<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT (NO. 33-2908) UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 9
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 9
VANGUARD NEW YORK INSURED
TAX-FREE 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
IT IS HEREBY REQUESTED THAT THIS FILING BECOME EFFECTIVE ON MARCH 11, 1994,
PURSUANT TO PARAGRAPH (B) OF RULE 485.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER
THIS REGISTRATION STATEMENT BECOMES EFFECTIVE*.
REGISTRANT ELECTS TO REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO
REGULATION 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. REGISTRANT FILED
ITS RULE 24F-2 NOTICE FOR THE YEAR ENDED NOVEMBER 30, 1993, ON JANUARY 25,
1994.
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<PAGE>
VANGUARD NEW YORK INSURED TAX-FREE 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....................... Not Applicable
Item 3. Condensed Financial
Information.................... Financial Highlights
Item 4. General Description of Investment Objective; Investment
Registrant..................... Limitations; Investment Policies;
General Information
Item 5. Management of the Fund......... Trustees and Officers; Management
of the Fund
Item 6. Capital Stock and Other Opening an Account and Purchasing
Securities..................... Shares; Selling Your Shares; The
Fund's Share Price; Dividends,
Capital Gains and Taxes; General
Information
Item 7. Purchase of Securities Being Cover Page; Opening an Account
Offered........................ and Purchasing Shares
Item 8. Redemption or Repurchase....... Selling Your 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
General Information and
Item 12. History........................ Management of the Fund
Investment Objective and
Item 13. Policies....................... Investment Limitations
Item 14. Management of the Fund......... Management of the Fund;
Investment Management
Item 15. Control Persons and Principal
Holders of Securities.......... Management of the Fund
Item 16. Investment Advisory and Other Management of the Fund;
Services....................... Investment Management
Item 17. Brokerage Allocation........... Not Applicable
Capital Stock and Other
Item 18. Securities..................... Financial Statements
Item 19. Purchase, Redemption and
Pricing of Securities Being Purchase of Shares; Redemption of
Offered........................ 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>
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(ART) A Member of The Vanguard Group
- --------------------------------------------------------------------------------
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PROSPECTUS--MARCH 11, 1994
- --------------------------------------------------------------------------------
NEW ACCOUNT INFORMATION: INVESTOR INFORMATION DEPARTMENT--1-800-662-7447 (SHIP)
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNT SERVICES: CLIENT SERVICES DEPARTMENT--1-800-662-2739 (CREW)
- --------------------------------------------------------------------------------
INVESTMENT Vanguard New York Insured Tax-Free Fund (the "Fund") is an
OBJECTIVE & open-end non-diversified investment company that seeks to
POLICIES provide income that is exempt from federal and New York per-
sonal income taxes. The Fund will invest primarily in securi-
ties issued by New York state and local governments and pub-
lic financing authorities, but may also invest in securities
of issuers other than New York and its political subdivi-
sions. The Fund is available only to New York residents.
- --------------------------------------------------------------------------------
OPENING AN Please complete and return the Account Registration Form. If
ACCOUNT you need assistance in completing this Form, please call the
Investor Information Department. The minimum initial invest-
ment is $3,000. The Fund is offered on a no-load basis (i.e.,
there are no sales commissions or 12b-1 fees). However, the
Fund incurs expenses for investment advisory, management, ad-
ministrative and distribution services.
- --------------------------------------------------------------------------------
ABOUT THIS This Prospectus is designed to set forth concisely the infor-
PROSPECTUS mation that you should know about the Fund before you invest.
It should be retained for future reference. A "Statement of
Additional Information" containing additional information
about the Fund has been filed with the Securities and Ex-
change Commission. This Statement is dated March 11, 1994,
and has been incorporated by reference into this Prospectus.
It may be obtained, without charge, by writing to the Fund or
by calling the Investor Information Department.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Fund Expenses........................................ 2
Financial Highlights................................. 2
Yield and Total Return............................... 3
FUND INFORMATION
Investment Objective................................. 4
Investment Policies.................................. 4
Investment Risks..................................... 5
Who Should Invest.................................... 7
How to Compare Tax-Free and Taxable Yields........... 8
Implementation of Policies........................... 9
Investment Limitations............................... 13
Management of the Fund............................... 13
Investment Adviser................................... 14
Dividends, Capital Gains and Taxes................... 15
The Share Price of the Fund.......................... 16
General Information.................................. 17
SHAREHOLDER GUIDE
Opening an Account and Purchasing Shares............. 18
When Your Account Will Be Credited................... 21
Selling Your Shares.................................. 21
Exchanging Your Shares............................... 24
Important Information About Telephone Transactions... 25
Transferring Registration............................ 26
Other Vanguard Services.............................. 26
</TABLE>
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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 AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
- --------------------------------------------------------------------------------
<PAGE>
FUND EXPENSES The following table illustrates ALL expenses and fees that
you would incur as a shareholder of the Fund. The expenses
and fees set forth in the table are for the 1993 fiscal year.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------
<S> <C> <C>
Sales Load Imposed on Purchases............... None
Sales Load Imposed on Reinvested Dividends.... None
Redemption Fees*.............................. None
Exchange Fees................................. None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-----------------------------------------------------------
<S> <C> <C>
Management & Administrative Expenses.......... 0.14%
Investment Advisory Expenses.................. 0.01
12b-1 Fees.................................... None
Other Expenses
Distribution Costs........................... 0.03%
Fund Insurance............................... 0.00
Miscellaneous Expenses....................... 0.01
------
Total Other Expenses.......................... 0.04%
-----
TOTAL OPERATING EXPENSES................... 0.19%
=====
</TABLE>
* Wire redemptions of less than $5,000 subject to a $5.00
charge.
The purpose of this table is to assist you in understanding
the various costs and expenses that you would bear directly
or indirectly as an investor in the Fund.
The following example illustrates the expenses that you would
incur on a $1,000 investment over various periods, assuming
(1) a 5% annual rate of return and (2) redemption at the end
of each period. As noted in the table above, the Fund charges
no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<C> <C> <C> <C>
$2 $6 $11 $24
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
FINANCIAL The following financial highlights for a share outstanding
HIGHLIGHTS throughout each period, insofar as they relate to each of the
five years in the period ended November 30, 1993, have been
audited by Price Waterhouse, independent accountants, whose
report thereon was unqualified. This information should be
read in conjunction with the Fund's financial statements and
notes thereto, which are incorporated by reference in the
Statement of Additional Information and this Prospectus, and
which appear, along with the report of Price Waterhouse, in
the Fund's 1993 Annual Report to Shareholders. For a more
complete discussion of the Fund's performance, please see the
Fund's 1993 Annual Report to Shareholders, which may be ob-
tained without charge by writing to the Fund or by calling
our Investor Information Department at 1-800-662-7447.
2
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------- APRIL 7, 1986
1993 1992 1991 1990 1989 1988 1987 TO NOV. 30, 1986**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.45 $10.04 $ 9.66 $9.73 $9.26 $8.87 $10.08 $10.00
------ ------ ------ ----- ----- ----- ------ ------
INVESTMENT OPERATIONS
Net Investment Income.. .594 .631 .639 .629 .635 .618 .628 .381
Net Realized and
Unrealized Gain (Loss)
on Investments........ .665 .410 .380 (.070) .470 .390 (1.210) .080
------ ------ ------ ----- ----- ----- ------ ------
TOTAL FROM INVESTMENT
OPERATIONS........... 1.259 1.041 1.019 .559 1.105 1.008 (.582) .461
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income..... (.594) (.631) (.639) (.629) (.635) (.618) (.628) (.381)
Distributions from
Realized Capital
Gains................. (.145) -- -- -- -- -- -- --
------ ------ ------ ----- ----- ----- ------ ------
TOTAL DISTRIBUTIONS... (.739) (.631) (.639) (.629) (.635) (.618) (.628) (.381)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $10.97 $10.45 $10.04 $9.66 $9.73 $9.26 $ 8.87 $10.08
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN............ 12.42% 10.63% 10.87% 5.99% 12.25% 11.62% (5.82)% 5.10%
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions)...... $807 $574 $408 $241 $167 $103 $76 $52
Ratio of Expenses to
Average Net Assets..... .19% .23%+ .27%+ .31%+ .34%+ .40%+ .35%+ .34%*+
Ratio of Net Investment
Income to Average Net
Assets................. 5.47% 6.11% 6.48% 6.60% 6.64% 6.75% 6.80% 6.50%*
Portfolio Turnover Rate. 10% 28% 19% 17% 10% 4% 31% 8%
</TABLE>
*Annualized.
**Commencement of operations.
+Insurance Expenses Represent .01%, .01%, .02%, .04%, .07%, .08% and .08%.
- --------------------------------------------------------------------------------
YIELD AND From time to time the Fund may advertise its yield and total
TOTAL RETURN return. Both yield and total return figures are based on his-
torical earnings and are not intended to indicate future per-
formance. The "total return" of the Fund refers to the aver-
age annual compounded rates of return over one, five and ten
year periods or over the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested
at the beginning of a stated period to the ending redeemable
value of the investment, assuming the reinvestment of all
dividend and capital gains distributions.
The "30-day yield" of the Fund is calculated by dividing the
net investment income per share earned during a 30-day period
by the net asset value per share on the last day of the peri-
od. Net investment income includes interest and dividend in-
come earned on the Fund's securities; it is net of all ex-
penses and all recurring and nonrecurring charges that have
been applied to all shareholder accounts. The yield calcula-
tion assumes that the net investment income earned over 30
days is compounded monthly for six months and then
annualized. Methods used to calculate advertised yields are
standardized for all bond mutual funds. However, these meth-
ods differ from the accounting methods used by the Fund to
maintain its books and records, and so the advertised 30-day
yield may not fully reflect the income paid to your own ac-
count or the yield reported in the Fund's Annual Report to
Shareholders.
- --------------------------------------------------------------------------------
3
<PAGE>
INVESTMENT The objective of the Fund is to provide investors with a high
OBJECTIVE level of income that is exempt from federal and New York per-
sonal income taxes.
THE FUND SEEKS
TO PROVIDE The Fund is available only to investors who reside in New
INCOME THAT IS York. There is no assurance that the Fund will achieve its
EXEMPT FROM stated objective.
FEDERAL AND
NEW YORK The investment objective of the Fund is fundamental and so
INCOME TAXES may not be changed without the approval of a majority of the
Fund's shareholders.
- --------------------------------------------------------------------------------
INVESTMENT The Fund will invest at least 80% of its assets in insured
POLICIES New York municipal securities, exclusive of New York AMT
bonds (see below). New York municipal securities are debt ob-
THE FUND ligations issued by New York state and local governments and
INVESTS IN public financing authorities (and, possibly, by certain U.S.
INSURED NEW territories) that provide interest income that is exempt from
YORK MUNICIPAL both federal and New York personal income taxes. The New York
SECURITIES municipal securities described above, may include securities
in which the tax exempt interest rate is determined by an in-
dex, swap or some other formula. Insured New York municipal
securities are those in which scheduled payments of interest
and principal are guaranteed by a private (non-governmental)
insurance company.
THE INSURANCE FEATURE OF THE FUND DOES NOT GUARANTEE THE MAR-
KET VALUE OF THE MUNICIPAL BONDS OR THE VALUE OF THE FUND'S
SHARES. The insurance refers to the face or par value of the
securities in the Fund. See "Implementation of Policies" for
a description of the Fund's insurance feature.
The Fund is expected to maintain an average weighted maturity
between 15 and 25 years. BONDS WITH LONGER MATURITIES USUALLY
OFFER HIGHER YIELDS, BUT ARE ALSO SUBJECT TO GREATER MARKET
FLUCTUATIONS AS INTEREST RATES CHANGE. See "Investment
Risks."
Normally, the Fund seeks to invest substantially all of its
assets in insured New York municipal obligations. However,
under certain circumstances, such as a temporary decline in
the issuance of New York obligations, the Fund may invest up
to 20% of its assets in any combination of the following se-
curities:
. Municipal notes and variable rate demand instruments, in-
cluding derivative securities, rated MIG-1 or VMIG-1, or P-
1 by Moody's Investors Service, Inc. ("Moody's") or SP-1+,
SP-1, A-1+, or A-1 by Standard & Poor's Corporation ("Stan-
dard & Poor's");
. Uninsured, short-term municipal securities; and
. Certain taxable securities, including U.S. Government secu-
rities.
In such cases, a portion of the Fund's income may be subject
to New York income taxes, federal income taxes, or both.
Subject to the same 20% limit, the Fund is also authorized to
invest in New York AMT bonds. The income from New York AMT
bonds is exempt from federal and
4
<PAGE>
New York income taxes, but may be a tax preference item for
purposes of the federal alternative minimum tax, see "Imple-
mentation of Policies."
Under unusual circumstances, such as a national financial
emergency, the Fund reserves the right to invest more than
20% of its assets in securities other than New York municipal
obligations. In most instances, however, the Fund will seek
to avoid such holdings in an effort to provide income that is
fully exempt from federal and New York personal income taxes.
THE FUND WILL Although organized as a non-diversified investment company,
DIVERSIFY ITS the Fund intends to diversify its holdings of New York munic-
HOLDINGS ipal securities by complying with Subchapter M of the Inter-
nal Revenue Code. In part, Subchapter M requires that, at the
close of each quarter of the taxable year, those issues which
represent more than 5% of the Fund's assets be limited in ag-
gregate to 50% of the Fund, and that no one issue exceed 25%
of the Fund's total assets. As of November 30, 1993, the Fund
held securities of 82 issuers, with the largest holding rep-
resenting 4.21% of the Fund's assets.
The Fund's policy of investing at least 80% of its assets in
New York municipal securities under normal circumstances is
fundamental and may not be changed without shareholder ap-
proval. The other investment policies described above are not
fundamental and so may be changed by the Board of Trustees
without shareholder approval.
- --------------------------------------------------------------------------------
INVESTMENT As a mutual fund investing in long-term municipal securities,
RISKS the Fund is subject to both interest rate and credit risk.
THE FUND IS INTEREST RATE RISK is the potential for bond price fluctua-
SUBJECT TO tions due to changing interest rates. In general, bond prices
INTEREST RATE, vary inversely with interest rates. If interest rates rise,
CREDIT, CALL bond prices generally decline; if interest rates fall, bond
AND INCOME prices generally rise. In addition, for a given change in in-
RISK terest rates, longer-maturity bonds exhibit greater price
fluctuations than shorter-maturity bonds. To compensate in-
vestors for this risk, longer-maturity bonds generally offer
higher yields than shorter-maturity bonds, other factors, in-
cluding credit quality, being equal. Interest rate risk may
be increased or decreased when a portfolio initiates or pur-
chases derivative New York municipal securities. Such deriva-
tive securities rely on sophisticated interest rate calcula-
tion mechanisms. For certain types of derivative bonds, the
magnitude of increases and decreases in their price may be
proportionately larger or smaller than, or inverse to, the
price changes that broad market interest rate fluctuations
would produce in long-term bonds.
