ThZeal - The Zeal

PRE 14A 1 proxystatement.txt VANGUARD FUNDS PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [x] Preliminary Proxy Statement [ ] Confidential, for use of Commission only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 VANGUARD ADMIRAL FUNDS VANGUARD BALANCED INDEX FUND VANGUARD BOND INDEX FUNDS VANGUARD CALIFORNIA TAX-FREE FUNDS VANGUARD CONVERTIBLE SECURITIES FUND VANGUARD EXPLORER FUND VANGUARD FENWAY FUNDS VANGUARD FIXED INCOME SECURITIES FUNDS VANGUARD FLORIDA TAX-FREE FUND VANGUARD HORIZON FUNDS VANGUARD INDEX FUNDS VANGUARD INSTITUTIONAL INDEX FUNDS VANGUARD INTERNATIONAL EQUITY INDEX FUNDS VANGUARD MALVERN FUNDS VANGUARD MASSACHUSETTS TAX-EXEMPT FUNDS VANGUARD MONEY MARKET RESERVES VANGUARD MORGAN GROWTH FUND VANGUARD MUNICIPAL BOND FUNDS VANGUARD NEW YORK TAX-FREE FUNDS VANGUARD NEW JERSEY TAX-FREE FUNDS VANGUARD OHIO TAX-FREE FUNDS VANGUARD PENNSYLVANIA TAX-FREE FUNDS VANGUARD PRIMECAP FUND VANGUARD QUANTITATIVE FUNDS VANGUARD SPECIALIZED FUNDS VANGUARD STAR FUNDS VANGUARD TAX-MANAGED FUNDS VANGUARD TREASURY FUND VANGUARD TRUSTEES EQUITY FUND VANGUARD VARIABLE INSURANCE FUND VANGUARD WELLESLEY INCOME FUND VANGUARD WELLINGTON FUND VANGUARD WHITEHALL FUNDS VANGUARD WINDSOR FUNDS VANGUARD WORLD FUND -------------------------------------------------------------------------------- (Name of Registrant as Specified in its Declaration of Trust) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [ X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11. (1) Title of each class of securities to which transaction applies: -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: -------------------------------------------------------------------------------- (5) Total fee paid: -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount previously paid: -------------------------------------------------------------------------------- (2) Form, schedule or registration statement no.: -------------------------------------------------------------------------------- (3) Filing party: -------------------------------------------------------------------------------- (4) Date filed: -------------------------------------------------------------------------------- THE VANGUARD FUNDS* NOTICE OF SPECIAL MEETING OF SHAREHOLDERS All Vanguard funds will host a Special Meeting of Shareholders on TUESDAY, DECEMBER 3, 2002, AT 9:30 A.M., EASTERN TIME, at Vanguard's North Carolina offices: 2605 Water Ridge Parkway, Two North Falls Plaza, Rooms 517 and 519, Charlotte, NC 28217. This joint meeting of the Vanguard funds is being held so that shareholders can vote on proposals to: 1. Elect trustees for each fund; 2. Change certain funds' policy on investing in other mutual funds; 3. Authorize the trustees of certain index funds to change target indexes; 4. Reclassify certain index funds as nondiversified; 5. Change two money market funds' industry concentration policy; 6. Change certain bond and balanced funds' policy on borrowing money; and 7. Change the Utilities Income Fund's investment objective and concentration in utilities stocks. By Order of the Board of Trustees, R. Gregory Barton, Secretary SEPTEMBER 23, 2002 ================================================================================ YOUR VOTE IS IMPORTANT! You can vote easily and quickly over the Internet, by toll-free telephone call, or by mail. Just follow the simple instructions that appear on your enclosed proxy card. Please help your fund avoid the expense of a follow-up mailing by voting today! ================================================================================ -------------------------- *Please see Part V of this booklet for an alphabetical list of all Vanguard funds. THE VANGUARD FUNDS SPECIAL MEETING OF SHAREHOLDERS DECEMBER 3, 2002 PROXY STATEMENT INTRODUCTION This combined proxy statement is being provided to you on behalf of the boards of trustees of all Vanguard funds. We have divided the proxy statement into five main parts: Part I An Overview of Our Proposals begins on page x. Part II Proposal Details begins on page x. Part III Information on Fund Governance begins on page x. Part IV More on Proxy Voting and Shareholder Meetings begins on page x. Part V Fund and Investment Adviser Information begins on page x. Please read the proxy statement before voting on our proposals. If you have questions about the proxy statement, or if you would like additional information, please call us toll-free at 1-800-992-0833. Participants in a