AMENDED AND RESTATED CUSTODY AGREEMENT
AMENDED AND RESTATED CUSTODY AGREEMENT, dated as of June 19, 2001 between
each open-end management investment company listed on Schedule II hereto as
amended from time to time (each such investment company, a "Fund"), each a
business trust organized and existing under the laws of the State of Delaware
and registered with the U.S. Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of
certain of their series (each a "Series") having their principal office and
place of business at c/o The Vanguard Group ("Vanguard"), X.X. Xxx 0000, Xxxxxx
Xxxxx, Xxxxxxxxxxxx 00000 and The Bank of New York, a New York corporation
authorized to do a banking business having its principal office and place of
business at Xxx Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Custodian").
W I T N E S S E T H:
that for and in consideration of the mutual promises hereinafter set forth each
Fund and Custodian agree as follows:
1. DEFINITIONS
Whenever used in this Agreement, the following words shall have the
meanings set forth below:
1.1 "AUTHORIZED PERSON" shall be any person, whether or not an officer or
employee of a Fund, duly authorized to execute any Certificate or to give any
Oral Instruction with respect to one or more Accounts, such persons to be
designated in a Certificate as may be received by Custodian from time to time.
2. "AUTOFAX" shall mean an unsigned hard copy facsimile generated by a
Fund's computer system and transmitted to Custodian.
3. "BNY AFFILIATE" shall mean any office, branch or subsidiary of The Bank
of New York Company, Inc.
4. "BOOK-ENTRY SYSTEM" shall mean the Federal Reserve/Treasury book-entry
system for receiving and delivering securities, its successors and
nominees.
5. "BUSINESS DAY" shall mean any day on which Custodian, Book-Entry System
and relevant Depositories are open for business.
6. "CERTIFICATE" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to Custodian,
which is actually received by Custodian by letter or facsimile transmission and
signed on behalf of a Fund by an Authorized Person of the Fund or a person
reasonably believed by Custodian to be an Authorized Person.
7. "COMPOSITE CURRENCY UNIT" shall mean the Euro or any other composite
currency unit consisting of the aggregate of specified amounts of specified
currencies, as such unit may be constituted from time to time.
8. "DEPOSITORY" shall include (a) the Book-Entry System, (b) the Depository
Trust Company, (c) any other clearing agency or securities depository registered
with the Securities and Exchange Commission identified to a Fund from time to
time, and (d) the respective successors and nominees of the foregoing.
9. "FOREIGN DEPOSITORY" shall mean (a) Euroclear, (b) Clearstream Banking,
societe anonyme, (c) each Eligible Securities Depository as defined in Rule
17f-7 under the 1940 Act, as amended, identified to a Fund from time to time,
and (d) the respective successors and nominees of the foregoing.
10. "INSTRUCTIONS" shall mean communications transmitted by electronic or
telecommunications media, including S.W.I.F.T., computer-to- computer interface,
dedicated transmission lines, telex or Autofax.
11. "ORAL INSTRUCTIONS" shall mean verbal instructions received by
Custodian from an Authorized Person or from a person reasonably believed by
Custodian to be an Authorized Person.
12. "SECURITIES" shall include, without limitation, any common stock and
other equity securities, bonds, debentures and other debt securities, notes,
mortgages or other obligations, and any instruments representing rights to
receive, purchase, or subscribe for the same, or representing any other rights
or interests therein (whether represented by a certificate or held in a
Depository or by a Subcustodian).
13. "SERIES" shall mean the various portfolios, if any, of a Fund listed on
Schedule II hereto, and if none are listed references to Series shall be
references to the Fund.
14. "SUBCUSTODIAN" shall mean a bank (including any branch thereof) or
other financial institution (other than a Foreign Depository) located outside
the U.S. which is utilized by Custodian in connection with the purchase, sale or
custody of Securities hereunder and identified to a Fund from time to time, and
their respective successors and nominees.
2. APPOINTMENT OF CUSTODIAN; ACCOUNTS; REPRESENTATIONS, WARRANTIES, AND
COVENANTS
2.1.(a) Each Fund hereby appoints Custodian as custodian of all Securities
and cash at any time delivered to Custodian during the term of this Agreement,
and authorizes Custodian to hold Securities in registered form in its name or
the name of its nominees. Custodian hereby accepts such appointment and agrees
to establish and maintain one or more securities accounts and cash accounts for
each Series in which Custodian will hold Securities and cash as provided herein.
Custodian shall maintain books and records segregating the assets of each Series
from the assets of any other Series. Such accounts (each, an "Account";
collectively, the "Accounts") shall be in the name of the Fund on behalf of the
relevant Series.
(a) Custodian may from time to time establish on its books and records
such sub-accounts within each Account as a Fund and Custodian may
reasonably agree upon (each a "Special Account"), and Custodian shall
reflect therein such assets as the Fund may specify in a Certificate or
Instructions.
(b) Custodian may from time to time establish pursuant to a written
agreement with and for the benefit of a broker, dealer, futures commission
merchant or other third party identified in a Certificate or Instructions
such accounts on such terms and conditions as a Fund and Custodian shall
reasonably agree, and Custodian shall transfer to such account such
Securities and money as the Fund may specify in a Certificate or
Instructions.
2.2 Each Fund hereby represents and warrants, which representations and
warranties shall be continuing and shall be deemed to be reaffirmed upon each
delivery of a Certificate or each giving of Oral Instructions or Instructions by
such Fund, that:
(i) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its
business as now conducted, to enter into this Agreement, and to
perform its obligations hereunder;
(ii) This Agreement has been duly authorized, executed and
delivered by the Fund, approved by a resolution of its board of
trustees, constitutes a valid and legally binding obligation of the
Fund, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other laws affecting generally
the enforceability of creditors' rights or by equitable principles
generally applied, and there is no statute, regulation, rule, order or
judgment binding on it, and no provision of its charter or by-laws,
nor of any mortgage, indenture, credit agreement or other contract
binding on it or affecting its property, which would prohibit its
execution or performance of this Agreement;
(b) It is conducting its business in substantial compliance with all
applicable laws and requirements, both state and federal, and has obtained
all regulatory licenses, approvals and consents necessary to carry on its
business as now conducted;
(c) It will not use the services provided by Custodian hereunder in
any manner that is, or will result in, a violation of any law, rule or
regulation applicable to the Fund;
(d) Its board of trustees or its foreign custody manager, as defined
in Rule 17f-5 under the 1940 Act, has determined that use of each
Subcustodian (including any Replacement Custodian) and each Depository
which Custodian or any Subcustodian is authorized to utilize in accordance
with Section 1(a) of Article III hereof, satisfies the applicable
requirements of the 1940 Act and Rules 17f-4 or 17f-5 thereunder, as the
case may be;
(e) Upon receiving from Custodian an initial analysis of and
information concerning changes in the custody risks associated with
maintaining assets at a Foreign Depository, the Fund or its investment
adviser has determined that the custody arrangements of each Foreign
Depository provide reasonable safeguards against the custody risks
associated with maintaining assets with such Foreign Depository within the
meaning of Rule 17f-7 under the 1940 Act;
(f) It is fully informed of the protections and risks associated with
various methods of transmitting Instructions and Oral Instructions and
delivering Certificates to Custodian, understands that there may be more
secure methods of transmitting or delivering the same than the methods
selected by the Fund, agrees that the security procedures (if any) to be
utilized provide a commercially reasonable degree of protection in light of
its particular needs and circumstances, acknowledges and agrees that
Instructions need not be reviewed by Custodian if such Instructions require
authentication codes and have such codes, acknowledges and agrees the same
may conclusively be presumed by Custodian to have been given by person(s)
duly authorized, and may be acted upon as given;
(g) It shall manage its borrowings, including, without limitation, any
advance or overdraft (including any day-light overdraft) in the Accounts,
so that the aggregate of its total borrowings for each Series does not
exceed the amount such Series is permitted to borrow under the 1940 Act;
(h) Its transmission or giving of, and Custodian acting upon and in
reliance on, Certificates, Instructions, or Oral Instructions pursuant to
this Agreement shall at all times comply with the 1940 Act;
(i) It shall impose and maintain restrictions on the destinations to
which cash may be disbursed by Instructions to ensure that each
disbursement is for a proper purpose; and
(j) It has the right to make the pledge and grant the security
interest and security entitlement to Custodian contained in Section 1 of
Article V hereof, free of any right or prior claim of any other person or
entity (except as otherwise provided by law), such pledge and such grants
shall have a first priority subject to no setoffs, counterclaims, or other
liens or grants prior to or on a parity therewith (except as otherwise
provided by law).
