 5.4. The cost of
distributing shares of the Funds shall not include distribution-related
expenses of an administrative nature, which shall be allocated among
the Funds pursuant to Section 3.2(A). Distribution expenses of a
marketing and promotional nature shall be allocated
<PAGE> 6
among the Funds in the manner approved by the Securities and Exchange
Commission in Investment Company Act Release No. 11645 (Feb. 25, 1981):
(1) 50% of these expenses will be allocated based upon
each Fund's average month-end assets during the preceding
quarter relative to the average month-end assets during
preceding quarter of the Funds as a group.
(2) 50% of these expenses will be allocated initially
among the Funds based upon each Fund's sales for the 24 months
ended with the last day of the preceding quarter relative to the
sales of the Funds as a group for the same period. (Shares
issued pursuant to a reorganization shall be excluded from the
sales of a Fund and the Funds as a group.)
(3) Provided, however, that no Fund's aggregate
quarterly contribution for distribution expenses, expressed as a
percentage of its assets, shall exceed 125% of the average
expenses for the Funds as a Group, expressed as a percentage of
the total assets of the Funds. Expenses not charged to a
particular Fund(s) because of this 125% limitation shall be
re-allocated to other Funds on iterative basis; and that no
Fund's annual expenses for distribution shall exceed 0.2% of its
average month-end net assets.
IV. CONCERNING THE SERVICE COMPANY
4.1 Name. Each Fund acknowledges and agrees:
A. that the name "The Vanguard Group, Inc.", and any variants
thereof used to identify (1) the Funds as a group, (2) any Fund as a
member of a group being served by Service Company, or (3) any other
person as being served or related to Service Company (whether now in
existence or hereafter created), shall be the sole and exclusive
property of Service Company, its affiliates and its successors.
B. That Service Company shall have the sole and exclusive
right to permit the use of said name or variants thereof so long as
this Agreement or any amendments thereto are effective.
C. That upon its withdrawal from this Agreement and upon the
written request of Service Company, the Fund shall cease to use, or in
any way to refer to itself as related to, "The Vanguard Group, Inc." or
any variant thereof.
The foregoing agreements on the part of each Fund are hereby
made binding upon it, its directors, officers, shareholders and
creditors and all other persons claiming under or through it.
4.2 Services to Others. The Service Company may render services to any
person other than the Funds so long as:
A. The services to be rendered to the Funds hereunder are not
impaired thereby.
B. The terms and provisions upon which the services are to be
rendered have been approved by the holders of a majority of the Shares.
C. The services rendered for compensation and, to the extent
achievable, for the purpose of gaining a profit thereon.
<PAGE> 7
D. Any income earned and fees received by Service Company
shall be used to reduce the total costs and expenses of Service
Company.
4.3 Books, Records and Audits of Service Company. The Service Company,
and any subsidiary established pursuant to Section 3.1(C), shall maintain
complete, accurate and current books, records and financial statements
concerning its activities. To the extent appropriate it will preserve said
records in the manner and for the periods prescribed by law. Financial records
and statements shall be kept in accord with generally accepted accounting
principles and shall be audited at least annually by independent public
accountants (who may also be accountants for any of the Funds). Within 120 days
after the close of Service Company's fiscal year it shall deliver to each Fund a
copy of its audited financial statements for that year and the accountants
report thereon. Service Company, on behalf of itself and any subsidiary,
acknowledges that all of the records they shall prepare and maintain pursuant to
this Agreement shall be the property of the Funds and that upon a request of any
Fund they shall make the Fund's records available to it, along with such other
information and data as are reasonably requested by the Fund, for inspection,
audit or copying, or turn said records over to the Fund.
4.4 Indemnification.
A. Each Fund (herein the "Indemnitor") agrees to indemnify,
hold harmless and reimburse (herein "indemnify") every other Fund,
Service Company and/or any subsidiary of Service Company (herein the
"Indemnitee"):
(1) which Indemnitee (a) was or is a party to, or is
threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (herein a "suit"), or (b)
incurs an actual economic loss or expense (herein a "loss").
(2) if: (a) such suit or loss arises from an action
or failure to act, event, occurrence, transaction or other
analogous happening (herein an "event") under circumstances in
which the indemnitee is involved in a suit or incurs a loss.
(i) as a result substantially of, or
attributable primarily to, its being a party to this
Agreement, or to its indirect participation in
transactions contemplated by this Agreement; and
(ii) where the suit or loss arises primarily
and substantially from an event related primarily and
substantially to the business and/or operations of
the Indemnitor; and
(b) an independent third party, who may but
need not be legal counsel for the Funds, advises the
Funds in writing (I) that the condition set forth in
"(1)" and "(2)(a)" have occurred and (ii) that the
Indemnitee is without significant fault or
responsibility for the suit or loss as measured by
the comparative conduct of the Indemnitor and
Indemnitee and by the purposes sought to be
accomplished by this Agreement.