CREDIT RISK is the possibility that a bond issuer will fail
to make timely payments of interest or principal to a Fund.
The credit risk of a Fund depends on the credit quality of
its underlying securities. In general, the lower the credit
quality of a Fund's municipal securities, the higher a Fund's
yield, all other factors such as maturity being equal.
CALL RISK is the possibility that, during periods of falling
interest rates, a municipal security with a high stated in-
terest rate will be prepaid (or "called") prior to
5
<PAGE>
its expected maturity date. As a result, a fund will be re-
quired to invest the unanticipated proceeds at lower interest
rates, and the fund's income may decline. Call provisions are
most common for intermediate- and long-term municipal bonds.
INCOME RISK is the potential for a decline in a fund's income
due to falling market interest rates. Because a fund's income
is based on interest rates, which can fluctuate substantially
over short periods, income risk is expected to vary from fund
to fund.
THE FUND IS Finally, the investment adviser manages the fund according to
SUBJECT TO the traditional methods of "active" investment management,
MANAGER RISK which involves the buying and selling of securities based
upon economic, financial and market analysis and investment
judgment. MANAGER RISK refers to the possibility that the
fund's investment adviser may fail to execute a fund's in-
vestment strategy effectively. As a result, a fund may fail
to achieve its stated objective.
Because the Fund invests in long-term municipal bonds, inter-
est rate risk for the Fund may be high. The average weighted
maturity of the Fund is expected to exceed 15 years, meaning
that the Fund's share price will fluctuate, sometimes sub-
stantially, when interest rates change. The following chart
illustrates the potential interest rate risk of the Fund. The
chart shows the market value of a $1,000 investment in a sin-
gle bond with the same yield and maturity characteristics as
the Fund on November 30, 1993, assuming a 1% and 2% point in-
crease or decrease in interest rates:
<TABLE>
<CAPTION>
HYPOTHETICAL VALUE OF $1,000 INVESTMENT
---------------------------------------
AFTER CHANGE IN INTEREST RATES OF:
----------------------------------
30-DAY AVERAGE 1% POINT 1% POINT 2% POINT 2% POINT
YIELD MATURITY INCREASE DECREASE INCREASE DECREASE
------ --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
4.73% 9.9 years $925 $1,082 $857 $1,172
</TABLE>
This chart is intended to provide you with general guidelines
for evaluating the effect of interest rate changes on the
Fund and determining the degree of interest rate risk you may
be willing to assume. The yield and price changes shown are
purely for illustrative purposes, and should not be taken as
representative of current or future yields or expected
changes in the share price of the Fund.
CREDIT RISK IS Credit risk depends on the average quality of the Fund's un-
EXPECTED TO BE derlying securities and the Fund's degree of diversification.
LOW The Fund invests primarily in bonds insured by top-rated in-
surance companies against the possible default of an issuer
as to the timely payment of interest and principal. As a re-
sult, the average credit quality of the Fund is expected to
be very high, and credit risk is expected to be minimal.
Ordinarily, an investment company concentrating its invest-
ments in one state, such as the Fund, would be exposed to
greater credit risks than an investment company investing in
a nationally diversified portfolio of municipal securities.
These risks include possible tax law changes, a deterioration
in economic con
6
<PAGE>
ditions, and differing levels of supply and demand for New
York municipal obligations.
To minimize the effects of concentrating its investments in
New York obligations, the Fund intends to diversify its hold-
ings by complying with Subchapter M of the Internal Revenue
Code. (See "Investment Policies" for a description of the re-
quirements of Subchapter M.) In addition, the use of munici-
pal bond insurance should minimize the credit risk associated
with the Fund.
As of November 30, 1993, top ten portfolio holdings, based on
market value, represented 27.2% of the Insured Long-Term
Portfolio's net assets.
The following chart summarizes credit interest rate and in-
come risks for the Fund.
<TABLE>
<CAPTION>
CREDIT INTEREST INCOME PREPAYMENT/
RISK RATE RISK RISK CALL RISK
------ --------- ------ -----------
<S> <C> <C> <C>
Very Low High Low Medium
</TABLE>
- --------------------------------------------------------------------------------
WHO SHOULD The Fund is intended for New York residents seeking income
INVEST that is exempt from federal and New York personal income tax-
es. As a rule, tax-free income is attractive to investors in
NEW YORK high federal and New York tax brackets. You can determine
RESIDENTS whether tax-exempt or taxable income is more attractive in
SEEKING TAX- your own case by comparing the Fund's tax-free yield with the
EXEMPT INCOME yield from a comparable taxable mutual fund investment. See
"How to Compare Tax-Free and Taxable Yields."
Assuming that tax-free income is attractive in your own tax
bracket, you should weigh an investment in the Fund in terms
of its expected yield and price volatility, and your own in-
vestment objectives, risk preferences, and time horizon. The
Fund is suitable for investors who are seeking the highest,
most durable streams of income and who can tolerate sometimes
sharp fluctuations in share price in pursuit of their income
objectives. The yield of the Fund is expected to be higher,
and the level of income provided more stable, than that pro-
vided by other mutual funds which invest in short-term New
York municipal securities. However, because of the Fund's po-
tential price volatility, the Fund is appropriate only for
those investors who can hold their investment over the long
term.
The Fund is intended to be a long-term investment vehicle and
is not designed to provide investors with a means of specu-
lating on short-term market movements. Investors who engage
in excessive account activity generate additional costs which
are borne by all of the Fund's shareholders. In order to min-
imize such costs, the Fund has adopted the following poli-
cies. The Fund reserves the right to reject any purchase re-
quest (including exchange purchases from other Vanguard port-
folios) that is reasonably deemed to be disruptive to effi-
cient portfolio management, either because of the timing of
the investment or previous excessive trading by the investor.
Additionally, the Fund has adopted exchange privilege limita-
tions as described in the section "Exchange Privilege Limita-
tions." Finally, the Fund reserves the right to suspend the
offering of its shares.
7
<PAGE>
- --------------------------------------------------------------------------------
HOW TO COMPARE Before choosing a specific tax-exempt investment, such as the
TAX-FREE AND Fund, you should determine if you would be better off with
TAXABLE YIELDS taxable or tax-exempt income for your tax bracket. To compare
taxable and tax-free income, you should first determine your
combined federal, state and local tax bracket. Then you
should calculate the "taxable equivalent yield" for the Fund
you are considering, and compare it with the yield of a tax-
able investment with similar credit and maturity characteris-
tics.
1. DETERMINE YOUR COMBINED TAX BRACKET. Your combined tax
bracket depends on whether you itemize state and local taxes
as a deduction on your
federal return. If you do not itemize, then your combined tax
bracket is the sum of your federal, state and local tax
brackets.
If you do itemize, then your combined tax bracket is calcu-
lated as follows. First, calculate your effective state and
local tax bracket using the following formula:
Federal Effective
Tax State & State &
(100% - Bracket) X Local Bracket = Local Bracket
For example, if you are in a 7.6% state tax bracket, a local
tax bracket of 3.91%, and a 28% federal tax bracket, your ef-
fective state and local tax bracket would be 8.28%:
(100% - 28%) X 11.51% = 8.28%
Second, add your effective state and local tax bracket to
your federal tax bracket to determine your combined tax
bracket:
Federal Effective Combined
Tax + State & = Tax
Bracket Local Bracket Bracket
28% + 8.28% = 36.28%
2. CALCULATE YOUR TAXABLE EQUIVALENT YIELD. The taxable
equivalent yield for a Fund is based upon the Fund's current
tax-exempt yield and your combined tax bracket. The formula
is:
Fund's Tax-Free Yield Your Taxable
-------------------------------- = Equivalent Yield
100% - Your Combined Tax Bracket
For example, if you are in a combined tax bracket of 36.28%,
and the Fund's tax-free yield is 6%, the Fund's taxable
equivalent yield would be 9.42%:
6%
------------- = 9.42%
100% - 36.28%
In this example, you would choose the tax-free investment if
the 9.42% taxable equivalent yield were greater than the tax-
able yield from a comparable investment (e.g., a taxable bond
fund of comparable maturity and credit quality).
8
<PAGE>
- --------------------------------------------------------------------------------
IMPLEMENTATION The Fund's adviser uses a variety of investment vehicles to
OF POLICIES achieve the objective of the Fund.
THE FUND The Fund invests principally in tax-exempt New York municipal
INVESTS IN securities, which are debt obligations issued by state and
MUNICIPAL local governments and public financing authorities (and by
BONDS, NOTES certain U.S. territories) that provide interest income that
AND SECURITIES is exempt from federal and New York personal income taxes.
DERIVED FROM Municipal securities include both municipal bonds (those se-
MUNICIPAL curities with maturities of five years or more) municipal
BONDS AND notes (those with maturities of less than five years) and de-
NOTES rivative securities (those securities in which a maturity may
have been shortened by a demand feature).
Municipal bonds are issued for a wide variety of reasons: to
construct public facilities, such as airports, highways,
bridges, schools, hospitals, housing, mass transportation,
streets, water and sewer works; to obtain funds for operating
expenses; to refund outstanding municipal obligations; and to
loan funds to various public institutions and facilities.
Certain industrial development bonds are also considered mu-
nicipal bonds if their interest is exempt from federal income
tax. Industrial development bonds are issued by or on behalf
of public authorities to obtain funds for various privately
operated manufacturing facilities, housing, sports arenas,
convention centers, airports, mass transportation systems,
and water, gas or sewage works.
General obligation municipal bonds are secured by the is-
suer's pledge of full faith, credit and taxing power. Revenue
or special tax bonds are payable from the revenues derived
from a particular facility or, in some cases, from a special
excise or other tax, but not from general tax revenue. Indus-
trial development bonds are ordinarily dependent on the
credit quality of a private authority.
Municipal notes are issued to meet the short-term funding re-
quirements of local, regional and state governments. Munici-
pal notes include tax anticipation notes, bond anticipation
notes, revenue anticipation notes, tax and revenue anticipa-
tion notes, construction loan notes, short-term discount
notes, tax-exempt commercial paper, and demand notes. Demand
notes permit an investor (such as the Fund) to demand from
the issuer payment of principal plus accrued interest upon a
specified number of days' notice.
Derivative securities represent the purchaser's right to re-
ceive principal and interest payments from underlying munici-
pal bonds, general obligation municipal bonds or municipal
notes. A Portfolio may purchase a derivative security from
another portfolio within the Vanguard Group, as permitted by
the Investment Company Act of 1940 and applicable rules
thereunder, or from an outside financial institution. There
are different derivative structures. An example of the steps
involved in creating and using a derivative structure fol-
lows: 1) a depositor places the underlying New York municipal
security into a trust supervised by an independent party; 2)
a financial institution provides the purchasers the right, at
periodic intervals, to tender the derivative security; 3) the
financial
9
<PAGE>
institution receives the difference between the prevailing
short-term interest rate (which is paid to the portfolio
holding the derivative security) and the coupon on the under-
lying New York municipal security in consideration for pro-
viding the tender option; and 4) the tender option may be
discontinued upon the occurrence of certain events, in which
case, the portfolio of the derivative security should receive
its proportional share of the underlying New York municipal
security. The primary risks associated with the use of deriv-
ative securities are: certain interest rate risks discussed
under "Investment Risks," the possibility of a tax law ruling
which affects the status of the state or federal opinions
which are necessary to support the issuance of a derivative
security, and the possible lack of a liquid secondary market.
The Portfolios intend to limit the risk of derivative securi-
ties through policies that restrict the maximum amount of a
Portfolio's overall market risk that can be tolerated. Hence,
derivative securities' contributions to overall market risk
will be restricted, such that the risk/return characteristics
of the portfolios will be fully representative of their broad
maturity guidelines.
THE FUND MAY The Fund is authorized to invest up to 20% of its assets in
INVEST IN AMT so-called "AMT" bonds. AMT bonds are tax-exempt "private ac-
BONDS tivity" bonds issued after August 7, 1986, whose proceeds are
directed at least in part to a private, for-profit organiza-
tion. While the income from AMT bonds is exempt from regular
federal income tax, it is a tax preference item for purposes
of the alternative minimum tax. The alternative minimum tax
is a special separate tax that applies to a limited number of
taxpayers who have certain adjustments to income or tax pref-
erence items.
THE FUND MAY The Fund may utilize bond futures contracts and options to a
USE FUTURES limited extent. Specifically, the Fund may enter into futures
CONTRACTS AND contracts provided that not more than 5% of its assets are
OPTIONS required as a futures contract deposit; in addition, the Fund
may enter into futures contracts and options transactions
only to the extent that obligations under such contracts or
transactions represent not more than 20% of the Fund's as-
sets.
Futures contracts and options may be used for several rea-
sons: to maintain cash reserves while remaining fully invest-
ed, to facilitate trading, to reduce transaction costs, or to
seek higher investment returns when a futures contract is
priced more attractively than the underlying municipal secu-
rity or index. The Fund may not use futures contracts or op-
tions transactions to leverage its assets.
For example, in order to remain fully invested in bonds while
maintaining liquidity to meet potential shareholder redemp-
tions, the Fund may invest a portion of its assets in a bond
futures contract. Because futures contracts only require a
small initial margin deposit, the Fund would then be able to
maintain a cash reserve to meet potential redemptions, while
at the same time remaining fully invested. Also, because the
transaction costs of futures and options may be lower than
the costs of investing in bonds directly, it is expected that
the use of futures contracts and options may reduce the
Fund's total transaction costs.
10
<PAGE>
FUTURES The primary risks associated with the use of futures and op-
CONTRACTS AND tions are: (i) imperfect correlation between the change in
OPTIONS POSE market value of the bonds held by the Fund and the prices of
CERTAIN RISKS futures and options; and (ii) possible lack of a liquid sec-
ondary market for a futures contract and the resulting in-
ability to close a futures position prior to its maturity
date. The risk of imperfect correlation will be minimized by
investing in those contracts whose price fluctuations are ex-
pected to resemble those of the Fund's underlying securities.
The risk that the Fund will be unable to close out a futures
position will be minimized by entering into such transactions
on a national exchange with an active and liquid secondary
market. In general, the futures market is more liquid than
the municipal bond market; therefore, the Fund's liquidity
may be improved by investing in futures.
The risk of loss in trading futures contracts in some strate-
gies can be substantial, due both to the low margin deposits
required and the extremely high degree of leverage involved
in futures pricing. As a result, a relatively small price
movement in a futures contract may result in immediate and
substantial loss (or gain) to the investor. When investing in
futures contracts, the Fund will segregate cash or cash
equivalents in the amount of the underlying obligation.