2.3 The Fund hereby covenants that it shall from time to time complete and
execute and deliver to Custodian upon Custodian's request a Form FR U-1 (or
successor form) whenever the Fund borrows from Custodian any money to be used
for the purchase or carrying of margin stock as defined in Federal Reserve
Regulation U.
4. Custodian hereby represents and warrants, which representations and
warranties shall be continuing and shall be deemed to be reaffirmed upon each
receipt of a Certificate or each receipt of Oral Instructions or Instructions by
the Custodian, that:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its business
as now conducted, to enter into this Agreement and to perform its
obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered by
Custodian, constitutes a valid and legally binding obligation of Custodian,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting generally the enforceability
of creditors' rights or by equitable principles generally applied, and
there is no statute, regulation, rule, order or judgment binding on it, and
no provision of its charter or by-laws, nor of any mortgage, indenture,
credit agreement or other contract binding on it or affecting its property,
which would prohibit its execution or performance of this Agreement;
(c) It is conducting its business in substantial compliance with all
applicable laws and requirements, both state and federal, and has obtained
all regulatory licenses, approvals and consents necessary to carry on its
business as now conducted;
(d) It will not provide services hereunder in any manner that is, or
will result in, a violation of any law, rule or regulation applicable to
the Custodian;
(e) Custodian will submit to the Funds on an annual basis a copy of
its report prepared in compliance with the requirements of Statement of
Auditing Standards No. 70 issued by the American Institute of Certified
Public Accountants, as it may be amended from time to time; and
(f) Custodian shall maintain, directly or through a third party
selected with reasonable care, back-up computer and communication systems.
3. CUSTODY AND RELATED SERVICES
3.1(a) Subject to the terms hereof, each Fund hereby authorizes Custodian
to hold any Securities and cash received by it from time to time for such Fund's
account. Custodian shall be entitled to utilize Depositories, Subcustodians,
and, subject to subsection (c) of this Xxxxxxx 0, Xxxxxxx Xxxxxxxxxxxx, to the
extent possible in connection with its performance hereunder. Securities and
cash held in a Depository or Foreign Depository will be held subject to the
rules, terms and conditions of such entity. Securities and cash held through
Subcustodians shall be held subject to the terms and conditions of Custodian's
agreements with such Subcustodians. Subcustodians may be authorized to hold
Securities in Foreign Depositories in which such Subcustodians participate.
Unless otherwise required by local law or practice or a particular subcustodian
agreement, Securities deposited with a Subcustodian, a Depository or a Foreign
Depository will be held in a commingled account, in the name of Custodian,
holding only Securities held by Custodian as custodian for its customers.
Custodian shall identify on its books and records the Securities and cash
belonging to each Fund and their Series, whether held directly or indirectly
through Depositories, Foreign Depositories, or Subcustodians. Custodian shall,
directly or indirectly through Subcustodians, Depositories, or Foreign
Depositories,
endeavor, to the extent feasible, to hold Securities in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for cancellation and/or
payment and/or registration, or where such Securities are acquired. Custodian at
any time may cease utilizing any Subcustodian and/or may replace a Subcustodian
with a different Subcustodian (the "Replacement Subcustodian"). In the event
Custodian selects a Replacement Subcustodian, Custodian shall not utilize such
Replacement Subcustodian until after the Fund's board or foreign custody manager
has determined that utilization of such Replacement Subcustodian satisfies the
requirements of the 1940 Act and Rule 17f-5 thereunder.
(a) Unless Custodian has received a Certificate or Instructions to the
contrary, Custodian shall hold Securities indirectly through a Subcustodian
only if (i) the Securities are not subject to any right, charge, security
interest, lien or claim of any kind in favor of such Subcustodian or its
creditors or operators, including a receiver or trustee in bankruptcy or
similar authority, except for a claim of payment for the safe custody or
administration of Securities on behalf of the Fund by such Subcustodian,
and (ii) beneficial ownership of the Securities is freely transferable
without the payment of cash or value other than for safe custody or
administration.
(b) With respect to each Foreign Depository, Custodian shall exercise
reasonable care, prudence, and diligence (i) to provide the Fund with an
analysis of the custody risks associated with maintaining assets with the
Foreign Depository, and (ii) to monitor such custody risks on a continuing
basis and promptly notify the Fund or the Fund's investment adviser of any
material change in such risks. Each Fund acknowledges and agrees that such
analysis and monitoring shall be made on the basis of, and limited by,
information gathered from Subcustodians or through publicly available
information otherwise obtained by Custodian, and shall include information
concerning, but no evaluation of, Country Risks. As used herein the term
"Country Risks" shall mean with respect to any Foreign Depository: (a) the
financial infrastructure of the country in which it is organized, (b) such
country's prevailing custody and settlement practices, (c) nationalization,
expropriation or other governmental actions, (d) such country's regulation
of the banking or securities industry, (e) currency controls, restrictions,
devaluations or fluctuations, and (f) market conditions which affect the
order execution of securities transactions or affect the value of
securities.
2. Promptly after the close of business on each Business Day or the next
Business Day in the case of a Subcustodian or Foreign Depositary, or in
accordance with practices in the related local market, Custodian shall furnish
each Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the Accounts, either hereunder or with any Subcustodian
appointed in accordance with this Agreement during said day. Where Securities
are transferred to an Account for a Series, Custodian shall also by book-entry
or otherwise identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of Custodian (or its nominee)
or shown on Custodian's account on the books of the Book-Entry System or a
Depository. At least monthly and from time to time, Custodian shall furnish each
Fund with a detailed statement, on a per Series basis, of the Securities and
cash held by Custodian for such Fund.
3. With respect to all Securities held hereunder, Custodian shall, unless
otherwise instructed to the contrary:
(iii) Collect and receive all income and other payments and
advise each Fund as promptly as practicable of any such amounts due
but not paid;
(b) Give notice to each Fund and present payment and collect the
amount payable upon such Securities that are called, but only if either (i)
Custodian receives a written notice of such call, or (ii) notice of such
call appears in or is received from a nationally recognized bond or
corporate action service to which Custodian subscribes;
(c) Unless otherwise instructed by a Fund, Custodian shall retain in
the appropriate account any stock dividends, subscription rights and other
non-cash distributions on the Securities, or the proceeds from the sale of
any distributions. Custodian shall notify a Fund upon the receipt of any
non-cash item.
(d) Present for payment and collect the amount payable upon all
Securities which may mature, promptly deposit or withdraw such proceeds as
designated therein and advise each Fund as promptly as practicable of any
such amounts due but not paid;
(e) Surrender Securities in temporary form for definitive Securities;
(f) Forward to each Fund copies of all information or documents that
it may actually receive from an issuer of Securities which, in the opinion
of Custodian, are intended for the beneficial owner of Securities;
(g) Execute, as custodian, any certificates of ownership, affidavits,
declarations or other certificates under any tax laws now or hereafter in
effect in connection with the collection of bond and note coupons;
(h) Hold directly or through a Depository, a Foreign Depository, or a
Subcustodian all rights and similar Securities issued with respect to any
Securities credited to an Account hereunder; and
(i) Endorse for collection checks, drafts or other negotiable
instruments.
4. (a) Custodian shall notify each Fund of rights or discretionary actions
with respect to Securities held hereunder, and of the date or dates by when such
rights must be exercised or such action must be taken (each a "Notice" and
collectively "Notices"), provided that Custodian has actually received, from the
issuer or the relevant Depository (with respect to Securities issued in the
United States) or from the relevant Subcustodian, Foreign Depository, or a
nationally or internationally recognized bond or corporate action service to
which Custodian subscribes (each a " Notice Provider" and collectively " Notice
Providers"), timely notice of such rights or discretionary corporate action or
of the date or dates such rights must be exercised or such action must be taken.