company-sponsored 401(k) or other retirement plan administered by Vanguard should call us at 1-800-523-1188. This proxy statement was mailed to shareholders beginning the week of September 23, 2002. ================================================================================ ATTENTION: VANGUARD VARIABLE INSURANCE FUND SHAREHOLDERS You have the right to instruct your annuity provider on how to vote the Vanguard Variable Insurance Fund shares held under your plan. You can issue voting instructions for these shares over the Internet, by toll-free telephone call, or by mail. Just follow the simple instructions that appear on your enclosed proxy card. Note that your annuity provider will "shadow vote" any fund shares for which contract owners fail to provide voting instructions. This means that the uninstructed shares will be voted in proportionately the same manner--either "For," "Against," or "Abstain"--as the instructed shares. ================================================================================ 2 PART I AN OVERVIEW OF OUR PROPOSALS Shareholders of all Vanguard funds are being asked to vote on a number of proposals. Not all proposals apply to each fund. The table below shows each proposal and the specific Vanguard funds to which it applies. Only shareholders of record on September 6, 2002, are entitled to vote on a fund's proposals. ================================================================================ PROPOSALS VANGUARD FUNDS -------------------------------------------------------------------------------- 1. ELECT TRUSTEES FOR EACH Applies to all Vanguard funds. FUND. -------------------------------------------------------------------------------- 2. CHANGE THE FUND'S POLICY Applies to all Vanguard funds EXCEPT: Capital ON INVESTING IN OTHER MUTUAL Value Fund, Developed Markets Index Fund, FUNDS. Growth Equity Fund, Inflation-Protected Securities Fund, InstitutionalDeveloped Markets Index Fund, Institutional Total Bond Market Index Fund, Institutional Total Stock Market Index Fund, International Explorer Fund, the LifeStrategy Funds, Massachusetts Tax-Exempt Fund, Mid-Cap Growth Fund, STAR Fund, Total International Stock Index Fund, U.S. Value Fund, and the Diversified Value, Mid-Cap Index, REIT Index, and Short-Term Corporate Portfolios of the Variable Insurance Fund. These more recently launched funds are excluded from Proposal 2 because they do not have this fundamental policy. -------------------------------------------------------------------------------- 3. AUTHORIZE THE FUND'S Applies to Extended Market Index Fund, Growth TRUSTEES TO CHANGE THE TARGET Index Fund, Mid-Cap Index Fund, Small-Cap Index INDEX. Fund, Small-Cap Growth Index Fund, Small-Cap Value Index Fund, Total Stock Market Index Fund, and Value Index Fund. -------------------------------------------------------------------------------- 4. RECLASSIFY THE FUND AS Applies to 500 Index Fund, Balanced Index Fund, NONDIVERSIFIED. Emerging Markets Stock Index Fund, European Stock Index Fund, Extended Market Index Fund, Institutional Index Fund, Institutional Total Stock Market Index Fund, Mid-Cap Index Fund, Pacific Stock Index Fund, REIT Index Fund, Small-Cap Index Fund, Small-Cap Growth Index Fund, Small-Cap Value Index Fund, the Tax-Managed Funds, Total Stock Market Index Fund, Value Index Fund, and the Equity Index, Mid-Cap Index, and REIT Index Portfolios of the Variable Insurance Fund. -------------------------------------------------------------------------------- 5. CHANGE THE FUND'S INDUSTRY Applies to Prime Money Market Fund and the CONCENTRATION POLICY. Money Market Portfolio of the Variable Insurance Fund. -------------------------------------------------------------------------------- 6. CHANGE THE FUND'S POLICY Applies to Asset Allocation Fund, Balanced Index ON BORROWING MONEY. Fund, all Bond Index Funds, GNMA Fund, High-Yield Corporate Fund, High-Yield Tax-Exempt Fund, Inflation-Protected Securities Fund, Institutional Total Bond Market Index Fund, Insured Long-Term Tax-Exempt Fund, Intermediate- Term Corporate Fund, Intermediate-Term Tax- Exempt Fund, Intermediate-Term Treasury Fund, Limited-Term Tax-Exempt Fund, Long-Term Corporate Fund, Long-Term Tax-Exempt Fund, Long-Term Treasury Fund, Short-Term Corporate Fund, Short-Term Federal Fund, Short-Term Tax- Exempt Fund, Short-Term Treasury Fund, all State Tax-Exempt Funds, Tax-Exempt Money Market Fund, Tax-Managed Balanced Fund, the Balanced, High-Yield Bond, Short-Term