IN UNUSUAL Although it does not expect to do so, except in unusual cir-
CIRCUMSTANCES, cumstances, the Fund may invest up to 20% of its assets in
THE FUND MAY the following non-tax-exempt securities: obligations of the
INVEST IN United States Government and its agencies or instrumentali-
TAXABLE ties; commercial paper, bank certificates of deposit, and
SECURITIES bankers' acceptances; and repurchase agreements collateral-
ized by these securities.
THREE TYPES OF To provide an added level of credit protection, the Fund uses
INSURANCE MAY three types of insurance: new issue, mutual fund and second-
BE USED BY THE ary market insurance. A new issue insurance policy is pur-
FUND chased by a bond issuer who wishes to increase the credit
rating of a security. By paying a premium and meeting the in-
surer's underwriting standards, the bond issuer is able to
obtain a high credit rating for the security (usually Aaa
from Moody's or AAA from Standard & Poor's). New issue insur-
ance policies are non-cancellable and continue in force as
long as the bonds are outstanding.
A mutual fund insurance policy may be used to guarantee spe-
cific bonds only while owned by a mutual fund. The Fund has
obtained a mutual fund insurance policy from Financial Guar-
anty Insurance Company ("Financial Guaranty"), a AAA-rated
insurance company. Based upon the expected composition of the
Fund, the annual premiums for the policy are likely to range
from 0.20% to 0.40% of the principal value of the bonds in-
sured under the policy, thereby reducing the Fund's current
yield.
A secondary market insurance policy is purchased by an in-
vestor (such as the Fund) subsequent to the bond's original
issuance and generally insures a particular bond for the re-
mainder of its term. The Fund may purchase bonds which have
already been insured under a secondary market insurance pol-
icy by a prior
11
<PAGE>
investor, or the Fund may itself purchase such a policy from
Financial Guaranty for bonds that are currently uninsured.
An insured municipal bond in the Fund will typically be cov-
ered by only one of the three policies. For instance, if a
bond is already covered by a new issue insurance policy or a
secondary market insurance policy, then that security will
not be insured under the Fund's mutual fund insurance policy.
All of the insurance policies used by the Fund will be ob-
tained only from companies rated Aaa by Moody's or AAA by
Standard & Poor's.
THE FUND MAY The Fund observes strict maturity guidelines as set forth in
REPORT AN detail under "Investment Policies." These maturity standards
EFFECTIVE are specified in terms of the Fund's average weighted maturi-
AVERAGE ty. From time to time, however, the Fund may also report an
WEIGHTED effective average weighted maturity, which reflects, among
MATURITY other items, the likelihood that a municipal bond or note
held by the Fund may be redeemed or "called" prior to its
stated maturity date. For example, if the Fund consists en-
tirely of 20-year bonds, some of which may be "called" prior
to their stated maturity in 20 years, the Fund's average
weighted maturity will be 20 years, while its effective aver-
age maturity will be shorter.
The Fund's effective average weighted maturity will be influ-
enced by bond market conditions, and so may vary from day-to-
day, even if no change has been made to the Fund's underlying
investment securities. For example, if interest rates de-
cline, a greater proportion of the Fund's securities may be
subject to call (redemption) prior to their stated maturity.
As a result, reflecting this increased call risk, the effec-
tive average maturity of the Fund will shorten, independent
of actual purchases or sales of portfolio securities.
THE FUND MAY The Fund may purchase tax-exempt securities on a "when-is-
PURCHASE WHEN- sued" basis. In buying "when-issued" securities, the Fund
ISSUED commits to buy securities at a certain price even though the
SECURITIES securities may not be delivered for up to 45 days. The Fund
pays for the securities and begins earning interest when the
securities are actually delivered. As a consequence, it is
possible that the market price of the securities at the time
of delivery may be higher or lower than the purchase price.
THE FUND MAY The Fund may lend its investment securities to qualified in-
LEND ITS stitutional investors for the purpose of realizing additional
SECURITIES net investment income. Loans of securities by a Fund will be
collateralized by cash, letters of credit, or securities is-
sued or guaranteed by the U.S. Government or its agencies.
The collateral will equal at least 100% of the current market
value of the loaned securities. Income derived from the lend-
ing of securities is not tax-exempt, and a portion of the
tax-exempt interest earned when a municipal security is on
loan must be characterized as taxable income. Therefore, the
Fund will limit such activity in accordance with its invest-
ment objective.
THE FUND MAY Each Portfolio may purchase municipal lease obligations,
INVEST IN which are securities issued by state and local governments to
MUNICIPAL acquire land, equipment and facilities. These obligations
LEASE typically are not backed by the issuing municipality's full
OBLIGATIONS
12
<PAGE>
authority to assess taxes to meet its debt obligations. If
the issuing authority fails to make the appropriations neces-
sary to cover lease payments, then the lease may terminate,
with the possibility of default on the lease obligation and
loss to investors.
- --------------------------------------------------------------------------------
INVESTMENT The Fund has adopted certain limitations designed to reduce
LIMITATIONS its exposure to specific situations. These limitations in-
clude the following:
THE FUND HAS
ADOPTED a) The Fund will invest a minimum of 80% of its net assets in
CERTAIN insured municipal bonds, the interest on which is exempt
FUNDAMENTAL from federal and New York personal income taxes.
LIMITATIONS
b) At the close of each quarter of the taxable year, the Fund
will limit the aggregate value of all holdings, except
U.S. Government and cash items, as defined in the Internal
Revenue Code (the "Code"), each of which exceeds 5% of the
Fund's total assets, to an aggregate amount of 50% of such
assets.
c) The Fund will limit the aggregate value of holdings of a
single issuer (except U.S. Government and cash items as
defined in the Code) to a maximum of 25% of the Fund's to-
tal assets. For the purposes of this limitation, identifi-
cation of the issuer will be based on a determination of
the source of assets and revenues committed to meeting in-
terest and principal payments on each security.
d) The Fund will not borrow money except for temporary or
emergency purposes, and then not in excess of 10% of the
Fund's total assets. The Fund will repay all borrowings
before making additional investments, and the interest
paid on such borrowings will reduce income.
e) The Fund will not pledge, mortgage, or hypothecate more
than 10% of its total assets.
These investment limitations are considered at the time in-
vestment securities are purchased. The limitations described
here and in the Statement of Additional Information may be
changed only with the approval of a majority of the Fund's
shareholders.
- --------------------------------------------------------------------------------
MANAGEMENT OF The Fund is a member of The Vanguard Group of Investment Com-
THE FUND panies, a family of 32 investment companies with 77 distinct
investment portfolios and total assets in excess of $120 bil-
VANGUARD lion. Through their jointly owned subsidiary, The Vanguard
ADMINISTERS Group, Inc. ("Vanguard"), the Fund and the other funds in the
AND Group obtain at cost virtually all of their corporate manage-
DISTRIBUTES ment, administrative, shareholder accounting and distribution
THE FUND services. Vanguard also provides investment advisory services
on an at-cost basis to certain Vanguard funds. As a result of
Vanguard's unique corporate structure, the Vanguard Funds have
costs substantially lower than those of most competing mutual
funds. In 1993, the average expense ratio (annual costs
including advisory fees divided by total net assets) for the
Vanguard funds amounted to approximately .30%
13
<PAGE>
compared to an average of 1.02% for the mutual fund industry
(data provided by Lipper Analytical Services).
The Officers of the Fund manage its day-to-day operations and
are responsible to the Fund's Trustees. The Trustees set
broad policies for the Fund and choose its Officers. A list
of Trustees and Officers of the Fund and a statement of their
present positions and principal occupations during the past
five years can be found in the Statement of Additional Infor-
mation.
Vanguard employs a supporting staff of management and admin-
istrative personnel needed to provide the requisite services
to the funds and also furnishes the funds with necessary of-
fice 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 Trustees
(Directors) of each fund. In addition, each fund bears its
own direct expenses, such as legal, auditing and custodian
fees.
Vanguard also provides distribution and marketing services to
the Vanguard funds. The funds are available on a no-load ba-
sis (i.e., there are no sales commissions or 12b-1 fees).
However, each fund bears its share of the Group's distribu-
tion costs.
- --------------------------------------------------------------------------------
INVESTMENT The Fund receives all investment advisory services on an at-
ADVISER cost basis from Vanguard's Fixed Income Group. The Group also
provides investment advisory services to 34 other Vanguard
VANGUARD money market and bond portfolios, both taxable and tax-ex-
MANAGES THE empt. Total assets under management by Vanguard's Fixed In-
FUND'S come Group were $52 billion as of December 31, 1993. The
INVESTMENTS Fixed Income Group is supervised by the Officers of the Fund.
Ian A. MacKinnon, Senior Vice President of Vanguard, has been
in charge of the Group since its inception in 1981.
* David Hamlin, Assistant Vice President of Vanguard, serves
as portfolio manager of the New York Insured Tax-Free Fund.
Mr. Hamlin has managed the Fund since its inception in
1986. Prior to joining Vanguard, Mr. Hamlin managed tax ex-
empt money market funds for a major investment company.
The Fixed Income Group manages the investment and reinvest-
ment of the assets of the Fund and continuously reviews, su-
pervises and administers the Fund's investment program, sub-
ject to the maturity and quality standards specified in this
Prospectus and supplemental guidelines approved by the Fund's
Board of Trustees. The Fixed Income Group's selection of in-
vestments is based on: (a) continuing credit analysis of
those instruments held in the Fund and those being considered
for inclusion therein; (b) possible disparities in yield re-
lationships between different fixed-income securities; and
(c) actual or anticipated movements in the general level of
interest rates.
Vanguard's Fixed Income Group places all orders for purchases
and sales of portfolio securities. Purchases of portfolio se-
curities are made either directly from the issuer or from mu-
nicipal securities dealers. The Fixed Income Group
14
<PAGE>
may sell portfolio securities prior to their maturity if cir-
cumstances and considerations warrant and if it believes such
dispositions advisable. The Fixed Income Group seeks to ob-
tain the best available net price and most favorable execu-
tion for all portfolio transactions.
- --------------------------------------------------------------------------------
DIVIDENDS, Dividends consisting of virtually all of the ordinary income
CAPITAL GAINS of each Portfolio are declared daily and are payable to
AND TAXES shareholders of record at the close of the previous business
day. Such dividends are paid on the first business day of
THE FUND PAYS each month. Net capital gains distributions, if any, will be
MONTH-END made annually.
DIVIDENDS
Dividend and capital gains distributions may be automatically
reinvested or received in cash. See "Choosing a Distribution
Option" for a description of these distribution methods.
In addition, in order to satisfy certain distribution re-
quirements of the Tax Reform Act of 1986, the Fund may de-
clare special year-end dividend and capital gains distribu-
tions during December. Such distributions, if received by
shareholders by January 31, are deemed to have been paid by
the Fund and received by shareholders by December 31 of the
prior year.
DIVIDENDS WILL The Fund intends to continue to qualify for taxation as a
BE EXEMPT FROM "regulated investment company" under the Internal Revenue
FEDERAL AND Code so that it will not be subject to federal income tax to
NEW YORK the extent its income is distributed to shareholders. In ad-
INCOME TAXES dition, the Fund intends to invest a sufficient portion of
its assets in municipal bonds and notes so that it will con-
tinue to qualify to pay "exempt-interest dividends" to share-
holders. Such exempt-interest dividends are excluded from a
shareholder's gross income for federal tax purposes. The Rev-
enue Reconciliation Act enacted during 1993 provides that
market discount on tax-exempt bonds purchased after April 30,
1993 must be taxed as ordinary income. Accordingly, to the
extent that the Fund purchases such discounted securities,
taxable income may result. Furthermore, the Fund expects to
invest substantially all of its assets in New York municipal
securities. As a result, it will be eligible to pay to New
York residents dividends that will be exempt from New York
State personal income taxes.
Net long-term capital gains realized by the Fund from the
sale of securities will be distributed as taxable capital
gains distributions. Any short-term capital gains or any tax-
able interest income will be distributed as a taxable ordi-
nary dividend distribution. In general, such taxable income
distributions from the Fund are expected to be negligible in
comparison with tax-exempt dividends. However, under unusual
circumstances, the Fund may invest in securities other than
New York municipal obligations. In such cases, a portion of
the Fund's income may be subject to New York income taxes,
federal income taxes, or both.
At present, the Fund does not invest in AMT bonds. (See "In-
vestment Policies.") However, were the Fund to invest in such
bonds, a portion of the Fund's dividends, while exempt from
the regular federal income tax, would be a tax preference
item for purposes of the alternative minimum tax.
15
<PAGE>
A sale of the Fund's shares is a taxable event and may result
in a capital gain or loss. A capital gain or loss may be re-
alized from an ordinary redemption of shares, a check-writing
A CAPITAL GAIN redemption, or an exchange of shares between two mutual funds
OR LOSS MAY BE (or two portfolios of a mutual fund). In addition, if you
REALIZED UPON held shares in the Fund for six months or less, any capital
EXCHANGE OR loss realized upon redemption is disallowed to the extent of
REDEMPTION the tax-exempt dividend income you received.
Capital gains distributions from the Fund and any capital
gains or losses realized from the sale or exchange of shares
may also be subject to state and local taxes.
The Fund is required to withhold 31% of any taxable divi-
dends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identi-
fication regulations. You may avoid this withholding require-
ment by indicating your proper Social Security or Taxpayer
Identification Number on your Account Registration Form and
by certifying that you are not subject to backup withholding.
Up to 50% of an individual's Social Security benefits may be
subject to federal income tax. Along with other factors, to-
tal tax-exempt income, including any tax-exempt dividend in-
come from the Fund, is used to calculate the taxable portion
of Social Security benefits.
The Fund is organized as a Pennsylvania business trust and,
in the opinion of counsel, is not liable for any income or
franchise tax in the Commonwealth of Pennsylvania. However,
legislation has been introduced in the Pennsylvania legisla-
ture which, if enacted, could subject the Fund to such taxes.
The Fund will be subject to Pennsylvania county personal
property tax in the county which is the site of its principal
office.
The tax discussion set forth above is included for general
information only. Prospective investors should consult their
own tax advisers concerning the tax consequences of an in-
vestment in the Fund.
- --------------------------------------------------------------------------------
THE SHARE The share price or "net asset value" per share of the Fund is
PRICE OF THE computed daily by dividing the total value of the investments
FUND and other assets of the Fund, less any liabilities, by the
total outstanding shares of the Fund. The net asset value per
share of the Fund is determined as of the close of regular
trading on The New York Stock Exchange (generally 4:00 p.m.)
on each day the Exchange is open.