Absent actual receipt of Notices, Custodian shall have no liability for failing
to so notify a Fund except as provided in the last sentence of this paragraph.
Custodian shall use reasonable care in forwarding such Notice to the relevant
Fund. Custodian shall use reasonable care in the selection of a Notice Provider
other than a Foreign Depository. To the extent an officer of the Custodian, with
working knowledge of the Accounts, has actual knowledge that a Notice Provider
has failed to provide Notices to the Custodian, the Custodian shall use
reasonable careto obtain a mailing of such Notice from such Notice Provider or
except in the case of a Foreign Depository use an alternative Notice Provider.
(b) Whenever Securities (including, but not limited to, warrants,
options, tenders, options to tender or non-mandatory puts or calls) confer
discretionary rights on a Fund or provide for discretionary action or
alternative courses of action by a Fund, the Fund shall be responsible for
making any decisions relating thereto and for directing Custodian to act.
In order for Custodian to act, it must receive the Fund's Certificate or
Instructions at Custodian's offices, addressed as Custodian may from time
to time request, at such date or time as Custodian may specify to the Fund.
Absent Custodian's timely receipt of such Certificate or Instructions,
Custodian shall not be liable for failure to take any action relating to or
to exercise any rights conferred by such Securities.
5. All voting rights with respect to Securities, however registered, shall
be exercised by the Fund or its designee. For Securities issued in the United
States, Custodian's only duty shall be to mail to the Funds any documents
(including proxy statements, annual reports and signed proxies) actually
received by Custodian relating to the exercise of such voting rights. With
respect to Securities issued outside of the United States, Custodian's only duty
shall be to provide the Funds with access to a provider of global proxy services
at a Fund's request. The Fund using the services shall be responsible for all
associated costs.
6. Custodian shall promptly advise a Fund upon Custodian's actual receipt
of notification of the partial redemption, partial payment or other action
affecting less than all Securities of the relevant class. If Custodian, any
Subcustodian, any Depository, or any Foreign Depository holds any Securities in
which the Fund has an interest as part of a fungible mass, Custodian, such
Subcustodian, Depository, or Foreign Depository may select the Securities to
participate in such partial redemption, partial payment or other action in any
non-discriminatory manner that it customarily uses to make such selection.
7. Custodian shall not under any circumstances accept bearer interest
coupons which have been stripped from United States federal, state or local
government or agency securities unless explicitly agreed to by Custodian in
writing.
8. Each Fund shall be liable for all taxes, assessments, duties and other
governmental charges, including any interest or penalty with respect thereto
("Taxes"), with respect to any cash or Securities held on behalf of such Fund or
any transaction related thereto. Each Fund shall indemnify Custodian and each
Subcustodian for the amount of any Tax that Custodian, any such Subcustodian or
any other withholding agent is required under applicable laws (whether by
assessment or otherwise) to pay on behalf of, or in respect of income earned by
or payments or distributions made to or for the account of the Fund (including
any payment of Tax required by reason of an earlier failure to withhold).
Custodian shall, or shall instruct the applicable Subcustodian or other
withholding agent to, withhold the amount of any Tax which is required to be
withheld under applicable law upon collection of any dividend, interest or other
distribution made with respect to any Security and any proceeds or income from
the sale, loan or other transfer of any Security. In the event that Custodian or
any Subcustodian is required under applicable law to pay any Tax on behalf of a
Fund, Custodian is hereby authorized to withdraw
cash from any cash account in the amount required to pay such Tax and to use
such cash, or to remit such cash to the appropriate Subcustodian or other
withholding agent, for the timely payment of such Tax in the manner required by
applicable law. If the aggregate amount of cash in all cash accounts is not
sufficient to pay such Tax, Custodian shall promptly notify the Fund of the
additional amount of cash (in the appropriate currency) required, and the Fund
shall directly deposit such additional amount in the appropriate cash account
promptly after receipt of such notice, for use by Custodian as specified herein.
In the event that Custodian reasonably believes that Fund is eligible, pursuant
to applicable law or to the provisions of any tax treaty, for a reduced rate of,
or exemption from, any Tax which is otherwise required to be withheld or paid on
behalf of the Fund under any applicable law, Custodian shall, or shall instruct
the applicable Subcustodian or withholding agent to, either withhold or pay such
Tax at such reduced rate or refrain from withholding or paying such Tax, as
appropriate; provided that Custodian shall have received from the Fund all
documentary evidence of residence or other qualification for such reduced rate
or exemption required to be received under such applicable law or treaty. In the
event that Custodian reasonably believes that a reduced rate of, or exemption
from, any Tax is obtainable only by means of an application for refund,
Custodian and the applicable Subcustodian shall have no responsibility for the
accuracy or validity of information provided by a Fund on any forms or
documentation provided by the Fund to Custodian hereunder. Each Fund hereby
agrees to indemnify and hold harmless Custodian and each Subcustodian in respect
of any liability arising from any underwithholding or underpayment of any Tax
which results from the inaccuracy or invalidity of information provided by a
Fund on any such forms or other documentation, and such obligation to indemnify
shall be a continuing obligation of such Fund, its successors and assigns
notwithstanding the termination of this Agreement.
9. (a) For the purpose of settling Securities and foreign exchange
transactions, each Fund shall provide Custodian with sufficient immediately
available funds for all transactions by such time and date as conditions in the
relevant market dictate. As used herein, "sufficient immediately available
funds" shall mean either (i) sufficient cash denominated in U.S. dollars to
purchase the necessary foreign currency, or (ii) sufficient applicable foreign
currency to settle the transaction. Custodian shall provide each Fund with
immediately available funds each day which result from the actual settlement of
all sale transactions, based upon advices received by Custodian from
Subcustodians, Depositories, and Foreign Depositories. Such funds shall be in
U.S. dollars or such other currency as a Fund may specify to Custodian.
(b) Any foreign exchange transaction effected by Custodian in
connection with this Agreement may be entered with Custodian or a BNY
Affiliate acting as principal or otherwise through customary banking
channels. Each Fund may issue a standing Certificate or Instructions with
respect to foreign exchange transactions, but Custodian may establish rules
or limitations concerning any foreign exchange facility made available to
the Funds. Each Fund shall bear all risks of investing in Securities or
holding cash denominated in a foreign currency.
(c) To the extent that Custodian has agreed to provide pricing or
other information services in connection with this Agreement, Custodian is
authorized to utilize any vendor (including brokers and dealers of
Securities) reasonably believed by Custodian to be reliable to provide such
information. Each Fund understands that certain pricing information with
respect to complex financial instruments (e.g., derivatives) may be based
on calculated
amounts rather than actual market transactions and may not reflect actual
market values, and that the variance between such calculated amounts and
actual market values may or may not be material. Where vendors do not
provide information for particular Securities or other property, an
Authorized Person may advise Custodian in a Certificate regarding the fair
market value of, or provide other information with respect to, such
Securities or property as determined by it in good faith. Custodian shall
not be liable for any loss, damage or expense incurred as a result of
errors or omissions in pricing or other information received and utilized
by Custodian hereunder. Nevertheless, Custodian shall be liable for the
performance of any vendor selected by Custodian that is a BNY Affiliate to
the same extent as Custodian would have been liable if it performed such
services itself.
10. Custodian shall promptly send to a Fund (a) any reports it receives
from a Depository on such Depository's system of internal accounting control,
and (b) such reports on its own system of internal accounting control as the
Fund may reasonably request from time to time.
4. PURCHASE AND SALE OF SECURITIES; CREDITS TO ACCOUNT
4.1 Promptly after each purchase or sale of Securities by a Fund, the Fund
shall deliver to Custodian a Certificate or Instructions, or with respect to a
purchase or sale of a Security generally required to be settled on the same day
the purchase or sale is made, Oral Instructions specifying all information
Custodian may reasonably request to settle such purchase or sale. Custodian
shall account for all purchases and sales of Securities on the actual settlement
date unless otherwise agreed by Custodian.