Corporate, and Total Bond Market Index Portfolios of the Variable Insurance Fund, Wellesley Income Fund, and Wellington Fund. -------------------------------------------------------------------------------- 7. CHANGE THE FUND'S Applies to Utilities Income Fund. INVESTMENT OBJECTIVE AND CONCENTRATION IN UTILITIES STOCKS. ================================================================================ 3 PART II PROPOSAL DETAILS ================================================================================ PROPOSAL 1--ELECT TRUSTEES FOR EACH FUND >This proposal applies to all Vanguard funds. ================================================================================ We are asking shareholders of each Vanguard fund to elect a board of trustees. The seven persons listed below have been nominated for election as Vanguard fund trustees. Ms. Heisen and Messrs. Brennan, Ellis, Rankin, and Wilson currently serve as trustees for all 109 Vanguard funds and are also nominees for trustee for all funds. Mr. Gupta currently serves as trustee for 87 Vanguard funds, but is a nominee for all funds. Dr. Malkiel currently serves as trustee, and is a nominee, for 107 Vanguard funds. Each nominee also serves as a director of The Vanguard Group, Inc., and each has consented to continue serving as a trustee for the funds if elected by shareholders. NOMINEES PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS -------------------------------------------------------------------------------- INTERESTED TRUSTEE JOHN J. BRENNAN(1) Chairman of the Board, Chief Executive Officer, and Born 1954 Director/Trustee of The Vanguard Group, Inc., and Trustee since May 1987 of each of the investment companies served by The Vanguard Group, Inc. INDEPENDENT TRUSTEES CHARLES D. ELLIS(2) The Partners of '63 (pro bono ventures in Born 1937 education); Senior Adviser to Greenwich Associates Trustee since January 2001 (international business-strategy consulting); Successor Trustee of Yale University; Overseer of the Stern School of Business at New York University; Trustee of the Whitehead Institute for Biomedical Research. RAJIV L. GUPTA(3) Chairman and Chief Executive Officer (since October Born 1945 1999), Vice Chairman (January-September 1999), Trustee since December 2001 and Vice President (prior to September 1999) of Rohm and Haas Co.(chemicals); Director of Technitrol, Inc. (electronic components), and Agere Systems (communications components); Board Member of the American Chemistry Council; Trustee of Drexel University. JOANN HEFFERNAN HEISEN Vice President, Chief Information Officer, and Born 1950 Member of the Executive Committee of Johnson & Trustee since July 1998 Johnson (pharmaceuticals/consumer products); Director of the Medical Center at Princeton and Women's Research and Education Institute. BURTON G. MALKIEL(4) Chemical Bank Chairman's Professor of Economics, Born 1932 Princeton University; Director of Vanguard Trustee since May 1977 Investment Series plc (Irish investment fund) (since November 2001), Vanguard Group (Ireland) Limited (Irish investment management firm) (since November 2001), Prudential Insurance Co. of America, BKF Capital (investment management), The Jeffrey Co. (holding company), and NeuVis, Inc.(software company). 4 ALFRED M. RANKIN, JR. Chairman, President, Chief Executive Officer, Born 1941 and Director of NACCO Industries, Inc. (forklift Trustee since January 1993 trucks/housewares/ lignite); Director of Goodrich Corporation (industrial products/aircraft systems and services); Director of the Standard Products Company (supplier for automotive industry) until 1998. J. Lawrence Wilson Retired Chairman and Chief Executive Officer of Born 1936 Rohm and Haas Co. (chemicals); Director of Cummins Trustee since April 1985 Inc.(diesel engines), The Mead Corp. (paper products), and AmerisourceBergen Corp. (pharmaceutical distribution); Trustee of Vanderbilt University. ------------------------------------------------ (1) Mr. Brennan is considered an "interested person" of each Vanguard fund because he holds the position of Chief Executive Officer in addition to serving as Trustee. (2) Mr. Ellis is a Senior Adviser to Greenwich Associates, a firm that consults with financial services organizations around the world on business strategy. For the last two recently completed fiscal years ending August 31, 2001, Vanguard has paid Greenwich subscription fees amounting to less than $275,000 for research-based consulting services. Vanguard's subscription