When approved by the Board of Trustees, bonds and other
fixed-income securities of the Fund may be valued on the ba-
sis of prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securi-
ties. (The prices provided by pricing services are generally
determined without regard to bid or last sale prices. Because
of the large number of outstanding municipal bonds, the ma-
jority of issues do not trade each day; therefore, last sale
prices are not normally available. In valuing such securi-
ties, the pricing services generally take into account insti-
tutional size trading in similar groups of securities and any
developments related to specific securities.) The
16
<PAGE>
methods used by the pricing service and the valuations so es-
tablished are reviewed by the Officers of the Fund under the
general supervision of the Trustees. There are a number of
pricing services available and the Trustees, on the basis of
ongoing evaluation of these services, may use other pricing
services or discontinue the use of any pricing service.
Valuation of securities not priced in this manner are priced
at the most recent quoted bid price provided by investment
dealers. Short-term instruments maturing within 60 days of
the valuation date may be valued at cost, plus or minus any
amortized discount or premium. Other assets and securities
for which no quotations are readily available will be valued
in good faith at their fair value using methods determined by
the Trustees.
The price per share of the Fund can be found daily in the mu-
tual fund section of most major newspapers under the heading
of The Vanguard Group.
- --------------------------------------------------------------------------------
GENERAL Vanguard New York Insured Tax-Free Fund is a Pennsylvania
INFORMATION business trust. The Declaration of Trust permits the Trustees
to issue an unlimited number of shares of beneficial inter-
est, without par value, from an unlimited number of classes
of shares. Currently the Fund is offering one class of
shares.
Shares of the Fund when issued are fully paid and non-assess-
able; participate equally in dividends, distributions and net
assets; are entitled to one vote per share; have pro rata
liquidation rights; and do not have pre-emptive rights. Also,
shares of the Fund have non-cumulative voting rights, meaning
that the holders of more than 50% of the shares voting for
the election of the Trustees can elect all of the Trustees if
they so choose.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other ap-
plicable law. An annual meeting will be held to vote on the
removal of a Trustee or Trustees of the Fund if requested in
writing by the holders of not less than 10% of the outstand-
ing shares of the Fund.
All securities and cash are held by CoreStates Bank, N.A.,
Philadelphia, PA. The Vanguard Group, Inc., Valley Forge, PA,
serves as the Fund's Transfer and Dividend Disbursing Agent.
Price Waterhouse serves as independent accountants for the
Fund and will audit its financial statements annually. The
Fund is not involved in any litigation.
- --------------------------------------------------------------------------------
17
<PAGE>
SHAREHOLDER GUIDE
OPENING AN To open a new account, either by mail or by wire, simply com-
ACCOUNT AND plete and return an Account Registration Form and any re-
PURCHASING quired legal documentation. Please indicate the amount you
SHARES wish to invest. Your purchase must be equal to or greater
than the $3,000 minimum initial investment requirement ($500
for Uniform Gifts/Transfers to Minors Act accounts). In addi-
tion, you must be a New York resident to invest in the Fund.
If you need assistance with the Account Registration Form or
have any questions about this Fund, please call our Investor
Information Department at 1-800-662-7447. NOTE: For other
types of Registrations (e.g. corporations, associations,
other organizations, trusts or powers of attorney), please
call us to determine which additional forms you may need.
Because of the risks associated with bond investments, the
Fund is intended to be a long-term investment vehicle and is
not designed to provide investors with a means of speculating
on short-term market movements. Consequently, the Fund re-
serves the right to reject any specific purchase (and ex-
change purchase) request. The Fund also reserves the right to
suspend the offering of shares for a period of time.
The Fund's shares are purchased at the next-determined net
asset value after your investment has been received in the
form of Federal Funds. See "When Your Account Will Be Credit-
ed". The Fund is offered on a no-load basis (i.e., there are
no sales commissions or 12b-1 fees).
ADDITIONAL Subsequent investments may be made by mail ($100 minimum per
INVESTMENTS portfolio), wire ($1,000 minimum per portfolio), exchange
from another Vanguard Fund account ($100 minimum), or Van-
guard Fund Express.
--------------------------------------------------------------
NEW ACCOUNT ADDITIONAL INVESTMENTS
TO EXISTING ACCOUNTS
PURCHASING BY Please include the Additional investments should
MAIL amount of your initial include the Invest-by-Mail re-
investment on the reg- mittance form attached to your
Complete and istration form, make Fund confirmation statements.
sign the your check payable to Please make your check payable
enclosed The Vanguard Group-76, to The Vanguard Group-76, write
Account and mail to: your account number on your
Registration check and, using the return en-
Form VANGUARD FINANCIAL CENTER velope provided, mail to the
P.O. BOX 2600 address indicated on the In-
VALLEY FORGE, PA 19482 vest-by-Mail Form.
For express or VANGUARD FINANCIAL CENTER All written requests should be
registered 455 DEVON PARK DRIVE mailed to one of the addresses
mail, send to: WAYNE, PA 19087 indicated for new accounts. Do
not send registered or express
mail to the post office box
address.
--------------------------------------------------------------
18
<PAGE>
PURCHASING BY CORESTATES BANK, N.A.
WIRE ABA 031000011
Money should CORESTATES NO. 0141 1274
be wired to: ATTN VANGUARD
VANGUARD NEW YORK INSURED TAX-FREE FUND
BEFORE WIRING ACCOUNT NUMBER
Please contact ACCOUNT REGISTRATION
Client
Services (1-
800-662-2739)
To assure proper receipt, please be sure your bank includes
the name of the Fund, the account number Vanguard has as-
signed to you and the eight digit CoreStates number. If you
are opening a new account, please complete the Account Regis-
tration Form and mail it to the "New Account" address after
completing your wire arrangement. NOTE: Federal Funds wire
purchase orders will be accepted only when the Fund and Cus-
todian Bank are open for business.
--------------------------------------------------------------
PURCHASING BY You may open an account or purchase additional shares by mak-
EXCHANGE (from ing an exchange from an existing Vanguard Fund account. Call
a Vanguard our Client Services Department at 1-800-662-2739. The new ac-
account) count will have the same registration as the existing ac-
count.
--------------------------------------------------------------
PURCHASING BY The Fund Express Special Purchase option lets you move money
FUND EXPRESS from your bank account to your Vanguard account at your re-
quest. Or if you choose the Automatic Investment option,
Special money will be moved from your bank account to your Vanguard
Purchase and account on the schedule (monthly, bimonthly [every other
Automatic month], quarterly or yearly) you select. To establish these
Investment Fund Express options, please provide the appropriate informa-
tion on the Account Registration Form. We will send you a
confirmation of your Fund Express service; please wait three
weeks before using the service.
- --------------------------------------------------------------------------------
CHOOSING A You must select one of three distribution options:
DISTRIBUTION
OPTION
1. AUTOMATIC REINVESTMENT OPTION--Both dividends and capital
gains distributions will be reinvested to purchase addi-
tional Fund shares. This option will be selected for you au-
tomatically unless you specify one of the other options.
2. CASH DIVIDEND OPTION--Your dividends will be paid in cash
and your capital gains will be reinvested in additional
Fund shares.
3. ALL CASH OPTION--Both dividend and capital gains distribu-
tions will be paid in cash.
You may change your option by calling our Client Services De-
partment (1-800-662-2739).
In addition, an option to reinvest your cash dividends and/or
capital gains distributions in another Vanguard Fund account
is available. Please call our Client Services Department (1-
800-662-2739) for information. You may also
19
<PAGE>
elect Vanguard Dividend Express which allows you to transfer
your cash dividends and/or capital gains distributions auto-
matically to your bank account. Please see "Other Vanguard
Services" for more information.
- --------------------------------------------------------------------------------
TAX CAUTION Under Federal tax laws, the Fund is required to distribute
net capital gains and investment income to Fund shareholders.
INVESTORS These distributions are made to all shareholders who own Fund
SHOULD ASK shares as of the distribution's record date, regardless of
ABOUT THE how long the shares have been owned. Purchasing shares just
TIMING OF prior to the record date could have a significant impact on
CAPITAL GAINS your tax liability for the year. For example, if you purchase
AND DIVIDEND shares immediately prior to the record date of a sizable cap-
DISTRIBUTIONS ital gain or income dividend distribution, you will be as-
BEFORE sessed taxes on the amount of the capital gain and/or divi-
INVESTING dend distribution later paid even though you owned the Fund
shares for just a short period of time. (Taxes are due on the
distributions even if the dividend or gain is reinvested in
additional Fund shares.) While the total value of your in-
vestment will be the same after the distribution--the amount
of the distribution will offset the drop in the NAV of the
shares--you should be aware of the tax implications the tim-
ing of your purchase may have.
Prospective investors should, therefore, inquire about poten-
tial distributions before investing. The Fund's annual capi-
tal gains distribution normally occurs in December, while in-
come dividends are generally paid on the first business day
of each month. For additional information on distributions
and taxes, see the section titled "Dividends, Capital Gains,
and Taxes."
- --------------------------------------------------------------------------------
IMPORTANT The easiest way to establish optional Vanguard services on
INFORMATION your account is to select the options you desire when you
complete your Account Registration Form. If you wish to add
ESTABLISHING shareholder options later, you may need to provide Vanguard
OPTIONAL with additional information and a signature guarantee. Please
SERVICES call our Client Services Department (1-800-662-2739) for fur-
ther assistance.
SIGNATURE For our mutual protection, we may require a signature guaran-
GUARANTEES tee on certain written transaction requests. A signature
guarantee verifies the authenticity of your signature, and
may be obtained from banks, brokers and any other guarantor
that Vanguard deems acceptable. A SIGNATURE GUARANTEE CANNOT
BE PROVIDED BY A NOTARY PUBLIC.
CERTIFICATES Share certificates will be issued upon request. If a certifi-
cate is lost, you may incur an expense to replace it.
BROKER-DEALER If you purchase shares in Vanguard Funds through a registered
PURCHASES broker-dealer or investment adviser the broker-dealer or ad-
viser may charge a service fee.
CANCELLING The Fund will not cancel any trade (e.g., a purchase, ex-
TRADES change or redemption) believed to be authentic, received in
writing or by telephone, once the trade has been received.
- --------------------------------------------------------------------------------
20
<PAGE>
WHEN YOUR The trade date is the date on which your account is credited.
ACCOUNT WILL It is generally the day on which the Fund receives your in-
BE CREDITED vestment in the form of Federal Funds (monies credited to the
Fund's Custodian Bank by a Federal Reserve Bank). Your trade
date varies according to your method of payment for your
shares.
For purchases by check, the Fund is ordinarily credited with
Federal Funds within one business day. Thus, if your purchase
by check is received by the close of regular trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time),
your trade date is the business day following receipt of your
check. If your purchase is received after the close of the
Exchange, your trade date is the second business day follow-
ing receipt of your check.
For purchases by Federal Funds wire or exchange, the Fund is
credited immediately with Federal Funds. Thus, if your pur-
chase by Federal Funds wire or exchange is received by the
close of the Exchange, your trade date is the day of receipt.
If your purchase is received after the close of the Exchange,
your trade date is the business day following receipt of your
wire or exchange.
Your shares are purchased at the net asset value determined
on your trade date. You will begin to earn dividends on the
calendar day following the trade date. (For a Friday trade
date, you will begin earning dividends on Saturday.)
In order to prevent lengthy processing delays caused by the
clearing of foreign checks, Vanguard will only accept a for-
eign check which has been drawn in U.S. dollars and has been
issued by a foreign bank with a U.S. correspondent bank.
Each Portfolio reserves the right to suspend the offering of
shares for a period of time. Each Portfolio also reserves the
right to reject any specific purchase request.
- --------------------------------------------------------------------------------
SELLING YOUR You may withdraw any portion of the funds in your account by
SHARES redeeming shares at any time. You may initiate a request by
writing or by telephoning. Your redemption proceeds are nor-
mally mailed, credited or wired--depending upon the method of
withdrawal you have PREVIOUSLY chosen--within two business
days after the receipt of the request in Good Order.
SELLING BY You may withdraw funds from your account by writing a check
WRITING A payable in the amount of $250 or more. When a check is pre-
CHECK sented for payment to the Fund's agent, CoreStates Bank, the
Fund will redeem sufficient shares in your account at the net
asset value next determined to cover the amount of the check.
In order to establish the checkwriting option on your ac-
count, all registered shareholders must sign a signature
card. After your completed signature card is received by the
Fund, an initial supply of checks will be mailed within 10
business days. There is no charge for checks or for their
clearance. CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS
SHOULD CALL OUR CLIENT SERVICES DEPARTMENT (1-800-662-2739)
BEFORE SUBMITTING SIGNATURE CARDS, AS ADDITIONAL DOCUMENTS
MAY BE REQUIRED TO ESTABLISH THE CHECKWRITING SERVICE.
21
<PAGE>
Before establishing the checkwriting option, you should be
aware that:
1. Writing a check (a redemption of shares) is a taxable
event.
2. The Fund does not allow an account to be closed through
the checkwriting option.
3. Vanguard cannot guarantee a stop payment on the
checkwriting option. If you wish to reverse a stop payment
order, you must do so in writing.
4. The Fund reserves the right to terminate or alter this
service at any time.
--------------------------------------------------------------
SELLING BY Requests should be mailed to VANGUARD FINANCIAL CENTER, VAN-
MAIL GUARD NEW YORK INSURED TAX-FREE FUND, P.O. BOX 1120, VALLEY
FORGE, PA 19482. (For express or registered mail, send your
request to Vanguard Financial Center, Vanguard New York In-
sured Tax-Free Fund, 455 Devon Park Drive, Wayne, PA 19087.)
The redemption price of shares will be the Fund's net asset
value next determined after Vanguard has received all re-
quired documents in Good Order.
--------------------------------------------------------------
DEFINITION OF GOOD ORDER means that the request includes the following:
GOOD ORDER
1. The account number and Fund name.
2. The amount of the transaction (specified in dollars or
shares).
3. Signatures of all owners EXACTLY as they are registered on
the account.
4. Any required signature guarantees.
5. Other supporting legal documentation that might be re-
quired, in the case of estates, corporations, trusts, and
certain other accounts.
IF YOU HAVE QUESTIONS ABOUT THIS DEFINITION AS IT PERTAINS TO
YOUR REQUEST, PLEASE CALL OUR CLIENT SERVICES DEPARTMENT AT
1-800-662-2739.
--------------------------------------------------------------
SELLING BY To sell shares by telephone, you or your pre-authorized rep-
TELEPHONE resentative may call our Client Services Department at 1-800-
662-2739. For telephone redemptions, you may have the pro-
ceeds sent to you either by mail or by wire. In addition to
the details below, please see "Important Information About
Telephone Transactions."