B. The financial obligations of the Indemnitor under this
Section shall be limited to:
(1) In the case of a suit, to expenses (including
attorneys' fees), actually incurred by the Indemnitee. The
termination of any suit by judgment, order, settlement, or
upon a plea of nolo contendere or its equivalent, shall not,
of itself,
<PAGE> 8
create a presumption that the Indemnitee is not entitled to be
indemnified hereunder.
(2) In the case of an event, to losses and/or
expenses (including attorneys' fees) actually incurred by the
Indemnitee.
The Indemnitee shall not be liable financially
hereunder for lost profits in the case of either a suit or
loss.
C. Expenses incurred in defending a suit or resolving an event
may be paid by the prospective Indemnitor in advance of the final
disposition of such suit or event if authorized by the Board of
Directors of the prospective Indemnitor in the specific case upon
receipt of an undertaking by or on behalf of the prospective indemnitee
to repay such amount unless it shall ultimately be determined that the
Indemnitee is entitled to be indemnified by the Indemnitor as provided
in this Section.
D. The indemnification provided by this Section shall not be
deemed exclusive of any other rights to which the Indemnitee may be
entitled under any agreement or otherwise.
V. TERM OF AGREEMENT
5.1 Effective Period. This Agreement shall become effective on the date
first written above, and shall continue in full force and effect as to all
parties hereto until terminated or amended by mutual agreement of all parties
hereto. The withdrawal pursuant to Section 5.2(A) or 5.2(B) of one or more of
the Funds from this Agreement shall not affect the continuance of this Agreement
except as to the parties withdrawing.
5.2 Withdrawal from Agreement.
A. Any Fund may elect to withdraw from this Agreement
effective at the end of any monthly period by giving at least 90 days'
prior written notice to each of the parties to this Agreement. Upon the
written demand of all other Funds which are parties to this Agreement a
Fund shall withdraw, and in the event of its failure to do so shall be
deemed to have withdrawn, from this Agreement; such demand shall
specify the date of withdrawal which shall be at the end of any monthly
period at least 90 days from the time of service of such demand.
B. In the event of the withdrawal of any Fund from this
Agreement, all its rights and obligations, except for lease
commitments, under this Agreement (except such rights or obligations as
have accrued prior to the date of withdrawal) shall terminate as of the
date of the withdrawal. The withdrawing Fund shall surrender its Shares
to Service Company, and (1) shall be entitled to receive from Service
Company an amount equal to the excess of the fair value of (i) its
Shares of other securities Service Company as of the date of its
withdrawal less (ii) its proportionate interest in any liabilities of
Service Company, including when appropriate any commitments of Service
Company and unexpired leases at the date of withdrawal; (2) shall be
obligated to pay to Service Company an amount equal to the excess of
(ii) over (i). Such amount to be received from or paid to Service
Company shall be determined by the favorable vote of the holders of a
majority of the Shares whose determination shall be conclusive upon the
Funds. Any amount found payable by Service Company to the withdrawing
Fund shall be recoverable
<PAGE> 9
by Service Company from the Funds remaining under this Agreement in
accordance with the provisions of Sections 1.2, 1.3 and 1.4 hereof.
5.3 Termination by Mutual Consent. In the event that all Funds withdraw
from this Agreement without entering into a comparable successor agreement, each
Fund shall surrender its Shares to Service Company and after payment by Service
Company of all its liabilities, including the settlement of unexpired lease
obligations, shall:
A. Receive from Service Company in cash an amount equal to its
proportionate share of the actual value of all assets of the Service
Company which can be reduced readily to cash.
B. Negotiate in good faith with the other Funds provision for
the equitable use and/or disposition of assets of the Service Company
which are not readily reducible to cash.
5.4 Additional Parties to Agreement. Upon the favorable vote of
two-thirds of the shareholders and of the holders of two-thirds of the Shares of
the Service Company, any investment company registered under the Investment
Company Act of 1940 may become a party to this Agreement and share as a Fund in
all of the rights, duties and liabilities hereunder by adopting, executing and
delivering to the Service Company and the Funds a signed copy of this Agreement
which shall evidence that investment company's agreement to assume the duties
and obligations of a Fund hereunder. Upon the delivery of a signed copy of this
Agreement, the new Fund shall be subject to all the provisions of this Agreement
and become a holder of Shares by adjustment in cash investments among the Funds
pursuant to Section 1.3. No person shall become a holder of Shares without
becoming a party to this Agreement.