4.2 Each Fund understands that when Custodian is instructed to deliver
Securities against payment, delivery of such Securities and receipt of payment
therefor may not be completed simultaneously. Notwithstanding any provision in
this Agreement to the contrary, settlements, payments and deliveries of
Securities may be effected by Custodian or any Subcustodian in accordance with
the customary or established securities trading or securities processing
practices and procedures in the jurisdiction in which the transaction occurs,
including, without limitation, delivery to a purchaser or dealer therefor (or
agent) against receipt with the expectation of receiving later payment for such
Securities. Each Fund assumes full responsibility for all risks, including,
without limitation, credit risks, involved in connection with such deliveries of
Securities, except the foregoing shall not excuse Custodian's acting in
accordance with such practices and procedures in a manner that constitutes
negligence, bad faith or willful misconduct.
4.3 Custodian may, as a matter of bookkeeping convenience or by separate
agreement with a Fund, credit the Account with the proceeds from the sale,
redemption or other disposition of Securities or interest, dividends or other
distributions payable on Securities prior to its actual receipt of final payment
therefor. All such credits shall be conditional until Custodian's actual receipt
of final payment and may be reversed by Custodian to the extent that final
payment is not received. Custodian shall notify the appropriate Fund at least 48
hours prior to any such reversal, but such reversal shall be made as of the date
Custodian determines it has not received
final payment. Payment with respect to a transaction will not be "final" until
Custodian shall have received immediately available funds which under applicable
local law, rule and/or practice are irreversible and not subject to any security
interest, levy or other encumbrance, and which are specifically applicable to
such transaction.
5. OVERDRAFTS OR INDEBTEDNESS
5.1 If Custodian should in its sole discretion advance funds on behalf of
any Series which results in an overdraft (including, without limitation, any
day-light overdraft) because the cash held by Custodian in an Account for such
Series shall be insufficient to pay the total amount payable upon a purchase of
Securities specifically allocated to such Series, as set forth in a Certificate,
Instructions or Oral Instructions, or if an overdraft arises in the separate
Account of a Series for some other reason, including, without limitation,
because of a reversal of a conditional credit or the purchase of any currency,
or if the Fund is for any other reason indebted to Custodian with respect to a
Series, (except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate agreement and
subject to the provisions of Section 2 of this Article), Custodian shall
promptly notify the appropriate Fund of any such advance and the time at which
such advance or overdraft must be paid. Such overdraft or indebtedness shall be
deemed to be a loan made by Custodian to the Fund for such Series payable on
demand and shall bear interest from the date incurred at a rate per annum agreed
by such Fund and Custodian from time to time, or, in the absence of an
agreement, at the rate ordinarily charged by Custodian to its institutional
customers, as such rate may be adjusted from time to time. In addition, the Fund
hereby agrees that Custodian shall to the maximum extent permitted by law have a
continuing lien, security interest, and security entitlement in and to such
Securities of such Series as shall have a fair market value equal to the
aggregate amount of all overdrafts of, or advances to, such Series, together
with accrued interest, such lien, security interest and security entitlement to
be effective only so long as such advance, overdraft, or accrued interest
thereon remains outstanding. The Fund authorizes Custodian to charge any such
overdraft or indebtedness together with interest due thereon against any balance
of account standing to such Series' credit on Custodian's books.
2. If a Fund borrows money from any bank (including Custodian if the
borrowing is pursuant to a separate agreement) for investment or for temporary
or emergency purposes using Securities held by Custodian hereunder as collateral
for such borrowings, the Fund shall deliver to Custodian a Certificate
specifying with respect to each such borrowing: (a) the Series to which such
borrowing relates; (b) the name of the bank, (c) the amount of the borrowing,
(d) the time and date, if known, on which the loan is to be entered into, (e)
the total amount payable to the Fund on the borrowing date, (f) the Securities
to be delivered as collateral for such loan, including the name of the issuer,
the title and the number of shares or the principal amount of any particular
Securities, and (g) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan is in
conformance with the 1940 Act and the Fund's prospectus. Custodian shall deliver
on the borrowing date specified in a Certificate the specified collateral
against payment by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. Custodian may, at the option of the lending bank, keep such
collateral in its
possession, but such collateral shall be subject to all rights therein given the
lending bank by virtue of any promissory note or loan agreement. Custodian shall
deliver such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in this Section.
The Fund shall cause all Securities released from collateral status to be
returned directly to Custodian, and Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the issuer, the title
and number of shares or the principal amount of any particular Securities to be
delivered as collateral by Custodian, Custodian shall not be under any
obligation to deliver any Securities. In this event, Custodian shall notify the
Fund that the Securities were not delivered, and the information that the Fund
failed to specify in the Certificate.
6. SALE AND REDEMPTION OF SHARES
6.1 Whenever a Fund shall sell any shares issued by the Fund ("Shares") it
shall deliver to Custodian a Certificate, Instructions or Oral Instructions
specifying the amount of cash and/or Securities to be received by Custodian for
the sale of such Shares and specifically allocated to an Account for such
Series.
6.2 Upon receipt of such cash from a Fund's transfer agent, Custodian shall
credit such cash to an Account in the name of the Series for which such cash was
received.
6.3 Except as provided hereinafter, whenever a Fund desires Custodian to
make payment out of the cash held by Custodian hereunder in connection with a
redemption of any Shares, it shall furnish to Custodian a Certificate,
Instructions or Oral Instructions specifying the total amount to be paid for
such Shares. Custodian shall make payment of such total amount to the transfer
agent specified in such Certificate, Instructions or Oral Instructions out of
the cash held in an Account of the appropriate Series.
6.4 Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by a Fund, Custodian, unless
otherwise instructed by a Certificate, Instructions, or Oral Instructions shall,
upon presentment of such check, charge the amount thereof against the cash held
in the Account of the Series of the Shares being redeemed, provided, that if the
Fund or its agent timely advises Custodian that such check is not to be honored,
Custodian shall return such check unpaid.
7. PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
7.1 Whenever a Fund shall determine to pay a dividend or distribution on
Shares it shall furnish to Custodian Instructions, Oral Instructions or a
Certificate setting forth with respect to the Series specified therein the date
of the declaration of such dividend or distribution, the total amount payable,
and the payment date.
7.2 Upon the payment date specified in such Instructions, Oral Instructions
or Certificate, Custodian shall pay out of the cash held for the Account of such
Series the total amount payable to the dividend agent of the Fund with respect
to the Series specified therein.
8. CONCERNING CUSTODIAN
8.1(a) Except as otherwise expressly provided herein, Custodian shall not
be liable for any costs, expenses, damages, liabilities or claims, including
attorneys' and accountants' fees (collectively, "Losses"), incurred by or
asserted against a Fund, except those Losses arising out of Custodian's own
negligence, bad faith or willful misconduct. Custodian shall have no liability
whatsoever for the action or inaction of any Depositories, or, except to the
extent such action or inaction is a direct result of the Custodian's failure to
fulfill its duties hereunder, of any Foreign Depositories. With respect to any
Losses incurred by the Fund as a result of the acts or any failures to act by
any Depository, Foreign Depository or Subcustodian (other than a BNY Affiliate),
Custodian shall take appropriate action to recover such Losses from such
Subcustodian, Depository or Foreign Depository; and Custodian's sole
responsibility and liability to the Fund shall be limited to amounts so received
from such Subcustodian, Depository or Foreign Depository (exclusive of costs and
expenses incurred by Custodian), except to the extent that (A) Custodian's
negligence, bad faith or willful misconduct is the direct cause of such
Subcustodian, Depository, or Foreign Depository's act or omission (it being
agreed that Custodian's decision to use any Subcustodian, Depository or Foreign
Depository shall not constitute negligence, bad faith or willful misconduct), or
(B) a transaction or other matter between Custodian and such Subcustodian,
Depository or Foreign Depository unrelated to the Funds was the cause of the
loss or damage, in each of which events, Custodian shall be liable for such
losses.