rates are similar to those of other subscribers. (3) Mr. Gupta is not currently a trustee for Vanguard Equity Income Fund, Vanguard Growth Equity Fund, the Vanguard Municipal Bond Funds, or the Vanguard State Tax-Exempt Funds. (4) Dr. Malkiel is not a trustee or nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. * * * * * WHY ARE FUND SHAREHOLDERS BEING ASKED TO ELECT TRUSTEES? Federal law requires that shareholders elect at least one-half of a fund's board of trustees. Four of the seven current trustees (Messrs. Brennan, Rankin, and Wilson and Dr. Malkiel) were elected by shareholders through earlier proxies. However, three of the current trustees (Ms. Heisen and Messrs. Ellis and Gupta) were nominated by each board's independent nominating committee and elected by each fund's full board, but were not elected by shareholders. In light of the recent retirement of two long-serving elected trustees (Bruce K. MacLaury and James O. Welch, Jr.) at the end of 2001, now is an appropriate time to hold an election. HOW MANY OF THE NOMINEES WILL BE "INDEPENDENT" TRUSTEES IF ELECTED? Six of the seven nominees--all but Mr. Brennan--will be independent trustees if elected by shareholders. Independent trustees have no affiliation with Vanguard or the funds they oversee, apart from any personal investments they choose to make as private individuals in the funds. Independent trustees play a critical role in overseeing fund operations and representing the interests of each fund's shareholders. DOES EACH VANGUARD FUND HAVE A SEPARATE BOARD OF TRUSTEES? Not necessarily. For organization purposes, the Vanguard funds are grouped into 35 separate trusts. Each of these trusts is made up of one or more Vanguard funds--which are sometimes called "series" of the trust--that share the same 5 board of trustees and therefore elect their trustees on a joint basis. Part V of this booklet includes an alphabetical list of Vanguard funds, which specifies the trust to which each fund belongs and provides a variety of other details about the funds. HOW LONG WILL EACH TRUSTEE SERVE IF ELECTED? If elected, each trustee will serve until he or she resigns, retires, or is removed from the board as provided in the fund's governing documents. A trustee may be removed from the board by a shareholder vote representing two-thirds of the total net asset value of all fund shares under the same trust. If a nominee is unable to accept election, or subsequently leaves the board before the next election, the board of trustees may, in its discretion, select another person to fill the vacant position. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES. ================================================================================ PROPOSAL 2-- CHANGE CERTAIN FUNDS' POLICY ON INVESTING IN OTHER MUTUAL FUNDS >This proposal applies to all Vanguard funds EXCEPT Capital Value Fund, Developed Markets Index Fund, Growth Equity Fund, Inflation-Protected Securities Fund, Institutional Developed Markets Index Fund, Institutional Total Bond Market Index Fund, Institutional Total Stock Market Index Fund, International Explorer Fund, the LifeStrategy Funds, Massachusetts Tax-Exempt Fund, Mid-Cap Growth Fund, STAR Fund, Total International Stock Index Fund, U.S. Value Fund, and the Diversified Value, Mid-Cap Index, REIT Index, and Short-Term Corporate Portfolios of the Variable Insurance Fund. ================================================================================ We propose to change the policy of each Vanguard fund (excluding the funds noted above, which do not have this fundamental policy) on investing in other mutual funds. The main benefit of the proposed change is that it would enable the funds to achieve greater diversification and modestly higher returns on their cash reserves. (As used here, "cash reserves" primarily refers to cash received too late in the day to be invested in an optimal way and to other amounts that may be held by certain funds for temporary purposes or as collateral for securities loans.) Under the revised policy, the funds would be able to invest cash reserves in money market funds and short-term bond funds created by Vanguard especially for this purpose. This program would be similar to the cash management programs operated by several other large mutual fund complexes. WHY CHANGE THE CURRENT POLICY? The current policy prohibits the funds from investing in other "investment companies" (a legal term that refers primarily to mutual funds) except