VI. GENERAL
6.1 Definition of Certain Terms. As used in this Agreement, the terms
set forth below shall mean:
A. "Fair Value of Shares" shall mean the proportionate
interest, as represented by the ratio of the number of Shares owned by
a Fund to the number of Shares issued and outstanding, in all assets of
the Service Company less all liabilities of the Service Company on the
date fair value is to be determined. Assets shall be valued at fair
market value. In case of any dispute as to the proportionate interest
of any Fund or as to the fair value of the Shares, the issue shall be
determined by the favorable vote of the holders of a majority of the
Shares, whose determination shall be conclusive upon the Fund.
B. "Person" shall mean a natural person, a corporation, a
partnership, an association, a joint-stock company, a trust, a fund or
any organized group of persons whether incorporated or not.
6.2 Assignment. This Agreement shall bind and inure to the benefit of
the parties thereto, their respective successors and assigns.
6.3 Captions. The captions in this Agreement are included for
convenience of reference only and in no way define any of the provisions hereof
or otherwise affect their construction or effect.
<PAGE> 10
6.4 Amendment. Unless prohibited by applicable laws, regulations or
orders of regulatory authorities and except as set forth below, this Agreement
may be amended at any time and in one or more respects upon the favorable vote
of the holders of a majority of the Shares (except that the vote required in
Sections 3.1 and 5.4 may be amended only by the favorable votes of the number of
holders or Shares specified therein) and without the further approval or vote of
shareholders of any of the Funds; provided, however, that Section 1.4 (limiting
cash investments by the Funds in Service Company) may not be amended unless an
exemptive order permitting such amendment is obtained from the U.S. Securities
and Exchange Commission.
6.5 Severability. If any provision of this Agreement shall beheld or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
In Witness Whereof, each of the parties hereto has caused the Agreement
to be signed and its corporate seal to be hereto affixed by its proper officers
thereunto duly authorized, all as of the date and year first above written.
Attest: The Vanguard Group, Inc.
By
- ----------------------------------- -------------------------------------
SECRETARY CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
The Vanguard Group of Investment Companies:
Vanguard Money Market Reserves, Inc.
Vanguard Institutional Portfolios, Inc.
Vanguard Municipal Bond Fund, Inc.
Vanguard California Tax-Free Fund
Vanguard Florida Tax-Free Fund
Vanguard New Jersey Tax-Free Fund
Vanguard New York Insured Tax-Free Fund
Vanguard Ohio Tax-Free Fund
Vanguard Pennsylvania Tax-Free Fund
Vanguard Bond Index Fund, Inc.
(formerly Vanguard Bond Market Fund, Inc.)
Vanguard Fixed Income Securities Fund, Inc.
Vanguard/Wellesley Income Fund, Inc.
(formerly Wellesley Income Fund, Inc.)
Vanguard Preferred Stock Fund
Vanguard Asset Allocation Fund, Inc.
Vanguard Convertible Securities Fund, Inc.
Vanguard/Wellington Fund, Inc.
(formerly Wellington Fund, Inc.)
Vanguard/Trustees' Equity Fund
(formerly Trustees' Commingled Fund)
<PAGE> 11
Vanguard Equity Income Fund, Inc.
Vanguard Index Trust
Vanguard International Equity Index Fund, Inc.
Vanguard Quantitative Portfolios, Inc.
Vanguard/Windsor Funds, Inc.
(formerly The Windsor Funds, Inc.)
Gemini II, Inc.
Vanguard/Primecap Fund, Inc.
(formerly PRIMECAP Fund, Inc.)
Vanguard World Fund, Inc.
Vanguard/Morgan Growth Fund, Inc.
Vanguard Explorer Fund, Inc.
Vanguard Small Capitalization Stock Fund, Inc.
Vanguard Specialized Portfolios
Vanguard Variable Insurance Fund
Vanguard Admiral Funds, Inc.
Vanguard Balanced Index Fund, Inc.
Vanguard Tax-Managed Fund, Inc.
Vanguard Horizon Fund, Inc.
Vanguard Treasury Fund
Attest:
By
- ---------------------------------------- -------------------------------
SECRETARY CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
<PAGE> 1
EX-99.B10
Vanguard Treasury Fund
P.O. Box 2600
Valley Forge, PA 19482
Gentlemen:
Vanguard Treasury Fund (the "Fund") was organized under the laws of the
State of Delaware on August 20, 1996. I am acting as counsel to the Fund in
connection with the Fund's initial registration as an open-end management
investment company under the Investment Company Act of 1940 ("1940 Act"), as
amended. It is in my capacity as counsel to the Fund that I am furnishing you
this opinion.