(b) In no event shall Custodian be liable to a Fund or any third party
for special, indirect or consequential damages, or lost profits or loss of
business, arising in connection with this Agreement, nor shall BNY or any
Subcustodian be liable: (i) for acting in accordance with any Certificate
or Oral Instructions actually received by Custodian and reasonably believed
by Custodian to be given by an Authorized Person; (ii) for acting in
accordance with Instructions requiring authentication codes if such
Instructions have authentication codes without reviewing the same; (iii)
for conclusively presuming that all disbursements of cash directed by the
Fund, whether by a Certificate, an Oral Instruction, or an Instruction, are
in accordance with Section 2(i) of Article II hereof; (iv) for holding
property in any particular country, including, but not limited to, Losses
resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; exchange or
currency controls or restrictions, devaluations or fluctuations;
availability of cash or Securities or market conditions which prevent the
transfer of property or execution of Securities transactions or affect the
value of property; (v) for the insolvency of any Subcustodian (other than a
BNY Affiliate), any Depository, or, except to the extent such action or
inaction is a direct result of the Custodian's failure to fulfill its
duties hereunder, any Foreign Depository; or (vi) for any Losses arising
from the applicability of any law or regulation now or hereafter in effect,
or from the occurrence of any event, including, without limitation,
implementation or adoption of any rules or procedures of a Foreign
Depository, which may affect, limit, prevent or impose costs or burdens on,
the transferability,
convertibility, or availability of any currency or Composite Currency Unit
in any country or on the transfer of any Securities, and in no event shall
Custodian be obligated to substitute another currency for a currency
(including a currency that is a component of a Composite Currency Unit)
whose transferability, convertibility or availability has been affected,
limited, or prevented by such law, regulation or event, and to the extent
that any such law, regulation or event imposes a cost or charge upon
Custodian in relation to the transferability, convertibility, or
availability of any cash currency or Composite Currency Unit, such cost or
charge shall be for the Account of the Fund, and Custodian may treat any
Account denominated in an affected currency as a group of separate accounts
denominated in the relevant component currencies. BNY shall not be liable
for any Losses due to forces beyond the control of Custodian, including
without limitation strikes, work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear or natural catastrophes or acts of God,
or interruptions, loss or malfunctions of utilities, communications or
computer (software and hardware) services. Custodian shall endeavor to
promptly notify the Funds when it becomes aware of any situation outlined
above, but shall not be liable for a failure to do so. The Funds shall not
be responsible for temporary delays in the performance of their duties and
obligations hereunder and correspondingly shall not be liable for any
Losses attributable to such delay in consequence of an event as described
above affecting the Funds' principal place of business operations or
administration
(c) Custodian may enter into subcontracts, agreements and
understandings with any BNY Affiliate, whenever and on such terms and
conditions as it deems necessary or appropriate to perform its services
hereunder. No such subcontract, agreement or understanding shall discharge
Custodian from its obligations hereunder.
(d) The Funds agree to indemnify Custodian and hold Custodian harmless
from and against any and all Losses sustained or incurred by or asserted
against Custodian by reason of or as a result of any action or inaction, or
arising out of Custodian's performance hereunder, including reasonable fees
and expenses of counsel incurred by Custodian in a successful defense of
claims by the Fund; provided however, that the Funds shall not indemnify
Custodian for those Losses arising out of Custodian's own negligence, bad
faith or willful misconduct. This indemnity shall be a continuing
obligation of each Fund, their successors and assigns, notwithstanding the
termination of this Agreement.
(e) Custodian agrees to indemnify each Fund against and hold each Fund
harmless from and against any and all direct damages sustained or incurred
because of or in connection with this Agreement; provided however, that
Custodian shall only indemnify the Funds for those direct damages arising
out of Custodian's own negligence, bad faith or willful misconduct. This
indemnity shall be a continuing obligation of Custodian, its successors and
assigns, notwithstanding the termination of this Agreement.
8.2 Without limiting the generality of the foregoing, Custodian shall be
under no obligation to inquire into, and shall not be liable for (except to the
extent that either (a) or (b) involves Custodian's negligence, bad faith or
willful misconduct):
(i) Any Losses incurred by a Fund or any other person as a result
of the receipt or acceptance of fraudulent, forged or invalid
Securities, or Securities which are otherwise not freely transferable
or deliverable without encumbrance in any relevant market;
(ii) The validity of the issue of any Securities purchased, sold,
or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received
therefor;
(iii) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
(iv) The legality of the declaration or payment of any dividend
or distribution by a Fund;
(v) The legality of any borrowing by a Fund;
(vi) The legality of any loan of portfolio Securities, nor shall
Custodian be under any duty or obligation to see to it that any cash
or collateral delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of such loan of
portfolio Securities is adequate collateral for the Fund against any
loss it might sustain as a result of such loan, which duty or
obligation shall be the sole responsibility of the Fund. In addition,
Custodian shall be under no duty or obligation to see that any broker,
dealer or financial institution to which portfolio Securities of the
Fund are lent makes payment to it of any dividends or interest which
are payable to or for the account of the Fund during the period of
such loan or at the termination of such loan, provided, however that
Custodian shall promptly notify the Fund in the event that such
dividends or interest are not paid and received when due;
(vii) The sufficiency or value of any amounts of cash and/or
Securities held in any Special Account in connection with transactions
by a Fund; whether any broker, dealer, futures commission merchant or
clearing member makes payment to the Fund of any variation margin
payment or similar payment which the Fund may be entitled to receive
from such broker, dealer, futures commission merchant or clearing
member, or whether any payment received by Custodian from any broker,
dealer, futures commission merchant or clearing member is the amount
the Fund is entitled to receive, or to notify the Fund of Custodian's
receipt or non-receipt of any such payment; or
(viii) Whether any Securities at any time delivered to, or held
by it or by any Subcustodian, for the account of a Fund and
specifically allocated to a Series are such as properly may be held by
the Fund or such Series under the provisions of its then current
prospectus and statement of additional information, or to ascertain
whether any transactions by a Fund, whether or not involving
Custodian, are such transactions as may properly be engaged in by the
Fund.
8.3 Custodian may, with respect to questions of law specifically regarding
an Account, obtain the advice of counsel and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with such
advice.
8.4 Custodian shall be under no obligation to take action to collect any
amount payable on Securities in default, or if payment is refused after due
demand and presentment, unless and until (i) it shall be directed to take such
action by a Certificate or Instructions and (ii) it shall be assured to its
satisfaction of reimbursement of its reasonable costs and expenses in connection
with any such action.
8.5 Custodian shall have no duty or responsibility to inquire into, make
recommendations, supervise, or determine the suitability of any transactions
affecting any Account.
8.6 Each Fund shall pay to Custodian the fees and charges as may be
specifically agreed upon from time to time and such other fees and charges at
agreed rates for such services as may be applicable.
8.7 In addition to, and not as a limitation of, Custodian's rights under
Section 1 of Article V, Custodian has the right to debit a cash account in
advance for any amount payable by a Fund in connection with any and all
obligations of the Fund to Custodian, provided Custodian has given the Fund
prior notice of such debit.
8.8 Each Fund agrees to forward to Custodian a Certificate or Instructions
confirming Oral Instructions by the close of business of the same day that such
Oral Instructions are given to Custodian. Each Fund agrees that the fact that
such confirming Certificate or Instructions are not received or that a contrary
Certificate or contrary Instructions are received by Custodian shall in no way
affect the validity or enforceability of transactions authorized by such Oral
Instructions and effected by Custodian. Under either of the two foregoing
circumstances, Custodian shall promptly notify the Fund. If a Fund elects to
transmit Instructions through an on-line communications system offered by
Custodian, the Fund's use thereof shall be subject to the Terms and Conditions
attached as Appendix I hereto, and Custodian shall provide user and
authorization codes, passwords and authentication keys only to an Authorized
Person or a person reasonably believed by Custodian to be an Authorized Person.
8.9 The books and records pertaining to a Fund which are in possession of
Custodian shall be the property of such Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and the rules thereunder and
other applicable securities laws, rules and regulations. The Fund, or its
authorized representatives, shall have access to such books and records during
Custodian's normal business hours. Upon the reasonable request of a Fund, copies
of any such books and records shall be provided by Custodian to the Fund or its
authorized representative. Upon the reasonable request of a Fund, Custodian
shall provide in hard copy or on computer disc any records included in any such
delivery which are maintained by Custodian on a computer disc, or are similarly
maintained.
8.10 It is understood that Custodian is authorized to supply any
information regarding the Accounts which is required by any law, regulation or
rule now or hereafter in effect. The Custodian shall provide each Fund with any
report obtained by the Custodian on the system of internal accounting control of
a Depository or OCC, and with such reports on its own system of internal
accounting control as a Fund may reasonably request from time to time.