through a merger, consolidation, or acquisition of assets, or within certain limits specified by the federal statute that regulates mutual funds. As a practical matter, these statutory limits prevent the funds from investing their cash reserves in other mutual funds. At present, the policy is "fundamental," meaning that it can be changed only by shareholder vote. 6 HOW DO THE FUNDS INVEST THEIR CASH RESERVES NOW? Currently, most of the funds pool their cash reserves each business day to invest jointly in overnight repurchase agreements. This pooled arrangement, which operates on the basis of a Securities and Exchange Commission (SEC) exemption, gives the funds access to better rates than would be available if they bought smaller repurchase agreements separately. However, the current arrangement carries three significant disadvantages. First, returns from repurchase agreements are limited in comparison with returns from other low-risk, short-term investments. Second, a fund that receives cash very late in the day may miss the opportunity to invest it in that day's pool. And third, Vanguard's tax-exempt funds cannot participate in the pool because the income from repurchase agreements is taxable. HOW WOULD THE NEW CASH MANAGEMENT PROGRAM WORK? Under the new cash management program, each fund would invest its cash reserves in one or more new funds created by Vanguard especially for this purpose. A range of dedicated funds--all short-term and low-risk in nature--would be made available, so that each fund could invest its daily cash reserves in the most appropriate options. (For instance, a tax-exempt fund would invest its cash reserves so that it would generate only tax-exempt income.) In this way, the funds would gain exposure to a wider selection of short-term investments--not just repurchase agreements--without losing the economies produced by investing cash on a pooled basis with other funds. The funds also would gain exposure to instruments that should provide a higher rate of return than overnight repurchase agreements, with no appreciable increase in risk to shareholders. Before implementing the new cash management program, Vanguard will need shareholder approval of this proposal and SEC approval of Vanguard's request for an exemption from certain legal provisions. The SEC has previously approved the same type of program for other mutual fund companies; however, the agency approves such programs only after determining that they are in the public interest and consistent with the protection of investors. WHAT IS THE PROPOSED POLICY? The proposed policy reads as follows: The fund may invest in other investment companies to the extent permitted by applicable law or SEC order. As proposed, the new policy would be "non-fundamental," meaning that each fund's board of trustees would have the flexibility to amend it further in shareholders' best interests, without the expense and delay of a future shareholder vote. Any future revision to the policy would have to conform to a fund's investment objective and could not alter the basic nature of the fund. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. 7 ================================================================================ PROPOSAL 3-- AUTHORIZE THE TRUSTEES OF CERTAIN INDEX FUNDS TO CHANGE TARGET INDEXES >This proposal applies to Extended Market Index Fund, Growth Index Fund, Mid-Cap Index Fund, Small-Cap Index Fund, Small-Cap Growth Index Fund, Small-Cap Value Index Fund, Total Stock Market Index Fund, and Value Index Fund. ================================================================================ We want to adopt a policy that authorizes the trustees of each of the above index funds to change the target index used by the fund if the trustees determine that doing so would be in shareholders' best interests. This policy--which already exists for most Vanguard index funds, including Vanguard's balanced, bond, and international stock index funds--would allow the trustees to seek out new indexes that do a better job of tracking the market segment targeted by each fund's investment objective. In addition, this policy would allow the trustees to take prompt corrective action if a fund's existing index were to begin experiencing difficulties in tracking its targeted market segment. WOULD THERE BE A LIMIT ON THE TRUSTEES' AUTHORITY TO CHANGE TARGET INDEXES? Yes. The trustees' authority to change target indexes would be subject to a key overriding limitation. Specifically, any