I have examined the Fund's: (1) Agreement and Declaration of Trust
("Declaration of Trust"); (2) By-Laws; (3) minutes of the meetings of the Board
of Trustees; (4) Notification of Registration on Form N-8A under the 1940 Act;
(5) Registration Statement on Form N-1A under the Securities Act of 1933 ("1933"
Act) and 1940 Act; (6) registration statements, application and other documents
filed with various state securities authorities; and (7) all other relevant
documents and records, as well as the procedures and requirements relative to
the issuance and sale of the Fund's shares.
Based upon the foregoing information and my examination, it is my opinion
that:
1. The Fund is a valid and existing business trust of the State of Delaware
authorized to issue an unlimited number of shares of beneficial interest with a
par value, of $.001. The Board of Trustees has the power to divide the shares
into series ("Portfolios") and divide the series into separate classes of shares
of beneficial interest. Currently, the Fund is offering one Portfolio.
2. The Fund is filing herewith a Registration Statement with the U.S.
Securities and Exchange Commission on Form N-1A to register as an open-end
management company under the 1940 Act and to register an indefinite number of
its securities under the 1933 Act.
3. The Fund will be filing registration statements, applications and/or
other documents required to register its securities under various State
securities laws.
4. The Fund will be authorized to offer and sell its shares when all
necessary Federal and State regulatory authorizations, which are prerequisite to
the issuance of the Fund's shares, have been obtained, subject to the Fund's
continuing to maintain the effectiveness of the requisite Registration Statement
under the 1933 Act and certain of the State securities laws.
5. Such shares, when issued for consideration deemed by the Board of
Trustees to be consistent with the Fund's Declaration of Trust, will be legally
authorized, fully paid and non-assessable.
6. The holders of the Fund's shares will have all the rights provided with
respect to such holdings by the Declaration of Trust and the laws of the State
of Delaware.
I hereby consent to use of this opinion as an Exhibit to the Fund's
Registration Statement on Form N-1A filed under the 1933 and 1940 Acts, and to
the applications and registration statements, and amendments thereto, filed in
accordance with the securities laws of the states in which shares of the Fund
are offered. I further consent to reference in the Prospectus of the Fund to the
fact that this opinion concerning the legality of the issue has been rendered by
me.
Very truly yours,
BY: (Raymond J. Klapinsky)
Senior Vice President and
General Counsel
<PAGE> 1
EX-99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this registration
statement on Form N-1A (THE "REGISTRATION STATEMENT") of our report dated
December 29, 1995, relating to the financial statements and financial highlights
appearing in the November 30, 1995 Annual Report to Shareholders of Vanguard
Money Market Reserves, WHICH IS ALSO INCORPORATED BY REFERENCE INTO THE
REGISTRATION STATEMENT. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and "Financial Statements" in
the Statement of Additional Information.
PRICE WATERHOUSE LLP
Philadelphia, PA
September 10, 1996
<PAGE> 1
EX-99.B16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD TREASURY FUND
1. Average Annual Total Return (As of May 31, 1996)
P (1 + T)n = ERV
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at the end of the period
EXAMPLE:
Treasury Money Market Portfolio*
One Year
P = $1,000
T = --%
N = 1
ERV = $--
Five Year
P = $1,000
T = --%
N = 5
ERV = $--
Ten Year
P = $1,000
T = --%
N = 10
ERV = $--
</TABLE>
* formerly U.S. Treasury Portfolio of Vanguard Money Market Reserves, Inc.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000106830
<NAME> VANGUARD TREASURY FUND
<SERIES>
<NUMBER> 01
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 2738388
<INVESTMENTS-AT-VALUE> 2738388
<RECEIVABLES> 687538
<ASSETS-OTHER> 288
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3426214
<PAYABLE-FOR-SECURITIES> 648594
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11132
<TOTAL-LIABILITIES> 659726
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2766509
<SHARES-COMMON-STOCK> 2766489
<SHARES-COMMON-PRIOR> 2527188
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (21)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2766488
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 73258
<OTHER-INCOME> 0
<EXPENSES-NET> 4409
<NET-INVESTMENT-INCOME> 68849
<REALIZED-GAINS-CURRENT> (241)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 68608
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 68849
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1995352
<NUMBER-OF-SHARES-REDEEMED> 1821747
<SHARES-REINVESTED> 65698
<NET-CHANGE-IN-ASSETS> 239062
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 220
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4409
<AVERAGE-NET-ASSETS> 2755581
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.025
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.025
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