8.11 Neither Custodian nor any Fund shall have any duties or
responsibilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement.
9. TERMINATION
9.1 Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of giving of such
notice. In the event such notice is given by a Fund, it shall be accompanied by
a copy of a resolution of the board of trustees of such Fund, certified by the
Secretary or any Assistant Secretary, electing to terminate this Agreement and
designating a successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by Custodian, the Fund
shall, on or before the termination date, deliver to Custodian a copy of a
resolution of the board of trustees of the Fund, certified by the Secretary or
any Assistant Secretary, designating a successor custodian or custodians. In the
absence of such designation by the Fund, Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits, and which shall be
satisfactory to the Funds. Upon the date set forth in such notice, this
Agreement shall terminate with respect to the affected Fund(s), and Custodian
shall upon receipt of a notice of acceptance by the successor custodian on that
date deliver directly to the successor custodian all Securities and cash then
owned by the Fund(s) and held by it as Custodian, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which it shall
then be entitled.
9.2 If a successor custodian is not designated by the Fund or Custodian in
accordance with the preceding section, the Fund shall upon the date specified in
the notice of termination of this Agreement and upon the delivery by Custodian
of all Securities (other than Securities which cannot be delivered to the Fund)
and cash then owned by the Fund be deemed to be its own custodian and Custodian
shall thereby be relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities which cannot be
delivered to the Fund to hold such Securities hereunder in accordance with this
Agreement.
10. MISCELLANEOUS
10.1 Each Fund agrees to furnish to Custodian a new Certificate of
Authorized Persons in the event of any change in the then present Authorized
Persons. Until such new Certificate is received, Custodian shall be fully
protected in acting upon Certificates, Instructions or Oral Instructions of such
present Authorized Persons.
10.2 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to Custodian, shall be sufficiently given if
addressed to Custodian and received by it at its offices at 000 Xxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at such other place as Custodian may from time to
time designate in writing.
10.3 Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and received by it at its offices at Attn.: Assistant Treasurer, The
Vanguard Group, Inc., X.X. Xxx 0000, Xxxxxx Xxxxx, Xxxxxxxxxxxx 00000, or at
such other place as the Fund may from time to time designate in writing.
10.4 Each and every right granted to a party hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of either party to exercise, and no delay in exercising, any right
will operate as a waiver thereof, nor will any single or partial exercise by
either party of any right preclude any other or future exercise thereof or the
exercise of any other right.
10.5 In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any exclusive jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected thereby. This Agreement, may not be amended or modified in any manner
except by a written agreement executed by both parties, except that any
amendment to the Schedule I hereto need be signed only by the Fund and any
amendment to Appendix I hereto need be signed only by Custodian. This Agreement
shall extend to and shall be binding upon the parties hereto, and their
respective successors and assigns; provided, however, that this Agreement shall
not be assignable by either party without the written consent of the other.
10.6 This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and Custodian hereby consent to the jurisdiction of a federal
court situated in New York City, New York in connection with any dispute arising
hereunder. Each Fund hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum.] Each Fund and Custodian each hereby irrevocably waives any and all
rights to trial by jury in any legal proceeding arising out of or relating to
this Agreement.
7. This Agreement is executed on behalf of the Board of Trustees of each
Fund as Trustees and not individually and the obligations of this Agreement are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of such Funds; further, the assets of
a particular Series of such Fund shall under no circumstances be charged with
liabilities attributable to any other Series of such Fund and that all persons
extending credit to, or contracting with or having any claim against a
particular Series of such Fund shall look only to the assets of that particular
Series for payment of such credit, contract or claim.
8. The parties hereto agree that each shall treat confidentially the terms
and conditions of this Agreement and all information provided by each party to
the other regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely for
the purpose of rendering or obtaining services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be disclosed
to any third party without the prior consent of such providing party. The
foregoing shall not be applicable to any information that is publicly available
when provided or thereafter becomes publicly available other than through a
breach of this Agreement, or that is required to be disclosed by or to any
regulatory authority, any external or internal accountant, auditor or counsels
of the parties hereto, by judicial or administration process or otherwise by
applicable law, or to any disclosure made by a party if such party's counsel has
advised that such party could be liable under any applicable law or any judicial
or administrative order or process for a failure to make such disclosure.
9. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the Funds and Custodian have caused this Agreement to
be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
Vanguard Funds
By: /s/ Xxxxxx X. Xxxxxxx
Title: Assistant Treasurer
THE BANK OF NEW YORK
By: /s/ Xxxxxx X. XxXxxx
Title: Vice President
SCHEDULE II
FUND: Vanguard Admiral Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Admiral Treasury Money Market Fund/
00-0000000
FUND: Vanguard Fixed Income Securities Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Intermediate-Term Corporate Fund/
00-0000000
Vanguard Intermediate-Term Treasury Fund/
00-0000000
Vanguard Long-Term Treasury Fund/00-0000000
Vanguard Short-Term Corporate Fund/00-0000000
Vanguard Short-Term Federal Fund/00-0000000
Vanguard Short-Term Treasury Fund/00-0000000
FUND: Vanguard Horizon Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Capital Opportunity Fund/00-0000000
Vanguard Strategic Equity Fund/00-0000000
FUND: Vanguard Money Market Reserves
SERIES/TAX IDENTIFICATION NO.: Vanguard Prime Money Market Fund/00-0000000
Vanguard Federal Money Market Fund/00-0000000
FUND: Vanguard PRIMECAP Fund/00-0000000
FUND: Vanguard Treasury Fund
SERIES/TAX IDENTIFICATION NO.: Vanguard Treasury Money Market Fund/
00-0000000
FUND: Vanguard Variable Insurance Funds
SERIES/TAX IDENTIFICATION NO.: Growth Portfolio/00-0000000
Xxxxx Xxxxxx Xxxxxxxxx/00-0000000
Xxxxx-Xxxx Corporate Portfolio/00-0000000
FUND: Vanguard Whitehall Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Selected Value Fund/00-0000000
APPENDIX I
THE BANK OF NEW YORK
ON-LINE COMMUNICATIONS SYSTEM (THE "SYSTEM")
TERMS AND CONDITIONS
1. License; Use. Upon delivery to the Funds of software enabling the Funds
to obtain access to the System (the "Software"), Custodian grants to each Fund a
personal, nontransferable and nonexclusive license to use the Software solely
for the purpose of transmitting Instructions, receiving reports, making
inquiries or otherwise communicating with Custodian in connection with the
Account(s). Each Fund shall use the Software solely for its own internal and
proper business purposes and not in the operation of a
service bureau. Except as set forth herein, no license or right of any kind is
granted to the Funds with respect to the Software. Each Fund acknowledges that
Custodian and its suppliers retain and have title and exclusive proprietary
rights to the Software, including any trade secrets or other ideas, concepts,
know-how, methodologies, or information incorporated therein and the exclusive
rights to any copyrights, trademarks and patents (including registrations and
applications for registration of either), or other statutory or legal
protections available in respect thereof. Each Fund further acknowledges that
all or a part of the Software may be copyrighted or trademarked (or a
registration or claim made therefor) by Custodian or its suppliers. No Fund
shall take any action with respect to the Software inconsistent with the
foregoing acknowledgments, nor shall any Fund attempt to decompile, reverse
engineer or modify the Software. No Fund may copy, sell, lease or provide,
directly or indirectly, any of the Software or any portion thereof to any other
person or entity without Custodian's prior written consent. No Fund may remove
any statutory copyright notice or other notice included in the Software or on
any media containing the Software. Each Fund shall reproduce any such notice on
any reproduction of the Software and shall add any statutory copyright notice or
other notice to the Software or media upon Custodian's request.
2. Equipment. Each Fund shall obtain and maintain at its own cost and
expense all equipment and services, including but not limited to communications
services, necessary for it to utilize the Software and obtain access to the
System, and Custodian shall not be responsible for the reliability or
availability of any such equipment or services. Custodian agrees to provide
reasonable training, instruction manuals and access to Custodian's "help desk"
in connection with each Fund's user support necessary to use the Software. At a
Fund's request, Custodian agrees to permit reasonable testing of the Software by
any Fund.
