VANGUARD FUNDS
MULTIPLE CLASS PLAN
I. INTRODUCTION
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This Multiple Class Plan (the "Plan") describes four separate classes of
shares that may be offered by investment company members of The Vanguard Group
(collectively the "Funds," individually a "Fund"). The Plan explains the
separate arrangements for each class, how expenses are allocated to each class,
and the conversion features of each class. Each Fund may offer any one or more
of the specified classes.
The Plan has been approved by the Board of Directors of The Vanguard Group
("Vanguard"). In addition, the Plan has been adopted by a majority of the Board
of Trustees of each Fund, including a majority of the Trustees who are not
interested persons of each Fund. The classes of shares offered by each Fund are
designated in Schedule A hereto, as such Schedule may be amended from time to
time.
II. SHARE CLASSES
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A Fund may offer any one or more of the following share classes:
Investor Shares
Admiral Shares
Institutional Shares
VIPER Shares
If a Fund has not previously issued separate classes of shares, all of its
currently outstanding shares will be designated as Investor Shares. Currently
outstanding shares of other Funds will continue to be designated as Investor
Shares or Institutional Shares, as appropriate.
III. DISTRIBUTION AND ELIGIBILITY
----------------------------
Distribution arrangements will be the same for all classes, although
eligibility requirements for purchasing shares of each class will differ, as
follows:
A. INVESTOR SHARES
Investor Shares will be available to investors who are not
permitted to purchase other classes of shares, subject to the
eligibility requirements specified in Schedule B hereto, as such
Schedule may be amended from time to time. It is expected that the
minimum investment amount for Investor Shares will be substantially
lower than the amount required for any other class of the Fund's
shares.
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B. ADMIRAL SHARES
Admiral Shares will be available to investors who meet the
eligibility requirements specified in Schedule B hereto, as such
Schedule may be amended from time to time. These eligibility
requirements may take into account: (i) the amount of an investment in
the Fund; (ii) the length of time that a Fund account has been
maintained; and (iii) whether the investor has registered for on-line
access to the Fund account through Vanguard's web site.
C. INSTITUTIONAL SHARES
Institutional Shares will be available to investors who meet
the eligibility requirements specified in Schedule B hereto, as such
Schedule may be amended from time to time. It is expected that the
minimum investment amount for Institutional Shares will be
substantially higher than the amount required for any other class of
the Fund's shares.
D. VIPER SHARES
VIPER Shares will be available to investors that are (or who
purchase through) Authorized DTC Participants, and who pay for their
VIPER shares by depositing a prescribed basket of securities rather
than paying cash. An Authorized DTC Participant is an institution,
usually a broker-dealer, that is a participant in the Depository Trust
Company (DTC) and that has executed a Participant Agreement with the
Fund's distributor.
IV. SERVICE ARRANGEMENTS
--------------------
All share classes will receive a range of services provided by Vanguard on
a per account basis. These "account-based" services may include transaction
processing and shareholder recordkeeping, as well as the mailing of updated
prospectuses, shareholder reports, tax statements, confirmation statements,
quarterly portfolio summaries, and other items. It is expected that the
aggregate amount of account-based services provided to Investor Shares will
materially exceed the amount of such services provided to any other class, due
to the existence of many more accounts holding Investor Shares. In addition to
this difference in the volume of services provided, arrangements will differ
among the classes as follows:
A. INVESTOR SHARES
Investor Shares will receive the most basic level of service
from Vanguard. In general, Investor Shares will be serviced through a
pool of Vanguard client service representatives. Investor Shares held
through an employee benefit plan may receive VISTA recordkeeping and
participant education services from Vanguard.
B. ADMIRAL SHARES
Admiral Shares will receive a higher level of service from
Vanguard as compared to Investor Shares. Special client service
representatives will be assigned
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to service Admiral Shares, and holders of such shares from time to
time may receive special mailings from Vanguard and unique additional
services.
Admiral Shares are not eligible to receive VISTA recordkeeping or
participant education services.
C. INSTITUTIONAL SHARES
Institutional Shares will receive the highest level of service
from Vanguard as compared to any other share classes. Special client
service representatives will be assigned to service Institutional
Shares, and most holders of such shares periodically will receive
special updates from Vanguard's investment staff. Holders of
Institutional Shares may receive unique additional services from
Vanguard, and generally will be permitted to transact with Vanguard
through the National Securities Clearing Corporation's FundSERV system
and other special servicing platforms for institutional investors.
Institutional Shares generally are not eligible to receive VISTA
recordkeeping or participant education services.