new target index would be required to track the same market segment as the fund's existing index (e.g., large-capitalization growth stocks in the case of the Growth Index Fund, small-cap value stocks in the case of the Small-Cap Value Index Fund). Because of this limitation, any change in the fund's target index would not result in a change in the fund's investment objective. The new policy would not apply to the 500 Index Fund or the Institutional Index Fund. These two funds target the Standard & Poor's 500 Index, a broad-based index that enjoys considerable market recognition. WHY WOULD THE TRUSTEES WANT TO CHANGE A FUND'S TARGET INDEX? Simply put, all indexes are not created equal. As the sponsor of 29 stock, bond, and balanced index funds that together comprise over $200 billion in indexed assets, Vanguard is continually seeking to identify or develop the most appropriate index for each of the funds. As new indexes are created, we analyze the quality and integrity of their construction methodology. We also regularly explore improved construction and rebalancing methods. As explained below, we believe new indexes under development by Morgan Stanley Capital International, Inc. (MSCI), a well-established index provider that maintains indexes tracked by Vanguard's international stock index funds, may offer improved indexing techniques. WHAT ARE THE CHARACTERISTICS OF AN "IDEAL" INDEX? Based on Vanguard's indexing experience over the past 25 years, we have formed certain views about the characteristics of an "ideal" index. We believe, most importantly, that an index must be judged by how accurately it measures returns from a designated market segment and not by how its returns compare to those of other indexes over any particular period of time. No one can predict which index will outperform over any time period. We believe that at least five aspects of an index provider's construction methodology are critical to producing a superior index. These are as follows: > OBJECTIVITY. In our view, an index should be maintained according to an objective set of rules that leaves virtually no doubt or ambiguity as to whether particular stocks warrant inclusion in the index. In the indexing world, an objective selection process leads to consistency--which, in turn, enhances the integrity of an index. 8 > ADJUSTMENT FOR "FLOAT." We believe that an index should weight its holdings in a manner that reflects the amount of a stock's "float," or availability, in the marketplace. Many companies have shares of stock outstanding that effectively are not available for purchase by the investing public. These shares often represent closely held positions in a company, or perhaps cross-holdings of other companies or governments. Including these unavailable shares in index calculations can produce a distorted picture of the returns actually attainable by investors. > APPROACH TO MARKET CAPITALIZATION. For indexes that focus on companies of a particular size, we believe that the cutoffs between small-cap, mid-cap, and large-cap should be defined as overlapping bands rather than fixed lines. In addition, we believe that these bands separating capitalization segments should be based on a list of companies ranked by relative size rather than by the specific dollar amounts of their market capitalization. > APPROACH TO "VALUE" VERSUS "GROWTH." Many index providers construct their value and growth indexes so that each investment style is a perfect complement of the other. Essentially, growth is defined as "not value," and value is defined as "not growth." We believe that this is not the best approach. In the real world, investment managers have their own independent criteria for determining whether a stock meets their particular investment style. A growth manager would not rule a stock out solely because it happened to meet another manager's criteria for value, and vice versa. In our view, stocks should be analyzed for inclusion in a value index or growth index in a way that allows for overlapping holdings, and in some cases, exclusion from both indexes. Similar to capitalization cutoffs, overlapping bands, rather than a fixed line, should define investment styles. > APPROACH TO REBALANCING. All index providers periodically rebalance their indexes by adding or dropping stocks to ensure that the indexes continue to measure their designated market segments. Index funds then quickly adjust their portfolio holdings to keep in close step with their target