3. Proprietary Information. The Software, any data base (other than
databases relating solely to the assets of a Fund and transactions with respect
thereto) and any proprietary data, processes, information and documentation made
available to the Fund (other than which are or become part of the public domain
or are legally required to be made available to the public) (collectively, the
"Information"), are the exclusive and confidential property of Custodian or its
suppliers. Each Fund shall keep the Information confidential by using the same
care and discretion that each Fund uses with respect to its own confidential
property and trade secrets, but not less than reasonable care. Upon termination
of the Agreement or the Software license granted herein for any reason, the
Funds shall return to Custodian any and all copies of the Information which are
in their possession or under their control.
4. Indemnification. Custodian will indemnify and hold harmless the Funds
with respect to any liability, damages, loss or claim incurred by or brought
against any Fund by reason of any claim or infringement against any patent,
copyright, license or other property right arising out or by reason of a Fund's
use of the Software in the form provided under this Appendix. Custodian at its
own expense will defend such action or claim brought against a Fund to the
extent that it is based on a claim that the Software in the form provided by
Custodian infringes any patents, copyrights, license or other property right,
provided that Custodian is provided with reasonable notice of such claim,
provided that the Fund has not settled, compromised or confessed any such claim
without the Custodian's written consent, in which event Custodian shall have no
liability or obligation hereunder, and provided Fund cooperates with and assists
Custodian in the defense of such claim. Custodian shall have the right to
control the defense of all such claims, lawsuits and other proceedings. If, as a
result of any claim of infringement against any patent, copyright, license or
other property right, Custodian is enjoined from using the Software, or if
Custodian believes that the System is likely to become the subject of a claim of
infringement, Custodian may in its sole discretion either (a) at its expense
procure the right for the Funds to continue to use the Software, or (b) replace
or modify the Software so as to make it non-infringing, or (c) may discontinue
the license granted herein upon
written notice to the Funds.
5. Modifications. Custodian reserves the right to modify the Software from
time to time at its own expense and each Fund shall install new releases of the
Software as Custodian may direct. Each Fund agrees not to modify or attempt to
modify the Software without Custodian's prior written consent. Each Fund
acknowledges that any modifications to the Software, whether by a Fund or
Custodian and whether with or without Custodian's consent, shall become the
property of Custodian.
6. NO REPRESENTATIONS OR WARRANTIES. CUSTODIAN AND ITS MANUFACTURERS AND
SUPPLIERS MAKE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE SOFTWARE,
SERVICES OR ANY DATABASE, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. EACH FUND ACKNOWLEDGES THAT THE SOFTWARE, SERVICES AND ANY DATABASE ARE
PROVIDED "AS IS." IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ANY
DAMAGES, WHETHER DIRECT, INDIRECT SPECIAL, OR CONSEQUENTIAL, WHICH A FUND MAY
INCUR IN CONNECTION WITH THE SOFTWARE, SERVICES OR ANY DATABASE, EVEN IF
CUSTODIAN OR SUCH SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
IN NO EVENT SHALL CUSTODIAN OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD, MACHINE
OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF
COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR
CAUSE BEYOND THEIR REASONABLE CONTROL.
7. Security; Reliance; Unauthorized Use. The Fund will cause all persons
utilizing the Software and System to treat all applicable user and authorization
codes, passwords and authentication keys with extreme care, and it will
establish internal control and safekeeping procedures to restrict the
availability of the same to persons duly authorized to give Instructions.
Custodian is hereby irrevocably authorized to act in accordance with and rely on
Instructions received by it through the System. Each Fund acknowledges that it
is its sole responsibility to assure that only persons duly authorized use the
System and that Custodian shall not be responsible or liable for any
unauthorized use thereof.
8. System Acknowledgments. Custodian shall acknowledge through the System
its receipt of each transmission communicated through the System, and in the
absence of such acknowledgment Custodian shall not be liable for any failure to
act in accordance with such transmission and a Fund may not claim that such
transmission was received by Custodian.
9. EXPORT RESTRICTIONS. EXPORT OF THE SOFTWARE IS PROHIBITED BY UNITED
STATES LAW. THE FUNDS MAY NOT UNDER ANY CIRCUMSTANCES RESELL, DIVERT, TRANSFER,
TRANSSHIP OR OTHERWISE DISPOSE OF THE SOFTWARE (IN ANY FORM) IN OR TO ANY OTHER
COUNTRY. IF CUSTODIAN DELIVERED THE SOFTWARE TO THE FUNDS OUTSIDE OF THE UNITED
STATES, THE SOFTWARE WAS EXPORTED FROM THE UNITED STATES IN ACCORDANCE WITH THE
EXPORTER ADMINISTRATION REGULATIONS. DIVERSION CONTRARY TO U.S. LAW IS
PROHIBITED. Each Fund hereby authorizes Custodian to report its name and address
to government agencies to which Custodian is required to provide such
information by law.
10. ENCRYPTION. Each Fund acknowledges and agrees that encryption may not
be available for every communication through the System, or for all data. Each
Fund agrees that Custodian may deactivate any encryption features at any time,
without notice or liability to the Funds, for the purpose of repairing or
troubleshooting the System or the Software. Custodian shall promptly advise each
Fund whenever Custodian has deactivated any encryption features. Custodian also
may deactivate any encryption features without liability, for the purpose of
scheduled maintenance, so long as it provides reasonable advance notice to the
Funds.
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of June 19, 2001 between each open-end management
investment company listed on Schedule II hereto, as amended from time to time
(each such investment company, a "Fund"), on behalf of certain of their series
(each, a "Series") and The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, each Fund desires to appoint BNY as a Foreign Custody Manager on
the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform the
duties set forth herein on the terms and conditions contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, each Fund and BNY hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "BOARD" shall mean the board of directors or board of trustees, as the
case may be, of a Fund.
2. "ELIGIBLE FOREIGN CUSTODIAN" shall have the meaning provided in the
Rule.
3. "MONITORING SYSTEM" shall mean a system established by BNY to fulfill
the Responsibilities specified in clauses (d) and (e) of Section 1 of Article
III of this Agreement.
4. "RESPONSIBILITIES" shall mean the responsibilities delegated to BNY
under the Rule as a Foreign Custody Manager with respect to each Specified
Country and each Eligible Foreign Custodian selected by BNY, as such
responsibilities are more fully described in Article III of this Agreement.
5. "RULE" shall mean Rule 17f-5 under the Investment Company Act of 1940,
as amended on June 12, 2000.
6. "SPECIFIED COUNTRY" shall mean each country, other than the United
States, constituting the primary market for a security with respect to which a
Fund has given settlement instructions to The Bank of New York as custodian (the
"Custodian") under its Custody Agreement with the Fund.
ARTICLE II.
BNY AS A FOREIGN CUSTODY MANAGER
1. Each Fund on behalf of its Board hereby delegates to BNY with respect to
each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect to
each Specified Country and agrees in performing the Responsibilities as a
Foreign Custody Manager to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of a Fund's assets would
exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the relevant Fund's
foreign custody arrangements written reports notifying the Board of the
placement of assets of the Fund with a particular Eligible Foreign Custodian
within a Specified Country and of any material change in the arrangements
(including the contract governing such arrangements) with respect to assets of
the Fund with any such Eligible Foreign Custodian.
ARTICLE III.
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with respect to
each Specified Country select an Eligible Foreign Custodian. In connection
therewith, BNY shall: (a) determine that assets of a Fund held by such Eligible
Foreign Custodian will be subject to reasonable care, based on the standards
applicable to custodians in the relevant market in which such Eligible Foreign
Custodian operates, after considering all factors relevant to the safekeeping of
such assets, including, without limitation, those contained in paragraph
(c)(1)(i) through (iv) of the Rule; (b) determine that the Fund's foreign
custody arrangements with each Eligible Foreign Custodian are governed by a
written contract with the Custodian which will provide reasonable care for the
Fund's assets based on the standards specified in paragraph (c)(1) of the Rule;
(c) determine that each contract with an Eligible Foreign Custodian shall
include the provisions specified in paragraph (c)(2)(i)(A) through (F) of the
Rule or, alternatively, in lieu of any or all of such (c)(2)(i)(A) through (F)
provisions, such other provisions as BNY determines will provide, in their
entirety, the same or a greater level of care and protection for the assets of
the Fund as such specified provisions; (d) monitor pursuant to the Monitoring
System the appropriateness of maintaining the assets of the Fund with a
particular Eligible Foreign Custodian pursuant to paragraph (c)(1) of the Rule
and the performance of the contract governing such arrangement pursuant to
paragraph (c)(2) of the Rule; (e) advise the Fund whenever BNY determines under
the Monitoring System that an arrangement no longer meets the requirement of the
Rule or there has been any material changes in a Fund's foreign custody
arrangements (including a material change in the contract
governing such arrangement) described in preceding clause (d) no longer meets
the requirements of the Rule; and (f) provide the Fund's Board at least annually
and more frequently as mutually agreed between the parties, written reports
specifying placement of a Fund's assets with each Eligible Foreign Custodian.