D. VIPER SHARES
The Fund will maintain only one shareholder of record for VIPER
Shares--DTC or its nominee. Special client service representatives
will be assigned to the DTC account, and all transactions on this
account will be handled electronically. Due to the nature and purpose
of the DTC account, VIPER Shares will not receive any special updates
from Vanguard's investment staff.
VIPER Shares are not eligible to receive VISTA recordkeeping or
participant education services.
V. CONVERSION FEATURES
-------------------
A. VOLUNTARY CONVERSIONS
1. CONVERSION INTO INVESTOR SHARES. An investor may
convert Admiral Shares or Institutional Shares into Investor
Shares, provided that following the conversion the investor:
(i) meets the then applicable eligibility requirements for
Investor Shares; and (ii) receives services consistent with
Investor Shares. Any such conversion will occur at the
respective net asset values of the share classes next
calculated after Vanguard's receipt of the investor's request
in good order.
2. CONVERSION INTO ADMIRAL SHARES. An investor may
convert Investor Shares or Institutional Shares into Admiral
Shares (if available), provided that following the conversion
the investor: (i) meets the then applicable eligibility
requirements for Admiral Shares; and (ii) receives
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services consistent with Admiral Shares. Any such conversion
will occur at the respective net asset values of the share
classes next calculated after Vanguard's receipt of the
investor's request in good order.
3. CONVERSION INTO INSTITUTIONAL SHARES. An investor
may convert Investor Shares or Admiral Shares into
Institutional Shares (if available), provided that following
the conversion the investor: (i) meets the then applicable
eligibility requirements for Institutional Shares; and (ii)
receives services consistent with Institutional Shares. Any
such conversion will occur at the respective net asset
values of the share classes next calculated after Vanguard's
receipt of the investor's request in good order.
4. CONVERSION INTO VIPER SHARES. An investor may
convert Investor Shares, Admiral Shares, or Institutional
Shares into VIPER Shares (if available), provided that: (i)
the shares to be converted are not held through an employee
benefit plan; and (ii) following the conversion, the
investor will hold VIPER Shares through a brokerage account.
Any such conversion will occur at the respective net asset
values of the share classes next calculated after Vanguard's
receipt of the investor's request in good order. Vanguard or
the Fund may charge an administrative fee to process
conversion transactions.
B. INVOLUNTARY CONVERSIONS AND CASH OUTS
1. CASH OUTS. If an investor in any class of shares no
longer meets the eligibility requirements for such shares,
the Fund may cash out the investor's remaining account
balance. Any such cash out will be preceded by written
notice to the investor and will be subject to the Fund's
normal redemption fees, if any.
2. CONVERSION OF ADMIRAL SHARES. If an investor no
longer meets the eligibility requirements for Admiral
Shares, the Fund may convert the investor's Admiral Shares
into Investor Shares. Any such conversion will be preceded
by written notice to the investor, and will occur at the
respective net asset values of the share classes without the
imposition of any sales load, fee, or other charge.
3. CONVERSION OF INSTITUTIONAL SHARES. If an investor
no longer meets the eligibility requirements for
Institutional Shares, the Fund may convert the investor's
Institutional Shares into Admiral Shares (or into Investor
Shares if the investor does not meet the eligibility
requirements for Admiral Shares). Any such conversion will
be preceded by written notice to the investor, and will
occur at the respective net asset values of the share
classes without the imposition of any sales load, fee, or
other charge.
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VI. EXPENSE ALLOCATION AMONG CLASSES
--------------------------------
A. BACKGROUND
Vanguard is a jointly-owned subsidiary of the Funds. Vanguard
provides the Funds, on an at-cost basis, virtually all of their
corporate management, administrative and distribution services.
Vanguard also may provide investment advisory services on an at-cost
basis to the Funds. Vanguard was established and operates pursuant to
a Funds' Service Agreement between itself and the Funds (the
"Agreement"), and pursuant to certain exemptive orders granted by the
U.S. Securities and Exchange Commission ("Exemptive Orders").
Vanguard's direct and indirect expenses of providing corporate
management, administrative and distribution services to the Funds are
allocated among such funds in accordance with methods specified in the
Agreement.