BY MAIL: Telephone mail redemption is automatically estab-
lished on your account unless you indicate otherwise on your
Account Registration Form. You may redeem any amount by call-
ing Vanguard. The proceeds will be paid to the registered
shareholders and mailed to the address of record.
BY WIRE: Telephone wire redemption must be specifically
elected for your account. The best time to elect telephone
wire redemption is at the time you complete your Account Reg-
istration Form. If you do not presently have telephone wire
redemption and wish to establish it, please contact our Cli-
ent Services Department.
22
<PAGE>
With the wire redemption option, you may withdraw a minimum
of $1,000 and have the amount wired directly to your bank ac-
count. Wire redemptions less than $5,000 are subject to a $5
charge deducted by Vanguard. There is no Vanguard charge for
wire redemptions of $5,000 or more. However, your bank may
assess a separate fee to accept incoming wires.
A request to change the bank associated with your wire re-
demption option must be received in writing, signed by each
registered shareholder, and accompanied by a voided check or
preprinted deposit slip. A signature guarantee is required if
your bank registration is not identical to your Vanguard Fund
account registration.
--------------------------------------------------------------
SELLING BY If you select the Fund Express Automatic Withdrawal option,
FUND EXPRESS money will be automatically moved from your Vanguard Fund ac-
count to your bank account according to the schedule you have
Automatic selected. The Special Redemption option lets you move money
Withdrawal & from your Vanguard account to your bank account upon your re-
Special quest. You may elect Fund Express on the Account Registration
Redemption Form or call our Investor Information Department at 1-800-
662-7447 for a Fund Express application.
--------------------------------------------------------------
SELLING BY You may sell shares of the Fund by making an exchange to an-
EXCHANGE other Vanguard Fund account. Please see "Exchanging Your
Shares" for details.
--------------------------------------------------------------
IMPORTANT Shares purchased by check or Fund Express may be redeemed at
REDEMPTION any time. However, your redemption proceeds will not be paid
INFORMATION until payment for the purchase is collected, which may take
up to ten calendar days. Your money is invested and earns
dividends during the holding period.
--------------------------------------------------------------
DELIVERY OF Redemption requests received by telephone prior to the close
REDEMPTION of regular trading on the New York Stock Exchange (generally
PROCEEDS 4:00 p.m. Eastern time) are processed on the day of receipt
and the redemption proceeds are normally sent on the follow-
ing business day.
Redemption requests received by telephone after the close of
the Exchange (generally 4:00 p.m., Eastern time) are proc-
essed on the business day following receipt and the proceeds
are normally sent on the second business day following re-
ceipt.
Redemption proceeds must be sent to you within seven days of
receipt of your request in Good Order.
If you experience difficulty in making a telephone redemption
during periods of drastic economic or market changes, your
redemption request may be made by regular or express mail. It
will be implemented at the net asset value next determined
after your request has been received by Vanguard in Good Or-
der. The Fund reserves the right to revise or terminate the
telephone redemption privilege at any time.
23
<PAGE>
The Fund may suspend the redemption right 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.
--------------------------------------------------------------
VANGUARD'S If you make a redemption from a qualifying account, Vanguard
AVERAGE COST will send you an Average Cost Statement which provides you
STATEMENT with the tax basis of the shares you redeemed. Please see
"Other Vanguard Services" for additional information.
--------------------------------------------------------------
MINIMUM Due to the relatively high cost of maintaining smaller ac-
ACCOUNT counts, the Fund reserves the right to redeem shares in any
BALANCE account that is below the minimum initial investment amount
REQUIREMENT of $3,000. In addition, if at any time the total investment
does not have a value of at least $1,000, you may be notified
that the value of your account is below the Fund's minimum
account balance requirement. You would then be allowed 60
days to make an additional investment before the account is
liquidated. Proceeds would be promptly paid to the sharehold-
er.
- --------------------------------------------------------------------------------
EXCHANGING Should your investment goals change, you may exchange your
YOUR SHARES shares of Vanguard New York Insured Tax-Free Fund for those
of other available Vanguard Funds.
EXCHANGING BY When exchanging shares by telephone, please have ready the
TELEPHONE Fund name, account number, Social Security Number or Taxpayer
Identification Number listed on the account, and account ad-
Call Client dress. Requests for telephone exchanges received prior to the
Services close of regular trading on the New York Stock Exchange (gen-
(1-800-662- erally 4:00 p.m. Eastern time) are processed at the close of
2739) business that same day. Requests received after the close of
the Exchange are processed the next business day. TELEPHONE
EXCHANGES ARE NOT ACCEPTED INTO OR FROM VANGUARD BALANCED IN-
DEX, VANGUARD EXPLORER FUND, VANGUARD INDEX TRUST, VANGUARD
INTERNATIONAL EQUITY INDEX FUND--EUROPEAN AND PACIFIC PORTFO-
LIOS, AND VANGUARD QUANTITATIVE PORTFOLIOS. If you experience
difficulty in making a telephone exchange, your exchange re-
quest may be made by regular or express mail, and it will be
implemented at the closing net asset value on the date re-
ceived by Vanguard provided the request is received in Good
Order.
--------------------------------------------------------------
EXCHANGING BY Please be sure to include on your exchange request the name
MAIL and account number of your current Fund, the name of the Fund
you wish to exchange into, the amount you wish to exchange,
and the signatures of all registered account holders. Send
your request to VANGUARD FINANCIAL CENTER, VANGUARD NEW YORK
INSURED TAX-FREE FUND, P.O. BOX 1120, VALLEY FORGE, PA 19482.
(For express or registered mail, send your request to Van-
guard Financial Center, Vanguard New York Insured Tax-Free
Fund, 455 Devon Park Drive, Wayne, PA 19087.)
--------------------------------------------------------------
24
<PAGE>
IMPORTANT Before you make an exchange, you should consider the follow-
EXCHANGE ing:
INFORMATION
. Please read the Fund's prospectus before making an ex-
change. For a copy and for answers to any questions you may
have, call our Investor Information Department (1-800-662-
7447).
. An exchange is treated as a redemption and a purchase.
Therefore, you could realize a taxable gain or loss on the
transaction.
. Exchanges are accepted only if the registrations and the
Taxpayer Identification numbers of the two accounts are
identical.
. The shares to be exchanged must be on deposit and not held
in certificate form.
. New accounts are not currently accepted in Vanguard/Windsor
Fund.
. The redemption price of shares redeemed by exchange is the
net asset value next determined after Vanguard has received
the required documentation in Good Order.
. When opening a new account by exchange, you must meet the
minimum investment requirement of the new Fund.
Every effort will be made to maintain the exchange privilege.
However, the Fund reserves the right to revise or terminate
its provisions, limit the amount of or reject any exchange,
as deemed necessary, at any time.
- --------------------------------------------------------------------------------
EXCHANGE The Fund's exchange privilege is not intended to afford
PRIVILEGE shareholders a way to speculate on short-term movements in
LIMITATIONS the market. Accordingly, in order to prevent excessive use of
the exchange privilege that may potentially disrupt the man-
agement of the Fund and increase transaction costs, the Fund
has established a policy of limiting excessive exchange ac-
tivity.
Exchange activity generally will not be deemed excessive if
limited to TWO SUBSTANTIVE EXCHANGE REDEMPTIONS (AT LEAST 30
DAYS APART) from the Fund during any twelve month period.
Notwithstanding these limitations, the Fund reserves the
right to reject any purchase request (including exchange pur-
chases from other Vanguard portfolios) that is reasonably
deemed to be disruptive to efficient portfolio management.
- --------------------------------------------------------------------------------
IMPORTANT The ability to initiate redemptions (except wire redemptions)
INFORMATION and exchanges by telephone is automatically established on
ABOUT TELEPHONE your account unless you request in writing that telephone
TRANSACTIONS transactions on your account not be permitted. The ability to
initiate wire redemptions by telephone will be established on
your account only if you specifically elect this option in
writing.
To protect your account from losses resulting from unautho-
rized or fraudulent telephone instructions, Vanguard adheres
to the following security procedures:
25
<PAGE>
1. SECURITY CHECK. To request a transaction by telephone, the
caller must know (i) the name of the Fund; (ii) the 10-digit
account number; (iii) the exact name in which the account is
registered; and (iv) the Social Security or Taxpayer Identi-
fication number listed on the account.
2. PAYMENT POLICY. The proceeds of any telephone redemption
made by mail will be made payable to the registered
shareowner and mailed to the address of record, only. In the
case of a telephone redemption by wire, the wire transfer
will be made only in accordance with the shareowner's prior
written instructions.
Neither the Fund nor Vanguard will be responsible for the au-
thenticity of transaction instructions received by telephone,
provided that reasonable security procedures have been fol-
lowed. Vanguard believes that the security procedures de-
scribed above are reasonable and that if such procedures are
followed, you will bear the risk of any losses resulting from
unauthorized or fraudulent telephone transactions on your ac-
count. If Vanguard fails to follow reasonable security proce-
dures, it may be liable for any losses resulting from unau-
thorized or fraudulent telephone transactions on your ac-
count.
- --------------------------------------------------------------------------------
TRANSFERRING You may transfer the registration of any of your Fund shares
REGISTRATION to another person by completing a transfer form and sending
it to: VANGUARD FINANCIAL CENTER, P.O. BOX 1110, VALLEY
FORGE, PA 19482, ATTENTION: TRANSFER DEPARTMENT. The request
must be in Good Order. BEFORE MAILING YOUR REQUEST, PLEASE
CALL OUR CLIENT SERVICES DEPARTMENT (1-800-662-2739) FOR FULL
INSTRUCTIONS.
- --------------------------------------------------------------------------------
OTHER VANGUARD For more information about any of these services, please call
SERVICES our Investor Information Department at 1-800-662-7447.
STATEMENTS AND Vanguard will send you a confirmation statement each time you
REPORTS initiate a transaction in your account except for
checkwriting redemptions from Vanguard money market accounts.
You will also receive a comprehensive account statement at
the end of each calendar quarter. The fourth-quarter state-
ment will be a year-end statement, listing all transaction
activity for the entire calendar year.
Vanguard's Average Cost Statement provides you with the aver-
age cost of shares redeemed from your account, using the av-
erage cost single category method. This service is available
for most taxable accounts opened since January 1, 1986. In
general, investors who redeemed shares from a qualifying Van-
guard account may expect to receive their Average Cost State-
ment in February of the following year. Please call our Cli-
ent Services Department (1-800-662-2739) for information.
Financial reports on the Fund will be mailed to you semi-an-
nually, according to the Fund's fiscal year-end.
26
<PAGE>
VANGUARD With Vanguard's Direct Deposit Service, most U.S. Government
DIRECT DEPOSIT checks (including Social Security and military pension
SERVICE checks) and private payroll checks may be automatically de-
posited into your Vanguard Fund account. Separate brochures
and forms are available for direct deposit of U.S. Government
and private payroll checks.
VANGUARD Vanguard's Automatic Exchange Service allows you to move
AUTOMATIC money automatically among your Vanguard Fund accounts. For
EXCHANGE instance, the service can be used to "dollar cost average"
SERVICE from a money market portfolio into a stock or bond fund or to
contribute to an IRA or other retirement plan.
VANGUARD FUND Vanguard's Fund Express allows you to transfer money between
EXPRESS your Fund account and your account at a bank, savings and
loan association, or a credit union that is a member of the
Automated Clearing House (ACH) system. You may elect this
service on the Account Registration Form or call our Investor
Information Department (1-800-662-7447) for a Fund Express
application.
The minimum amount that can be transferred by telephone is
$100. However, if you have established one of the automatic
options, the minimum amount is $50. The maximum amount that
can be transferred using any of the options is $100,000.
Special rules govern how your Fund Express purchases or re-
demptions are credited to your account. In addition, some
services of Fund Express cannot be used with specific Van-
guard Funds. For more information, please refer to the Van-
guard Fund Express brochure.
VANGUARD Vanguard's Dividend Express allows you to transfer your divi-
DIVIDEND dends and/or capital gains distributions automatically from
EXPRESS your Fund account, one business day after the Fund's payable
date, to your account at a bank, savings and loan associa-
tion, or a credit union that is a member of the Automated
Clearing House (ACH) network. You may elect this service on
the Account Registration Form or call our Investor Informa-
tion Department (1-800-662-7447) for a Vanguard Dividend Ex-
press application.
VANGUARD TELE- Vanguard's Tele-Account is a convenient, automated service
ACCOUNT that provides share price, price change and yield quotations
on Vanguard Funds through any TouchTone (TM) telephone. This
free service also lets you obtain information about your ac-
count balance, your last transaction, and your most recent
dividend or capital gains payment. To contact Vanguard's
Tele-Account service, dial 1-800-ON-BOARD (1-800-662-6273). A
free brochure offering detailed operating instructions is
available from our Investor Information Department (1-800-
662-7447).
- --------------------------------------------------------------------------------
27
<PAGE>
PO76
(LOGO)
------------------
THE VANGUARD GROUP
OF INVESTMENT
COMPANIES
Vanguard Financial Center
P.O. Box 2600
Valley Forge, PA 19482
INVESTOR INFORMATION
DEPARTMENT:
1-800-662-7447 (SHIP)
CLIENT SERVICES
DEPARTMENT:
1-800-662-2739 (CREW)
TELE-ACCOUNT FOR
24-HOUR ACCESS:
1-800-662-6273 (ON-BOARD)
TELECOMMUNICATION
SERVICE FOR THE
HEARING-IMPAIRED:
1-800-662-2738
TRANSFER AGENT:
The Vanguard Group, Inc.
Vanguard Financial Center
Valley Forge, PA 19482
(LOGO)
P R O S P E C T U S
MARCH 11, 1994
[LOGO OF VANGUARD GROUP APPEARS HERE]
<PAGE>
PART B
VANGUARD NEW YORK INSURED TAX-FREE FUND
STATEMENT OF ADDITIONAL INFORMATION
MARCH 11, 1994
This Statement is not a prospectus but should be read in conjunction with
the Fund's current Prospectus dated March 11, 1994. To obtain this Prospectus,
please call:
VANGUARD'S INVESTOR INFORMATION DEPARTMENT
1-800-662-7447
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Limitations..................................................... B-1
Investment Policies........................................................ B-3
Risks Factors.............................................................. B-6
Yield and Total Return..................................................... B-7
Performance Measures....................................................... B-8
Investment Management...................................................... B-9
Purchase of Shares......................................................... B-10
Redemption of Shares....................................................... B-10
Management of the Fund..................................................... B-12
Description of Shares and Voting Rights.................................... B-14
Financial Statements....................................................... B-15
Appendix A--Description of Municipal Bonds and their Ratings............... B-16
Appendix B--Municipal Lease Obligations.................................... B-19
</TABLE>
INVESTMENT LIMITATIONS
The following limitations cannot be changed without the consent of the hold-
ers of a majority of the Fund's outstanding shares (as defined in the Invest-
ment Company Act of 1940), including a majority of the shares of each Portfo-
lio.