2. For purposes of preceding Section 1 of this Article, BNY's determination
of appropriateness or of a material change in an arrangement, respectively,
shall not include, nor be deemed to include, any evaluation of Country Risks
associated with investment in a particular country. For purposes hereof,
"Country Risks" shall mean systemic risks of holding assets in a particular
country including but not limited to (a) an Eligible Foreign Custodian's use of
any depositories that act as or operate a system or a transnational system for
the central handling of securities or any equivalent book-entries; (b) such
country's financial infrastructure; (c) such country's prevailing custody and
settlement practices; (d) nationalization, expropriation or other governmental
actions; (e) regulation of the banking or securities industry; (f) currency
controls, restrictions, devaluations or fluctuations; and (g) market conditions
which affect the orderly execution of securities transactions or affect the
value of securities.
ARTICLE IV.
REPRESENTATIONS
1. Each Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by such Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present, and (c) the Board or the Fund's
investment advisor has considered the Country Risks associated with investment
in each Specified Country and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
country.
2. BNY hereby represents that: (a) BNY is duly organized and existing under
the laws of the State of New York, with full power to carry on its businesses as
now conducted, and to enter into this Agreement and to perform its obligations
hereunder; (b) this Agreement has been duly authorized, executed and delivered
by BNY, constitutes a valid and legally binding obligation of BNY enforceable in
accordance with its terms, and no statute, regulation, rule, order, judgment or
contract binding on BNY prohibits BNY's execution or performance of this
Agreement; and (c) BNY has established the Monitoring System.
ARTICLE V.
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages, liabilities or
claims, including attorneys' and accountants' fees, sustained or incurred by, or
asserted against a Fund with respect to custody of a Fund's Foreign Assets (as
defined in the Rule), except to the extent the same arises out of the failure of
BNY to exercise the care, prudence and diligence required by Section 2 of
Article II hereof. In no event shall BNY be liable to a Fund, the Board, or any
third party for special, indirect or consequential damages, or for lost profits
or loss of business, arising in connection with this Agreement.
2. Each Fund shall indemnify BNY and hold it harmless from and against any
and all costs, expenses, damages, liabilities or claims, including attorneys'
and accountants' fees, sustained or incurred by, or asserted against, BNY by
reason or as a result of any action or inaction, or arising out of BNY's
performance hereunder, provided that no Fund shall indemnify BNY to the extent
any such costs, expenses, damages, liabilities or claims arises out of BNY's
failure to exercise the reasonable care, prudence and diligence required by
Section 2 of Article II hereof.
3. BNY shall indemnify each Fund and hold them harmless from and against
any and all direct damages sustained or incurred by, or asserted against, the
Funds to the extent any such damages arise out of BNY's failure to exercise the
reasonable care, prudence and diligence required by Section 2 of Article II
hereof.
4. For its services hereunder, each Fund agrees to pay to BNY such
compensation as shall be mutually agreed.
5. BNY shall have only such duties as are expressly set forth herein. In no
event shall BNY be liable for any Country Risks associated with investments in a
particular country.
ARTICLE VI.
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between each Fund and
BNY as a foreign custody manager, and no provision in the Custody Agreement
between the Funds and the Custodian shall affect the duties and obligations of
BNY hereunder, nor shall any provision in this Agreement affect the duties or
obligations of the Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by it
at its offices at 000 Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at
such other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to a Fund shall be sufficiently given if received by
it at its offices at c/o The Vanguard Group, X.X. Xxx 0000, Xxxxxx Xxxxx,
Xxxxxxxxxxxx 00000, Attn: Assistant Treasurer, or at such other place as the
Funds may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by the parties. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided however, that this Agreement shall not be assignable by any
party without the written consent of the other.
5. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. Each Fund and BNY hereby consent to the jurisdiction of a federal court
situated in New York City, New York in connection with any dispute arising
hereunder. Each Fund hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in such a court and any claim
that such proceeding brought in such a court has been brought in an inconvenient
forum. Each Fund and BNY each hereby irrevocably waives any and all rights to
trial by jury in any legal proceeding arising out of or relating to this
Agreement.
6. The parties hereto agree that in performing hereunder, BNY is acting
solely on behalf of the Funds and no contractual or service relationship shall
be deemed to be established hereby between BNY and any other person by reason of
this Agreement.
7. This Agreement is executed on behalf of the Board of Trustees of each
Fund as Trustees and not individually and the obligations of this Agreement are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of such Funds; further, the assets of
a particular Series of such Fund shall under no circumstances be charged with
liabilities attributable to any other Series of such Fund and that all persons
extending credit to, or contracting with or having any claim against a
particular Series of such Fund shall look only to the assets of that particular
Series for payment of such credit, contract or claim.
8. The parties hereto agree that each shall treat confidentially the terms
and conditions of this Agreement and all information provided by each party to
the other regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely for
the purpose of rendering or obtaining services pursuant to this Agreement and,
except as may be required in carrying
out this Agreement, shall not authorize it to be disclosed to any third party
without the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by or to any regulatory
authority, any external or internal accountant, auditor or counsels of the
parties hereto, by judicial or administration process or otherwise by applicable
law, or to any disclosure made by a party if such party's counsel has advised
that such party could be liable under any applicable law or any judicial or
administrative order or process for a failure to make such disclosure.
9. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
10. This Agreement shall terminate simultaneously with the termination of
the Custody Agreement between the Funds and the Custodian, and may otherwise be
terminated by any party giving to the other party a notice in writing specifying
the date of such termination, which shall be not less than sixty (60) days after
the date of such notice.
IN WITNESS WHEREOF, the Funds and BNY have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
above written.
EACH FUND LISTED ON SCHEDULE II
By: /s/ Xxxxxx Xxxxxxx
Title: Assistant Treasurer
THE BANK OF NEW YORK
By: /s/ Xxxxxx X. XxXxxx
Title: Vice President
SCHEDULE II
Funds/Series
FUND: Vanguard Admiral Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Admiral Treasury Money Market Fund/
00-0000000
FUND: Vanguard Fixed Income Securities Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Intermediate-Term Corporate Fund/
00-0000000
Vanguard Intermediate-Term Treasury Fund/
00-0000000
Vanguard Long-Term Treasury Fund/00-0000000
Vanguard Short-Term Corporate Fund/00-0000000
Vanguard Short-Term Federal Fund/00-0000000
Vanguard Short-Term Treasury Fund/00-0000000
FUND: Vanguard Horizon Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Capital Opportunity Fund/00-0000000
Vanguard Strategic Equity Fund/00-0000000
FUND: Vanguard Money Market Reserves
SERIES/TAX IDENTIFICATION NO.: Vanguard Prime Money Market Fund/00-0000000
Vanguard Federal Money Market Fund/00-0000000
FUND: Vanguard PRIMECAP Fund/00-0000000
FUND: Vanguard Treasury Fund
SERIES/TAX IDENTIFICATION NO.: Vanguard Treasury Money Market Fund/
00-0000000
FUND: Vanguard Variable Insurance Funds
SERIES/TAX IDENTIFICATION NO.: Growth Portfolio/00-0000000
Xxxxx Xxxxxx Xxxxxxxxx/00-0000000
Xxxxx-Xxxx Corporate Portfolio/00-0000000
FUND: Vanguard Whitehall Funds
SERIES/TAX IDENTIFICATION NO.: Vanguard Selected Value Fund/00-0000000