B. CLASS SPECIFIC EXPENSES
1. Expenses for Account-Based Services. Expenses associated
with Vanguard's provision of account-based services to the Fund
will be allocated among the share classes on the basis of the
amount incurred by each such class as follows:
(a) ACCOUNT MAINTENANCE EXPENSES. Expenses
associated with the maintenance of investor accounts
will be proportionately allocated among the Fund's
share classes based upon a monthly determination of
the costs to service each class of shares. Factors
considered in this determination are (i) the
percentage of total shareholder accounts represented
by each class; (ii) the percentage of total account
transactions performed by Vanguard for each class;
and (iii) the percentage of new accounts opened for
each class.
(b) EXPENSES OF SPECIAL SERVICING
ARRANGEMENTS. Expenses relating to any special
servicing arrangements for a specific class will be
allocated entirely to that class.
(c) LITERATURE PRODUCTION AND MAILING
EXPENSES. Expenses associated with shareholder
reports, proxy materials and other literature will be
allocated among the Fund's share classes based upon
the number of such items produced and mailed for each
class.
2. OTHER CLASS SPECIFIC EXPENSES. Expenses for the primary
benefit of a particular share class will be allocated to that
share class. Such expenses would include any legal fees
attributable to a particular class.
C. FUND-WIDE EXPENSES
1. MARKETING AND DISTRIBUTION EXPENSES. Expenses associated
with Vanguard's marketing and distribution activities will be
allocated among
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the Funds and their separate share classes according to the
"Vanguard Modified Formula," with each share class treated as if
it were a separate Fund. The Vanguard Modified Formula, which is
set forth in the Agreement and in certain of the SEC Exemptive
Orders, has been deemed an appropriate allocation methodology by
each Fund's Board of Trustees under paragraph (c)(1)(v) of Rule
18f-3 under the Investment Company Act of 1940.
2. ASSET MANAGEMENT EXPENSES. Expenses associated with
management of a Fund's assets (including all advisory, tax
preparation and custody fees) will be allocated among the Fund's
share classes on the basis of their relative net assets.
3. OTHER FUND EXPENSES. Any other Fund expenses not
described above will be allocated among the share classes on the
basis of their relative net assets.
VII. ALLOCATION OF INCOME, GAINS AND LOSSES
--------------------------------------
Income, gains and losses will be allocated among the Fund's share
classes on the basis of their relative net assets. As a result of differences in
allocated expenses, it is expected that the net income of, and dividends payable
to, each class of shares will vary. Dividends and distributions paid to each
class of shares will be calculated in the same manner, on the same day and at
the same time.
VIII. VOTING AND OTHER RIGHTS
-----------------------
Each share class will have: (i) exclusive voting rights on any matter
submitted to shareholders that relates solely to its service or distribution
arrangements; and (ii) separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
the other class; and (iii) in all other respects the same rights, obligations
and privileges as each other, except as described in the Plan.
II. AMENDMENTS
----------
All material amendments to the Plan must be approved by a majority of
the Board of Trustees of each Fund, including a majority of the Trustees who are
not interested persons of the Fund. In addition, any material amendment to the
Plan must be approved by the Board of Directors of Vanguard.
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SCHEDULE A
TO
VANGUARD FUNDS MULTIPLE CLASS PLAN
Note: This Schedule reflects multiple class arrangements approved by the Boards
of Directors/Trustees of Vanguard and the Vanguard Funds on July 21, 2000.
Classes not previously in existence as of that date will be implemented in the
normal course of business.