1. The Fund will not invest in securities other than Municipal Bonds, ex-
cept that it may make temporary investments in (a) notes issued by or on
behalf of municipal or corporate issuers, obligations of the United States
Government and its agencies or instrumentalities, commercial paper and bank
certificates of deposit; (b) any investment companies investing in such se-
curities which have investment objectives and policies consistent with
those of the Fund, to the extent permitted by the Investment Company Act of
1940, and (c) any such securities or Municipal Bonds subject to short-term
repurchase agreements;
2. The Fund will limit the aggregate value of all holdings (except U.S.
Government and cash items, as defined under Subchapter M of the Internal
Revenue Service Code), each of which exceeds 5% of the Portfolio's total
assets, to an aggregate amount of 50% of such assets;
3. The Fund will limit the aggregate value of holdings of a single issuer
(except U.S. Government and cash items, as defined in the Code) to a maxi-
mum of 25% of the Fund's total assets. For the purposes of this limitation,
identification of the issuer will be based on a determination of the source
of assets and revenues committed to meeting interest and principal payments
of each security;
B-1
<PAGE>
4. The Fund will not borrow money except for temporary emergency purposes
and then only in an amount not exceeding 10% of the value of the total as-
sets of that Fund. The Fund will repay all borrowing before making addi-
tional investments. Interest paid on such borrowings will reduce income;
5. The Fund will not pledge, mortgage or hypothecate its assets to any
extent greater than 10% of the value of the total assets of the Fund;
6. The Fund will not issue senior securities as defined in the Investment
Company Act of 1940;
7. The Fund will not engage in the business of underwriting any issue of
securities issued by other persons, except to the extent that it may tech-
nically be deemed to be an underwriter under the Securities Act of 1933, as
amended, in disposing of investment securities;
8. The Fund will not purchase or sell real estate, but this shall not
prevent investments in Municipal Bonds secured by real estate or interests
therein;
9. The Fund will not make loans to other persons, except by the purchase
of bonds, debentures or similar obligations which are publicly distributed
and as provided under "Lending of Securities";
10. The Fund will not purchase on margin or sell short, except as speci-
fied below in Investment Limitation No. 12;
11. The Fund will not purchase or retain securities of an issuer if those
Trustees of the Fund, each of whom owns more than 1/2 of 1% of such securi-
ties, together own more than 5% of the securities of such issuer;
12. The Fund will not purchase or sell commodities or commodities con-
tracts, except that the Fund may invest in bond futures contracts, bond op-
tions and options on bond futures contracts to the extent that not more
than five percent of the Fund's assets are required as deposit on futures
contracts and not more than 20% of the Fund's assets are invested in
futures contracts and/or options transactions at any time;
13. The Fund will not invest in securities of other investment companies
except as they may be acquired as part of a merger, consolidation or acqui-
sition of assets or otherwise to the extent permitted by Section 12 of the
Investment Company Act of 1940;
14. The Fund will not invest in put, call, straddle or spread options
(except as described above in investment limitation No. 12) or interests in
oil, gas or other mineral exploration or development programs;
15. The Fund will not purchase an industrial revenue bond if as a result
of such purchase (i) more than 5% of the Portfolio's total assets, deter-
mined at market value at the time of the proposed investment, would be in-
vested in industrial revenue bonds where the payment of principal and in-
terest is the responsibility of a company with less than three (3) years
operating history, or (ii) more than 20% of the Portfolio's total assets,
determined at market value at the time of the proposed investment, would be
invested in industrial development bonds. These restrictions do not apply
to municipal obligations where the payment of principal and interest is the
responsibility of a government or the political subdivision of a govern-
ment; and
16. The Fund will not purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in securities
that are illiquid.
The above-mentioned investment limitations are considered at the time in-
vestment securities are purchased. Notwithstanding these limitations, the Fund
may own all or any portion of the securities of, or make loans to, or contrib-
ute 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
(2) primarily engaged in the business of providing, at cost, management, ad-
ministrative, distribution and/or related
B-2
<PAGE>
services to the Fund and such other investment companies. Additionally, the
Fund may invest in when-issued securities without limitation. Please see the
Prospectus for a description of such securities.
INVESTMENT POLICIES
REPURCHASE AGREEMENTS The Fund may invest in repurchase agreements with com-
mercial banks, brokers or dealers either for defensive purposes due to market
conditions or to generate income from its excess cash balances. A repurchase
agreement is an agreement under which the Fund acquires a money market instru-
ment (generally a security issued by the U.S. Government or an agency thereof,
a banker's acceptance or a certificate of deposit) from a commercial bank,
broker or dealer, subject to resale to the seller at an agreed upon price and
date (normally, the next business day). A repurchase agreement may be consid-
ered a loan collateralized by securities. The resale price reflects an agreed
upon interest rate effective for the period the instrument is held by the Fund
and is unrelated to the interest rate on the underlying instrument. In these
transactions, the securities acquired by the Fund (including accrued interest
earned thereon) must have a total value in excess of the value of the repur-
chase agreement and are held by the Fund's custodian bank until repurchased.
In addition, the Fund's Board of Trustees will monitor the Fund's repurchase
agreement transactions generally and will establish guidelines and standards
for review by the investment adviser of the creditworthiness of any bank, bro-
ker or dealer party to a repurchase agreement with the Fund. No more than an
aggregate of 10% of a Fund's assets, at the time of investment, will be in-
vested in repurchase agreements having maturities longer than seven days and
securities subject to legal or contractual restrictions on resale, or for
which there are no readily available market quotations.
The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligations to repurchase the un-
derlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
an agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the under-
lying security is collateral for a loan by the Fund not within the control of
the Fund and therefore the realization by the Fund on such collateral may be
automatically stayed. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's man-
agement acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.
LENDING OF SECURITIES The Fund may lend its investment securities to quali-
fied institutions who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver secu-
rities or completing arbitrage operations. By lending its investment securi-
ties, the Fund attempts to increase its income through the receipt of interest
on the loan. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Fund. The Fund may lend its investment securities to qualified brokers, deal-
ers, banks or other financial institutions, so long as the terms and the
structure of such loans are not inconsistent with the Investment Company Act
of 1940, or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require
that (a) the borrower pledge and maintain with the Fund collateral having a
value at all times not less than 100% of the value of the securities loaned,
(b) the borrower add to such collateral whenever the price of the securities
loaned rises (i.e., the borrower "marks to the market" on a daily basis), (c)
the loan be made subject to termination by the Fund at any time and (d) the
Fund receive reasonable interest on the loan (which may include the Fund in-
vesting any cash collateral in interest bearing short-term investments), any
distribution on the loaned securities and any increase in their market value.
The Fund will not lend its investment securities, if as a result, the aggre-
gate of such loans exceeds 10% of the value of its total assets. Loan arrange-
ments made by the Fund will comply
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with all other applicable regulatory requirements, including the rules of the
New York Stock Exchange, which rules presently require the borrower, after no-
tice, to redeliver the securities within the normal settlement time of five
business days. All relevant facts and circumstances, including the creditwor-
thiness of the broker, dealer or institution, will be considered in making de-
cisions with respect to the lending of securities, subject to review by the
Fund's Board of Trustees. Income derived from lending of securities is not
tax-exempt, and, thus, a portfolio will limit such activity in accordance with
its investment objective.
FUTURES CONTRACTS AND OPTIONS The Fund may enter into futures contracts,
options, and options on futures contracts for the purpose of simulating full
investment and reducing transactions costs. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount
of a specific security at a specified future time and at a specified price.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold," or "selling" a contract pre-
viously purchased) in an identical contract to terminate the position. Broker-
age commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure comple-
tion of the contract (delivery or acceptance of the underlying security) if it
is not terminated prior to the specified delivery date. Minimal initial margin
requirements are established by the futures exchange and may be changed. Bro-
kers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold at prices which
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes, to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of ex-
cess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund ex-
pects to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
interest rates of underlying securities. The Fund intends to use futures con-
tracts only for bona fide hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions. The Fund will
only sell futures contracts to protect securities it owns against price de-
clines or purchase contracts to protect against an increase in the price of
securities it intends to purchase. As evidence of this hedging interest, the
Fund expects that approximately 75% of its futures contract purchases will be
"completed," that is, equivalent amounts of related securities will have been
purchased or are being purchased by the Fund upon sale of open futures con-
tracts.
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Although techniques other than the sale and purchase of futures contracts
could be used to control the Fund's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
While the Fund will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS The Fund will not enter into
futures contract transactions to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of the Fund's total assets. In addition, the Fund will not enter into
futures contracts to the extent that its outstanding obligations to purchase
securities under these contracts would exceed 20% of the Fund's total assets.
RISK FACTORS IN FUTURES TRANSACTIONS Positions in futures contracts may be
closed out only on an Exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market
will exist for any particular futures contract at any specific time. Thus, it
may not be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments
to maintain its required margin. In such situations, if the Fund has insuffi-
cient cash, it may have to sell portfolio securities to meet daily margin re-
quirements at a time when it may be disadvantageous to do so. In addition, the
Fund may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on the ability to effectively hedge it.
The Fund will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The principal interest rate futures exchanges in the United States are the
Board of Trade of the City of Chicago and the Chicago Mercantile Exchange.
The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the Fund are engaged in only for hedging purposes, the Adviser
does not believe that the Fund is subject to the risks of loss frequently as-
sociated with futures transactions. The Fund would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Fund does involve the risk of im-
perfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is
also possible that the Fund could both lose money on futures contracts and
also experience a decline in value of its portfolio securities. There is also
the risk of loss by the fund of margin deposits in the event of bankruptcy of
a broker with whom the Fund has an open position in a futures contract or re-
lated option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made
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<PAGE>
on that day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not limit poten-
tial losses, because the limit may prevent the liquidation of unfavorable po-
sitions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby pre-
venting prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS Except for transactions the Fund
has identified as hedging transactions, the Fund is required for federal in-
come tax purposes to recognize as income for each taxable year its net
unrealized gains and losses on certain futures contracts held as of the end of
the year as well as those actually realized during the year. In most cases,
any gain or loss recognized with respect to a futures contract is considered
to be 60% long-term capital gain or loss and 40% short-term capital gain or
loss, without regard to the holding period of the contract. Furthermore, sales
of futures contracts which are intended to hedge against a change in the value
of securities held by the Fund may affect the holding period of such securi-
ties and, consequently, the nature of the gain or loss on such securities upon
disposition.
In order for the Fund to continue to qualify for federal income tax treat-
ment as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, inter-
est, income derived from loans of securities, gains from the sale of securi-
ties or of foreign currencies or other income derived with respect to the
Fund's business of investing in securities. In addition, gains realized on the
sale or other disposition of securities held for less than three months must
be limited to less than 30% of the Fund's annual gross income. It is antici-
pated that any net gain realized from the closing out of futures contracts
will be considered gain from the sale of securities and therefore be qualify-
ing income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held less than three months, the Fund may be re-
quired to defer the closing out of futures contracts beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts, which have been open for less than three months as
of the end of the Fund's fiscal year and which are recognized for tax purpos-
es, will not be considered gains on sales of securities held less than three
months for the purpose of the 30% test.
The Fund will distribute to shareholders annually any net capital gains
which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Fund's fiscal year) on futures transac-
tions. Such distributions will be combined with distributions of capital gains
realized on the Fund's other investments and shareholders will be advised on
the nature of the transactions.
RISK FACTORS
VANGUARD NEW YORK INSURED TAX-FREE FUND
The Vanguard New York Insured Tax-Free Fund invests primarily in the obliga-
tions of New York State government, state agencies, state authorities and var-
ious local governments, including counties, cities, towns, special districts,
and authorities. In general, the credit quality and credit risk of any is-
suer's debt depend on the state and local economy, the health of the issuer's
finances, the amount of the issuer's debt, the quality of management, and the
strength of legal provisions in debt documents that protect debt holders.
Credit risk is usually lower wherever the economy is strong, growing and di-
versified; financial operations are sound; and the debt burden is reasonable.
The average rating among American states for full faith and credit state
debt is "double-A" by Moody's Investors Service and Standard &Poor's Corpora-
tion. Against this measure and the criteria listed above, the credit risk as-
sociated with direct obligations of the State of New York and State agencies
and authorities, including general obligation and revenue bonds, "moral obli-
gation" bonds,
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<PAGE>
lease debt, and notes, compares somewhat unfavorably. During most of the last
two decades, the State's general obligation bonds have been rated just below
this average by both rating agencies. Additionally, the State's credit quality
could be characterized as more volatile than that of other states, since the
State's credit rating has been upgraded and downgraded much more often than
usual. This rating has fluctuated between "double-A" and "single-A" since the
early 1970s. Nonetheless, during this period the State's obligations could
still be characterized as providing upper medium grade security, with a strong
capacity for timely repayment of debt.
The wealth of New York State as well as the size and diversity of its econ-
omy serve to limit the credit risk of its securities. New York ranks third
among the states in per capita personal income, which is 18% above the U.S.
average. During most of the 1980s, economic indicators for New York, including
income and employment growth and unemployment rates, outperformed the nation
as a whole. The engine of growth for the State in the past decade was the
surge in financial and other services, especially in New York City. Manufac-
turing centers in Upstate New York, which more closely parallel the midwestern
economy, suffered during the 1970s and early 1980s. The Upstate economy has
now stabilized and continues to benefit from the free trade treaty with Canada
and the strength of U.S. exports in general.
Credit risk in New York State is heightened by a large and increasing debt
burden, frequently marginal financial operations, limited revenue raising
flexibility to raise revenues, and the uncertainty of the future credit qual-
ity of New York City, which comprises 40% of the State's population and econo-
my. Combined State and local debt per capita is about 50% above the U.S. aver-
age, and debt service expenditures have been growing as a claim on the State
budget. New York's debt structure is also complicated. To circumvent voter ap-
proval, most State debt is issued by agencies, is not backed by the State's
full faith and credit and has lower credit ratings. In the past, the state had
to rely on short-term borrowing to meet its obligations, but this practice has
ended.
Buoyed by rapid economic growth in the mid-1980s, the State's financial op-
erations generated surpluses. Beginning in 1988, however, unforeseen conse-
quences of federal tax reform, combined with a weakening economy, and resulted
in a series of state budget deficits. New York's heavy commitment to local aid
and social welfare programs allowed expenditure growth to exceed available
revenues. This lack of budgetary discipline caused the State's credit ratings
to fall. Moreover, New York's ability to raise revenues is limited, since com-
bined State and local taxes are among the highest in the nation as a percent
of personal income. Recent state budgets have been balanced, and the prospects
for reform of debt management are improving. The state's credit outlook is
therefore positive.