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VANGUARD FUND SHARE CLASSES OFFERED
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Vanguard Admiral Funds
o Money Market Treasury Fund Investor
o Short-Term Treasury Fund Investor
o Intermediate-Term Treasury Fund Investor
o Long-Term Treasury Fund Investor
o Treasury Money Market Fund Investor
Vanguard Balanced Index Fund Investor, Admiral, Institutional
Vanguard Bond Index Funds
o Short-Term Bond Index Fund Investor, Admiral
o Intermediate-Term Bond Index Fund Investor, Admiral
o Long-Term Bond Index Fund Investor
o Total Bond Market Index Fund Investor, Admiral, Institutional
Vanguard California Tax-Exempt Funds
o Tax-Exempt Money Market Fund Investor
o Insured Intermediate-Term Tax-Exempt Fund Investor, Admiral
o Insured Long-Term Tax-Exempt Fund Investor, Admiral
Vanguard Convertible Securities Fund Investor
Vanguard Explorer Fund Investor, Admiral
Vanguard Fenway Funds
o Equity Income Fund Investor, Admiral
o Growth Equity Fund Investor
Vanguard Fixed Income Securities Funds
o Short-Term Treasury Fund Investor, Admiral
o Short-Term Federal Fund Investor, Admiral
o Short-Term Corporate Fund Investor, Admiral, Institutional
o Intermediate-Term Treasury Fund Investor, Admiral
o Intermediate-Term Corporate Fund Investor, Admiral
o GNMA Fund Investor, Admiral
o Long-Term Treasury Fund Investor, Admiral
o Long-Term Corporate Fund Investor, Admiral
o High Yield Corporate Fund Investor, Admiral
o Inflation-Protected Securities Fund Investor
Vanguard Florida Insured Tax-Exempt Fund Investor
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VANGUARD FUND SHARE CLASSES OFFERED
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Vanguard Horizon Funds
o Aggressive Growth Fund Investor
o Capital Opportunity Fund Investor, Admiral
o Global Asset Allocation Fund Investor
o Global Equity Fund Investor
Vanguard Index Trust
o 500 Index Fund Investor, Admiral, VIPER
o Extended Market Index Fund Investor, Admiral, Institutional, VIPER
o Growth Index Fund Investor, Admiral, Institutional, VIPER
o Mid-Cap Index Fund Investor, Institutional, VIPER
o Small-Cap Growth Index Fund Investor, Institutional, VIPER
o Small-Cap Index Fund Investor, Admiral, Institutional, VIPER
o Small-Cap Value Index Fund Investor, Institutional, VIPER
o Total Stock Market Index Fund Investor, Admiral, Institutional, VIPER
o Value Index Fund Investor, Admiral, Institutional, VIPER
Vanguard International Equity Index Funds
o Emerging Markets Stock Index Fund Investor, Admiral, Institutional
o European Stock Index Fund Investor, Admiral, Institutional
o Pacific Stock Index Fund Investor, Admiral, Institutional
Vanguard Malvern Funds
o Asset Allocation Fund Investor, Admiral
o U.S. Value Fund Investor
Vanguard Massachusetts Tax-Exempt Fund Investor
Vanguard Money Market Reserves
o Prime Money Market Fund Investor, Institutional
o Federal Money Market Fund Investor
Vanguard Morgan Growth Fund Investor, Admiral
Vanguard Municipal Bond Funds
o Tax-Exempt Money Market Fund Investor
o Short-Term Tax-Exempt Fund Investor, Admiral
o Limited-Term Tax-Exempt Fund Investor, Admiral
o Intermediate-Term Tax-Exempt Fund Investor, Admiral
o Insured Long-Term Tax-Exempt Fund Investor, Admiral
o Long-Term Tax-Exempt Fund Investor, Admiral
o High Yield Tax-Exempt Fund Investor, Admiral
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VANGUARD FUND SHARE CLASSES OFFERED
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Vanguard New Jersey Tax-Exempt Funds
o Tax-Exempt Money Market Fund Investor
o Insured Long-Term Tax-Exempt Fund Investor, Admiral
Vanguard New York Tax-Exempt Funds
o Tax-Exempt Money Market Fund Investor
o Insured Long-Term Tax-Exempt Fund Investor, Admiral
Vanguard Ohio Tax-Exempt Funds
o Tax-Exempt Money Market Fund Investor
o Insured Long-Term Tax-Exempt Fund Investor
Vanguard Pennsylvania Tax-Exempt Funds
o Tax-Exempt Money Market Fund Investor
o Insured Long-Term Tax-Exempt Fund Investor, Admiral
Vanguard Preferred Stock Fund Investor
Vanguard PRIMECAP Fund Investor, Admiral
Vanguard Quantitative Funds
o Growth and Income Fund Investor, Admiral
Vanguard Specialized Funds
o Energy Fund Investor
o Gold and Precious Metals Fund Investor
o Health Care Fund Investor, Admiral
o Utilities Income Fund Investor
o REIT Index Fund Investor
Vanguard Tax-Managed Funds
o Tax-Managed Balanced Fund Investor
o Tax-Managed Capital Appreciation Fund Investor, Admiral, Institutional
o Tax-Managed Growth and Income Fund Investor, Admiral, Institutional
o Tax-Managed International Fund Investor, Institutional
o Tax-Managed Small-Cap Fund Investor, Institutional
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VANGUARD FUND SHARE CLASSES OFFERED
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Vanguard Treasury Funds
o Treasury Money Market Fund Investor
Vanguard Trustees' Equity Fund
o International Value Fund Investor, Admiral
Vanguard Wellesley Income Fund Investor, Admiral
Vanguard Wellington Fund Investor, Admiral
Vanguard Whitehall Funds
o Selected Value Fund Investor
Vanguard Windsor Funds
o Windsor Fund Investor, Admiral
o Windsor II Investor, Admiral
Vanguard World Funds
o U.S. Growth Fund Investor, Admiral
o International Growth Fund Investor, Admiral
o Calvert Social Index Fund Investor, Institutional
Vanguard Variable Insurance Funds
o Balanced Portfolio Investor
o Diversified Value Portfolio Investor
o Equity Income Portfolio Investor
o Equity Index Portfolio Investor
o Growth Portfolio Investor
o High-Grade Bond Portfolio Investor
o High Yield Bond Portfolio Investor
o International Portfolio Investor
o Mid-Cap Index Portfolio Investor
o Money Market Portfolio Investor
o REIT Index Portfolio Investor
o Short-Term Corporate Portfolio Investor
o Small Company Growth Portfolio Investor
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SCHEDULE B
TO
VANGUARD FUNDS MULTIPLE CLASS PLAN
Note: This Schedule reflects class eligibility requirements approved by the
Boards of Directors/Trustees of Vanguard and the Vanguard Funds on July 21,
2000. Classes not previously in existence as of that date will be implemented in
the normal course of business.