New York State's future credit quality will be heavily influenced by the fu-
ture of New York City. As the City's economic boom in the 1980s lifted the
State, the severe downturn in the financial services and real estate sectors,
which are concentrated in the City, has been serving as a drag on the State
economy. Stabilization or recovery in these areas is crucial to the economic
and fiscal health of the City and State. Moreover, the City faces daunting
challenges in combatting deteriorating infrastructure and serious social prob-
lems of housing, health, education and public safety. So far, City government
has demonstrated an ability to keep abreast of these problems, but the City's
and the State's ability to meet these challenges will be a continuing risk
factor.
YIELD AND TOTAL RETURN
The yield of the Fund for the 30 day period ended November 30, 1993 was
+4.73%.
The average annual total return of the Fund for the one and five year peri-
ods ending November 30, 1993 was +12.42% and +10.42%, respectively. The aver-
age annual total return for the Fund since its inception on April 7, 1986 is
+8.10%.
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PERFORMANCE MEASURES
Vanguard New York Insured Tax-Free Fund may use one or more, either singu-
larly or in a composite, of the following unmanaged indexes for comparative
performance purposes:
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX--is a well-diversified list
of 500 companies representing the U.S. Stock Market.
WILSHIRE 5000 EQUITY INDEXES--consists of nearly 5,000 common equity securi-
ties, 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 over 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 capi-
talization common stocks.
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX--is an arithmetic, market val-
ue-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 67 bonds and 33
preferreds. The original list of names was generated by screening for convert-
ible 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 Mort-
gage 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.
SHEARSON 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.
MERRILL LYNCH CORPORATE & GOVERNMENT BOND--consists of over 4,500 U.S. Trea-
sury, Agency and investment grade corporate bonds.
SHEARSON 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 in-
cludes over 1,000 issues.
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.
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<PAGE>
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 In-
dex.
COMPOSITE INDEX--35% Standard & Poor's 500 Index and 65% Salomon Brothers
High-Grade Bond Index.
COMPOSITE INDEX--65% Standard & Poor's 500 Index and 35% Salomon Brothers
High-Grade Bond Index.
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 BBB- or better. The Index has a market
value of over $4 trillion.
LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX--is a mar-
ket weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB- or better with maturities be-
tween 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, agen-
cy, 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 de-
fines 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 perfor-
mance 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 Analyt-
ical Services, Inc.
LIPPER NON-GOVERNMENT MONEY MARKET FUND AVERAGE--An industry benchmark of av-
erage 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.
INVESTMENT MANAGEMENT
The Fund receives all investment advisory services on an "internalized," at-
cost basis from an experienced investment management staff employed directly
by The Vanguard Group, Inc. ("Van-
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<PAGE>
guard"), a subsidiary jointly owned by the Fund and the other Funds in The
Vanguard Group of Investment Companies. The investment management staff is su-
pervised by the senior officers of the Fund.
The investment management staff is responsible for: maintaining the speci-
fied standards; making changes in specific issues in light of changes in the
fundamental basis for purchasing such securities; and adjusting the Fund to
meet cash inflow (or outflow), which reflects net purchases and exchanges of
shares by investors (or net redemptions of shares) and reinvestment of the
Fund's income.
A change in securities held by the Fund is known as "portfolio turnover" and
may involve the payment of the Fund of dealer mark-ups, underwriting commis-
sions and other transaction costs on the sales of securities as well as on the
reinvestment of the proceeds in other securities. The annual portfolio turn-
over rate for the Fund is set forth under the heading "Financial Highlights"
in the New York Insured Tax-Free Fund prospectus. The portfolio turnover rate
is not a limiting factor when management deems it desirable to sell or pur-
chase securities. It is impossible to predict whether or not the portfolio
turnover rate in future years will vary significantly from the rates in recent
years.
PURCHASE OF SHARES
The Fund reserves the right in its sole discretion (i) to suspend the offer-
ing of its shares, (ii) to reject purchase orders when in the judgment of man-
agement such rejection is in the best interest of the Fund, and (iii) to re-
duce or waive the minimum for initial and subsequent investments under circum-
stances where certain economies can be achieved in sales of the Fund's shares.
STOCK CERTIFICATES Your purchase will be made in full and fractional shares
of the Fund calculated to three decimal places. Shares are normally held on
deposit for shareholders by the Fund, which will send to shareholders a state-
ment of shares owned at the time of each transaction. This saves the share-
holders the trouble of safe-keeping the certificates and saves the Fund the
cost of issuing certificates. Share certificates are, of course, available at
any time upon written request at no additional cost to shareholders. No cer-
tificates will be issued for fractional shares.
REDEMPTION OF SHARES
The Fund may suspend redemption privileges 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 rea-
sonably practicable for the Fund 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.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay the redemption price in whole or in part by a
distribution in kind of securities held by the Fund in lieu of cash in confor-
mity with applicable rules of the Commission. Investors may incur brokerage
charges on the sale of such securities so received in payment of redemptions.
No charge is made by the Fund for redemptions except for wire redemptions of
under $5000 which may be charged a maximum fee of $5.00. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by the Fund.
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<PAGE>
SIGNATURE GUARANTEES To protect your account, the Fund and Vanguard from
fraud, signature guarantees are required for certain redemptions. Signature
guarantees enable the Fund to verify the identity of the person who has autho-
rized a redemption from your account. Signature guarantees are required in
connection with: (1) redemptions involving more than $25,000 on the date of
receipt by Vanguard of all necessary documents; (2) all redemptions, regard-
less of the amount involved, when the proceeds are to be paid to someone other
than the registered owners); and (3) share transfer requests.
A guarantor must be a bank, a trust company, a member firm of a domestic
stock exchange, or a foreign branch of any of the foregoing. Notaries public
are not acceptable guarantors.
The signature guarantees must appear either: (1) on the written request for
redemption, (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed, or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
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<PAGE>
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, which are elected annu-
ally by shareholders, set broad policies for the Fund and choose its Officers.
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 Fund's Trustees and officers is Post Office Box
876, Valley Forge, PA 19482.
JOHN C. BOGLE, Chairman, Chief Executive Officer and Trustee*
Chairman, Chief Executive Officer, 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 & Trustee*
President and Director of the Fund, The Vanguard Group, Inc. and of each of
the other investment companies in The Vanguard Group.
ROBERT E. CAWTHORN, Trustee
Chairman and Chief Executive Officer, Rhone-Poulenc Rorer, Inc.; Director of
Immune Response Corp. and Sun Company, Inc.; Trustee, Universal Health Realty
Income Trust.
BARBARA BARNES HAUPTFUHRER, Trustee
Director of The Great Atlantic and Pacific Tea Company, Alco Standard Corp.,
Raytheon Company, Knight-Ridder, Inc., and Massachusetts Mutual Life Insur-
ance Co.
BURTON G. MALKIEL, Trustee
Chemical Bank Chairman's Professor of Economics, Princeton University; Direc-
tor of Prudential Insurance Co. of America, Amdahl Corporation, Baker
Fentress & Co., Jeffrey Co., and The Southern New England Telephone Company.
ALFRED M. RANKIN, JR., Trustee
President, Chief Executive Officer and Director of NACCO Industries, Inc.;
Director of The BFGoodrich Company, The Standard Products Company and The Re-
liance Electric Company.
JOHN C. SAWHILL, Trustee
President and Chief Executive Officer, The Nature Conservancy; formerly, Di-
rector and Senior Partner, McKinsey & Co.; President, New York University;
Director of Pacific Gas and Electric Company and NACCO Industries.
JAMES O. WELCH, JR., Trustee
Retired Chairman of Nabisco Brands Inc., retired Vice Chairman and Director
of RJR Nabisco; Director of TECO Energy, Inc.
J. LAWRENCE WILSON, Trustee
Chairman and Director of Rohm & Haas Company; Director of Cummins Engine Com-
pany and Vanderbilt University; Trustee of the Culver Educational Foundation.
RAYMOND J. KLAPINSKY, Secretary*
Senior Vice President and Secretary of The Vanguard Group, Inc.; Secretary 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 invest-
ment companies in The Vanguard Group.
- --------
*Officers of the Fund are "interested persons" as defined in the Investment
Company Act of 1940.
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THE VANGUARD GROUP
Vanguard New York Insured Tax-Free 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 distribu-
tion services. Vanguard also provides investment advisory services on an at-
cost basis to fifteen of the Vanguard Funds, including the Vanguard New York
Insured Tax-Free Fund.
Vanguard employs a supporting staff of management and administrative person-
nel 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 net expenses which are allocated among the Funds
under methods approved by the Board of Trustees (Directors) 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 ad-
viser for the Funds.
The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
Funds' Service Agreement, as expected to be amended on or about May 10, 1993,
provides for the following arrangement: (1) each Vanguard Fund may invest a
maximum of 0.40% of its net assets in Vanguard; and (2) there is no restric-
tion on the maximum aggregate cash investment that the Vanguard Funds may make
in Vanguard. The amounts which each of the Funds have 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, 1993, Vanguard New York Insured Tax-Free Fund had contributed
capital of $135,000 to Vanguard representing .7% of Vanguard's capitalization.
MANAGEMENT Corporate management and administrative services include: (1) ex-
ecutive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian rela-
tionships; (6) shareholder reporting; and (7) review and evaluation of advi-
sory and other services provided to the Funds by third parties. During the
fiscal year ended November 30, 1993, the Funds share of Vanguard's actual net
costs of operations relating to management and administrative services (in-
cluding transfer agency) totaled approximately $1,016,000.
DISTRIBUTION Vanguard provides all distribution and marketing activities for
the Funds in the Group. Vanguard Marketing Corporation, a wholly-owned subsid-
iary of The Vanguard Group, Inc., acts as Sales Agent for shares of the Funds
in connection with any sales made directly to investors in the states of Flor-
ida, Missouri, New York, Ohio, Texas and such other states as it may be re-
quired.
The principal distribution expenses are for advertising, promotional materi-
als and marketing personnel. Distribution services may also include organizing
and offering to the public, from time to time, one or more new investment com-
panies which will become members of the Group. The Trustees (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 or-
ganize new investment companies.
One-half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon their relative net assets. The remain-
ing one-half of these 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 na-
ture shall exceed 125% of the 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 year ended November 30,
1993, the Fund paid approximately $191,000 of the Group's distribution and
marketing expenses.
B-13
<PAGE>
INVESTMENT ADVISORY SERVICES Vanguard also provides investment advisory
services to the Fund, Vanguard Municipal Bond Fund, Vanguard Money Market Re-
serves, Vanguard California Tax-Free Fund, Vanguard Pennsylvania Tax-Free
Fund, Vanguard New Jersey Tax-Free Fund, Vanguard Florida Insured Tax-Free
Fund, Vanguard Ohio Tax-Free Fund, Vanguard Admiral Funds, Vanguard Interna-
tional Equity Index Fund, Vanguard Balanced Index Fund, Vanguard Institutional
Index Fund, Vanguard Bond Index Fund, several Portfolios of Vanguard Variable
Insurance Fund, and several Portfolios of Vanguard Fixed Income Securities
Fund. 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, 1991, 1992 and 1993 the Fund paid approximately $60,000,
$50,000 and $65,000 of Vanguard's investment advisory expenses.
REMUNERATION OF TRUSTEES AND OFFICERS The Fund pays each Trustee, who is not
also an Officer, an annual fee plus travel and other expenses incurred in at-
tending Board meetings. During the year ended November 30, 1993, the Fund paid
$2,000 in Trustees' expenses. 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. During the year ended November 30, 1993, the Fund's pro-
portionate share of remuneration paid to all officers of the Fund as a group
was approximately $32,612.
Upon retirement, Trustees who are not officers are paid an annual fee based
upon the number of years of service on the Board. The fee is equal to $1,000
for each year of service up to a maximum of $15,000. Under its retirement
plan, Vanguard contributes annually an amount equal to 10% of each officer's
annual compensation plus 5.7% of that part of the officer's compensation dur-
ing the year, if any, that exceed the Social Security Taxable Wage Base then
in effect. Under Vanguard's thrift plan, all employees are permitted to make
pre-tax contributions in a maximum amount equal to 4% of total compensation.
Vanguard matches the basic contribution on a 100% basis. During the year ended
November 30, 1993 the Fund's proportionate share of retirement benefits paid
to all officers of the Fund, as a group, was approximately $4,321.
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Pennsylvania Trust on October 16, 1985.
The Declaration of Trust, as amended and restated on January 15, 1986, per-
mits the Trustees to issue an unlimited number of shares of beneficial inter-
est, without par value, from an unlimited number of separate classes ("Portfo-
lios") of shares. Currently, the Fund is offering shares of one Portfolio.
The shares of the Fund are fully paid and nonassessable, except as set forth
under "Shareholder and Trustee Liability," and have no preference as to con-
version, exchange, dividends, retirement or other features. The shares of the
Fund have no pre-emptive rights. The shares of the Fund 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 share-
holders, all shares of the Fund then issued and outstanding and entitled to
vote, irrespective of the class, shall be voted in the aggregate and not by
class: except (i) when required by the Investment Company Act of 1940, shares
shall be voted by individual class; and (ii) when the matter does not affect
any interest of a particular class, then only shareholders of the affected
class or classes shall be entitled to vote thereon.
B-14
<PAGE>
The Fund will continue without limitation of time, provided, however that:
1) Subject to the majority vote of the holders of shares of the Fund out-
standing, the Trustees may sell or convert the assets of the Fund to an-
other investment company in exchange for shares of such investment company,
and distribute such shares, ratably among the shareholders of the Fund.
2) Subject to the majority vote of shares of the Fund outstanding, the
Trustees may sell and convert into money the assets of the Fund and dis-
tribute such assets ratably among the shareholders of the Fund; and
Upon completion of the distribution of the remaining proceeds or the remain-
ing assets of any Portfolio as provided in paragraphs 1) and 2) above the Fund
shall terminate and the Trustees shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all par-
ties shall be cancelled and discharged.
SHAREHOLDER AND TRUSTEE LIABILITY Under Pennsylvania law shareholders of
such a Trust may under certain circumstances, be held personally liable as
partners for the obligations of the Fund. Therefore, the Declaration of Trust
contains an express disclaimer of shareholder liability for acts or obliga-
tions of the Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Fund or
the Trustees. The Declaration of Trust provides for indemnification out of the
Fund property of any shareholder held personally liable for the obligations of
the Fund. The Declaration of Trust also provides that the Fund shall, upon re-
quest, assume the defense of any claim made against any shareholder for any
act or obligation of the Fund and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet
its obligations.