INVESTOR SHARES - ELIGIBILITY REQUIREMENTS
------------------------------------------
Investor Shares require a minimum initial investment and ongoing account balance
of $3,000 ($1,000 for IRAs and UGMA accounts), subject to the following
exceptions:
o Vanguard Admiral Funds-$50,000 minimum amount for Investor Shares
o Vanguard Capital Opportunity Fund-$25,000 minimum amount for Investor Shares
o Vanguard STAR Fund-$1,000 minimum amount for Investor Shares
o Vanguard Tax-Managed Funds-$10,000 minimum amount for Investor Shares
ADMIRAL SHARES - ELIGIBILITY REQUIREMENTS
-----------------------------------------
Admiral Shares require a minimum initial investment and ongoing account balance
of $250,000, subject to the following exceptions:
o Tenure exception - The minimum amount for Admiral Shares is $150,000 if the
investor has maintained an account in the applicable Fund for 3 years and
$50,000 if the investor has maintained an account in the applicable Fund
for 10 years, subject to administrative policies developed by Vanguard to
exclude costly accounts. To take advantage of the tenure exception, an
investor must be registered for on-line access to their Fund account
through vanguard.com.
o Financial intermediary exception - Admiral Shares are not available to
financial intermediaries who would meet the eligibility requirements by
aggregating the holdings of underlying investors. However, financial
intermediaries may purchase Admiral Shares on behalf of any underlying
investor whose investment individually meets the $250,000 minimum amount if
they comply with Vanguard's procedures for identifying such accounts.
o VISTA exception - Admiral Shares are not available to participants in
employee benefit plans that utilize Vanguard's VISTA system for plan
recordkeeping.
o 403(b)(7) custodial account exception - Admiral Shares are not available to
403(b)(7) custodial acccounts.
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INSTITUTIONAL SHARES - ELIGIBILITY REQUIREMENTS
------------------------------------------------
Institutional Shares require a minimum initial investment and ongoing account
balance of $10,000,000, subject to the following exceptions:
o Vanguard Short-Term Corporate Fund - $50,000,000 minimum amount for
Institutional Shares
o Financial intermediary exception - Institutional Shares are not available
to financial intermediaries who would meet the eligibility requirements by
aggregating the holdings of underlying investors.
o VISTA exception - Institutional Shares are not available to participants in
employee benefit plans that utilize Vanguard's VISTA system for plan
recordkeeping. However, Vanguard may determine to waive this rule for
investors whose aggregate assets with the Vanguard Funds are expected to
generate substantial economies in the servicing of their accounts.
VIPER SHARES - ELIGIBILITY REQUIREMENTS
---------------------------------------
The eligibility requirements for VIPER Shares will be set forth in the Fund's
Registration Statement. To be eligible to purchase VIPER Shares directly from a
Fund, an investor must be (or must purchase through) an Authorized DTC
Participant, as defined in Paragraph III.D of the Multiple Class Plan. Investors
purchasing VIPER Shares from a Fund must purchase a minimum number of shares,
known as a Creation Unit. The number of VIPER Shares in a Creation Unit will
vary from Fund to Fund, and will be set forth in the relevant prospectus. The
value of a Fund's Creation Unit will vary with the net asset value of the Fund's
VIPER Shares, but is expected to be several million dollars. An eligible
investor generally must purchase a Creation Unit by depositing a prescribed
basket of securities with the Fund, rather than paying cash.
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