The Declaration of Trust further provides that the Trustees will not be lia-
ble for errors of judgment or mistakes of fact or law but nothing in the Dec-
laration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross negli-
gence, or reckless disregard of the duties involved in the conduct of his of-
fice.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended November 30, 1993, in-
cluding the financial highlights for each of the five fiscal years in the pe-
riod ended November 30, 1993, appearing in the Vanguard New York Insured Tax-
Free Fund's 1993 Annual Report to Shareholders, and the report thereon of
Price Waterhouse, independent accountants, also appearing therein, are incor-
porated by reference in this Statement of Additional Information. The Fund's
1993 Annual Report to Shareholders is enclosed with this Statement of Addi-
tional Information.
B-15
<PAGE>
APPENDIX A--DESCRIPTION OF MUNICIPAL BONDS AND THEIR RATINGS
MUNICIPAL BONDS--GENERAL Municipal Bonds generally include debt obligations
issued by states and their political subdivisions, and duly constituted au-
thorities and corporations, to obtain funds to construct, repair or improve
various public facilities such as airports, bridges, highways, hospitals,
housing, schools, streets and water and sewer works. Municipal Bonds may also
be issued to refinance outstanding obligations as well as to obtain funds for
general operating expenses and for loan to other public institutions and fa-
cilities.
The two principal classifications of Municipal Bonds are "general obliga-
tion" and "revenue" or "special tax" bonds. General obligation bonds are se-
cured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are pay-
able only from the revenues derived from a particular facility or class of fa-
cilities or, in some cases, from the proceeds of a special excise or other
tax, but not from general tax revenues. The Fund may also invest in tax-exempt
industrial development bonds, short-term municipal obligations (rated SP-1+ of
SP-1 by Standard & Poor's Corp. or MIG by Moody's Investors Service), project
notes, demand notes and tax-exempt commercial papers (rated A-1 by Standard &
Poor's Corp. or P-1 by Moody's Investors Service).
Industrial revenue bonds in most cases are revenue bonds and generally do
not have the pledge of the credit of the Issuer. The payment of the principal
and interest on such industrial revenue bonds is dependent solely on the abil-
ity of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed
as security for such payment. Short-term municipal obligations issued by
states, cities, municipalities or municipal agencies, include Tax Anticipation
Notes, Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan
Notes and Short-Term Discount Notes. Project Notes are instruments issued by
the Department of Housing and Urban Development but issued by a state or local
housing agency. While the issuing agency has the primary obligation on such
Project notes, they are also secured by the full faith and credit of the
United States.
Note obligations with demand onput options may have a stated maturity in ex-
cess of one year, but permit any holder to demand payment of principal plus
accrued interest upon a specified number of days' notice. Frequently, such ob-
ligations are secured by letters of credit or other credit support arrange-
ments provided by banks. The issuer of such notes normally has a corresponding
right, after a given period, to repay in its discretion the outstanding prin-
cipal of the note plus accrued interest upon a specific number of days' notice
to the bondholders. The interest rate on a demand note may be based upon a
known lending rate, such as a bank's prime rate, and be adjusted when such
rate changes, or the interest rate on a demand note may be a market rate that
is adjusted at specified intervals. The demand notes in which the Fund will
invest are payable on not more than one year's notice. Each note purchased by
the Fund will meet the quality criteria set out above for the Fund.
The yields of Municipal Bonds depend on, among other things, general money
market conditions, conditions in the Municipal Bond market, the size of a par-
ticular offering, the maturity of the obligation, and the rating of the issue.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Corpora-
tion represent their opinions of the quality of the Municipal Bonds rated by
them. It should be emphasized that such ratings are general and are not abso-
lute standards of quality. Consequently, Municipal Bonds with the same maturi-
ty, coupon and rating may have different yields, while Municipal Bonds of the
same maturity and coupon, but with different ratings may have the same yield.
It will be the responsibility of the investment management staff to appraise
independently the fundamental quality of the bonds held by the Fund.
Municipal Bonds are sometimes purchased on a "when issued" basis meaning the
Fund has committed to purchasing certain specified securities at an agreed
upon price when they are issued.
B-16
<PAGE>
The period between commitment date and issuance date can be a month or more.
It is possible that the securities will never be issued and the commitment
canceled.
From time to time proposals have been introduced before Congress to restrict
or eliminate the Federal income tax exemption for interest on Municipal Bonds.
Similar proposals may be introduced in the future. If any such proposal were
enacted, it might restrict or eliminate the ability of the Fund to achieve its
investment objective. In that event, the Fund's Trustees and officers would
reevaluate its investment objective and policies and consider recommending to
its shareholders changes in such objective and policies.
Similarly, from time to time proposals have been introduced before State and
local legislatures to restrict or eliminate the State and local income tax ex-
emption for interest on Municipal Bonds. Similar proposals may be introduced
in the future. If any such proposal were enacted, it might restrict or elimi-
nate the ability of each Portfolio to achieve its respective investment objec-
tive. In that event, the fund's trustees and officers would reevaluate its in-
vestment objective and policies and consider recommending to its shareholders
changes in such objective and policies. (For more information please refer to
"Risk Factors" on page 5.) Ratings. Excerpts from Moody's Investors Service,
Inc.'s Municipal Bond ratings: Aaa -- judged to be of the "best quality" and
are referred to as "gilt edge"; interest payments are protected by a large or
by an exceptionally stable margin and principal is secure; Aa -- judged to be
of "high quality by all standards" but as to which margins of protection or
other elements make long-term risks appear somewhat larger than Aaa-rated Mu-
nicipal Bonds; together with Aaa group they comprise what are generally known
as "high grade bonds"; A -- possess many favorable investment attributes and
are considered "upper medium grade obligations." Factors giving security to
principal and interest A-rated Municipal Bonds are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future; Baa -- considered as medium grade obligations; i.e., they are
neither highly protected nor poorly secured; interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length or
time; Ba -- protection of principal and interest payments may be very moderate;
judged to have speculative elements; their future cannot be considered as
well-assured; B -- lack characteristics of a desirable investment; assurance
of interest and principal payments over any long period of time may be small;
Caa -- (poor standing; may be in default or there may be present elements of
danger with respect to principal and interest; Ca -- speculative in a high de-
gree; often in default; C -- lowest rated class of bonds; issues so rated can
be regarded as having extremely poor prospects for ever attaining any real in-
vestment standing.
Description of Moody's ratings of state and municipal notes: Moody's ratings
for state and municipal notes and other short-term obligations are designated
Moody's Investment Grade ("MIG"). Symbols used will be as follows: MIG-1--Best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both; MIG-2 -- High quality with margins of protection ample
although not so large as in the preceding group.
Description of Moody's highest commercial paper rating: PRIME-1 ("P-1")--
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.
Excerpts from Standard & Poor's Corporation's Municipal Bond ratings: AAA --
has the highest rating assigned by S&P; extremely strong capacity to pay
principal and interest; AA -- has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in a small de-
gree; A -- has a strong capacity to pay principal and interest, although some-
what more susceptible to the adverse changes in circumstances and economic
conditions; BBB -- regarded as having an adequate capacity to pay principal
and interest; normally exhibit adequate protection
B-17
<PAGE>
parameters but adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest than for
bonds in A category; BB -- B -- CCC -- CC -- predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with
terms of obligation; BB is being paid; D -- in default, and payment of princi-
pal and/or interest is in arrears.
The ratings from "AA" to "B" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Excerpt from Standard & Poor's Corporation's rating of municipal note is-
sues: SP-1+ -- very strong capacity to pay principal and interest; SP-1 --
strong capacity to pay principal and interest.
Description of S&P's highest commercial papers rating: A-1+ -- This designa-
tion indicates the degree of safety regarding timely payment is overwhelming.
A-1 -- This designation indicates the degree of safety regarding timely pay-
ment is very strong.
B-18
<PAGE>
APPENDIX B--MUNICIPAL LEASE OBLIGATIONS
Each Portfolio may invest in municipal lease obligations. Such securities
will be treated as liquid under the following guidelines have been established
by the Board of Trustees:
1. The obligation has been rated "investment grade" by at least on NRSRO
and is considered to be investment grade by the investment adviser.
2. The obligation is secured by payments from a governmental lessee which
is generally recognized and has debt obligations which are actively traded
by a minimum of five broker/dealers.
3. At least $25 million of the lessee debt is outstanding either in a
single transaction or on parity, and owned by a minimum of five institu-
tional investors.
4. The investment adviser has determined that the obligation, or a compa-
rable lessee security, trades in the institutional marketplace at least pe-
riodically, with a bid/offer spread of 20 basis points or less.
5. The governmental lessee has a full faith and credit general obligation
rating of at least "A-" as published by at least one NRSRO or as determined
by the investment adviser. If the lessee is a state government, the general
obligation rating must be at least BAA1, BBB+, or equivalent, as determined
above.
6. The projects to be financed by the obligation are determined to be
critical to the lessee's ability to deliver essential services.
7. Specific legal features such as covenants to maintain the tax-exempt
status of the obligation, covenants to make lease payments without the
right of offset or counterclaim, covenants to return leased property to the
lessor in the event of non-appropriation, insurance policies, debt service
reserve fund, are present.
8. The lease must be "triple net" (i.e.--lease payments are net of prop-
erty maintenance, taxes and insurance).
9. If the lessor is a private entity, there must be a sale and absolute
assignment of rental payments to the trustee, accompanied by a legal opin-
ion from recognized bond counsel that lease payments would not be consid-
ered property of the lessor's estate in the event of lessor's bankruptcy.
B-19
<PAGE>
PART C
VANGUARD NEW YORK INSURED TAX-FREE FUND
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The Registrant's audited Financial Statements for the year ended November
30, 1993, including Price Waterhouse's report thereon, are incorporated by
reference, in the Statement of Additional Information, from the Registrant's
1993 Annual Report to Shareholders which has been filed with the Commission.
The financial statements included in the Annual Report are:
1. Statement of Net Assets as of November 30, 1993
2. Statement of Operations for the year ended November 30, 1993
3. Statement of Changes in Net Assets for the years ended November 30,
1992 and 1993
*4. Financial Highlights for each of the five years in the period ended
November 30, 1993
5. Notes to Financial Statements
6. Report of Independent Accountants
- --------
* In addition, the financial highlights for each of the respective periods
presented is included in Part A of this registration.
(B) EXHIBITS
<TABLE>
<C> <S>
1. Declaration of Trust**
2. By-Laws of Registrant**
3. Not Applicable
4. Not Applicable
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*
</TABLE>
- --------
* Filed herewith
** Previously filed
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 32 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.
C-1
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of November 30, 1993 there were 19,891 shareholders of the Fund.
ITEM 27. INDEMNIFICATION
Reference is made to Article XI of Registrant's Declaration of Trust.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, 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 ap-
propriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the fi-
nal 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 Regis-
trant 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
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, Pennsyl-
vania 19482; and the Registrant"s Custodian, Philadelphia National Bank, Phil-
adelphia, PA.
ITEM 31. MANAGEMENT SERVICES
Other than the Amended and Restated Funds' Service Agreement with The Van-
guard Group, Inc. which was previously filed as Exhibit 9(c) and described in
Part B hereof under "Management of the Fund;" the Registrant is not a party of
any management-related service contract.
ITEM 32. UNDERTAKINGS
Annual meetings of shareholders will not be held except as required by the
Investment Company Act of 1940 ("1940 Act") or other applicable law. Regis-
trant undertakes to comply with the provisions of Section 16(c) of the 1940
Act in regard to shareholders' rights to call a meeting of shareholders for
the purpose of voting on the removal of Trustees and to assist in shareholder
communications in such matters, to the extent required by law.
Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge, upon request.
C-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HEREBY CERTIFIES THAT IT MEETS
THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO
RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS POST-
EFFECTIVE AMENDMENT TO 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 9TH DAY OF MARCH, 1994.
Vanguard New York Insured Tax-Free Fund
BY: (signature)
---------------------------------
(RAYMOND J. KLAPINSKY)
JOHN C. BOGLE*, CHAIRMAN, AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
BY: (signature) John C. Bogle*, March 9, 1994
--------------------------------- Chairman of the
(RAYMOND J. KLAPINSKY) Board, Trustee, and
Chief Executive
Officer
BY: (signature) John J. Brennan*, March 9, 1994
--------------------------------- President and
(RAYMOND J. KLAPINSKY) Trustee
BY: (signature) Barbara B. March 9, 1994
--------------------------------- Hauptfuhrer*,
(RAYMOND J. KLAPINSKY) Trustee
BY: (signature) Burton G. Malkiel*, March 9, 1994
--------------------------------- Trustee
(RAYMOND J. KLAPINSKY)
BY: (signature) James O. Welch, March 9, 1994
--------------------------------- Jr.*, Trustee
(RAYMOND J. KLAPINSKY)
BY: (signature) J. Lawrence Wilson*, March 9, 1994
--------------------------------- Trustee
(RAYMOND J. KLAPINSKY)
BY: (signature) Richard F. Hyland*, March 9, 1994
--------------------------------- Treasurer and
(RAYMOND J. KLAPINSKY) Principal Financial
Officer and
Accounting Officer
</TABLE>
- --------
* By Power of Attorney--See File Number 2-14336, January 23, 1990. Incorpo-
rated by Reference.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Accountant's Consent........................................................ 11
Schedule for Computation of Performance Quotations.......................... 16
</TABLE>
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and in
the Statement of Additional Information, constituting parts of this amended
Registration Statement on Form N-1A, of our report dated December 27, 1993 re-
lating to the financial statements, including the financial highlights, ap-
pearing in the November 30, 1993 Annual Report to Shareholders of Vanguard New
York Insured Tax-Free Fund, which are also incorporated by reference into this
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "General Information" in the Prospectus
and "Financial Statements" in the Statement of Additional Information.
Price Waterhouse
Philadelphia, PA
March 8, 1994
<PAGE>
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD NEW YORK INSURED TAX-FREE FUND
1. AVERAGE ANNUAL TOTAL RETURN (AS OF NOVEMBER 30, 1993)
P(1 + T)/n/ = ERV
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:
--------
One Year
--------
P = 1,000.00
T = +12.42%
N = 1
ERV = $1,124.18
Five Year
---------
P = 1,000.00
T = +10.42%
N = 5
ERV = $1,641.79
Since inception on April 7, 1986
P = 1,000.00
T = +8.10%*
N = *
ERV = $1,813.99
2. YIELD (30 DAYS ENDED NOVEMBER 30, 1993)
a
Yield = 2 [ ( ----- + 1)/6/ -1 ] - b X 100
c X d
Where: a = dividends and interest paid during the period
b = expense ratios during the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
d = the maximum offering price per share on the last day of the
period
Example a = $3,289,016.37
b = .180
c = 73,727,969.011
d = $10.97
Yield = 4.75%