indexes, often incurring large transaction costs and making trades at unattractive prices. This periodic rush into and out of stocks is counterproductive, and not at all how investment managers prefer to manage money. We believe that there are considerable benefits to using a more rational approach to rebalancing indexes. Gradual and orderly rebalancing more accurately reflects investment activity in the markets, making the index a better proxy for its target market. As an added benefit, this approach would enable index funds to manage their transaction costs from portfolio adjustments in much the same manner as other investors. WHAT ARE THE BENEFITS OF ENABLING THE TRUSTEES TO ACT QUICKLY ON BEHALF OF SHAREHOLDERS? This proposal would allow the funds' trustees to change indexes in shareholders' best interests without first obtaining shareholder approval. We believe that this arrangement is preferable for several reasons: > TIMING. This policy would enable the trustees to take immediate action without the considerable delay (at least several months) required to obtain formal shareholder approval. This ability would be particularly valuable when time is of the essence in protecting shareholders' interests. 9 > COSTS. Along the same lines, this policy would allow the trustees to make a change without having the fund incur substantial costs in undertaking a proxy mailing and holding a special shareholder meeting to obtain formal approval of the change. > CONFIDENTIALITY. This policy would allow the trustees to make a change without tipping off the market about upcoming portfolio changes by the fund. HOW WOULD SWITCHING TO A NEW TARGET INDEX AFFECT A FUND'S SHAREHOLDERS? Any replacement index would track the same market segment as a fund's existing index, so shareholders should see no change in the overall character of their investment. Nonetheless, there are certain risks associated with our proposal. > TRANSITION ISSUES. Switching to a new index would likely require adjustments to a fund's portfolio holdings, which could temporarily increase the fund's transaction costs and cause it to realize capital gains or losses. In addition, if sophisticated traders and market-timers obtain advance knowledge of portfolio adjustments to be made by the fund, they could engage in harmful "front-running"--that is, they could seek to profit by driving up the prices of stocks to be bought by the fund, or driving down the prices of stocks to be sold by the fund. For this reason, any index change would be held in strict confidence by Vanguard until it actually occurs. Of course, shareholders would be notified of any index change when it occurs. > POTENTIAL FOR DIFFERENT INVESTMENT RETURNS. A fund's new target index could provide different investment returns (lower or higher) or different return volatility (greater or less) than its existing index over any period of time. It is important to understand that the fund's trustees would not base any decision to change indexes on expectations about future investment returns. Rather, they would choose a new index on the basis that it will measure returns from the fund's designated market segment more accurately than the fund's existing index. ARE THERE ANY INDEX CHANGES CURRENTLY IN THE WORKS? For some time, Vanguard has been pursuing the development of better indexes in accordance with the preferred indexing methods described above. MSCI recently announced that it is creating a full range of new U.S. stock indexes, that we believe may include many of the improved indexing methods we favor. Vanguard has entered into a nonexclusive licensing agreement with MSCI to secure the right to use these new indexes when available, currently expected in early 2003. Assuming MSCI succeeds in developing what we consider to be clearly superior U.S. stock indexes, fund management intends to recommend that the trustees adopt these indexes for the funds. 10 IF SHAREHOLDERS APPROVE THIS PROPOSAL, WILL THE FUNDS BE REQUIRED TO ADOPT THE NEW MSCI INDEXES? No. The funds will adopt the new MSCI indexes only if their trustees determine that to do so would be in the best interests of shareholders. Another possibility--although there is no current plan to do so--would be for Vanguard to develop and maintain its own target indexes for some or all of the funds. Shareholder approval of this proposal would allow the funds' trustees to adopt indexes maintained by MSCI, other outside providers, or Vanguard as they may be developed in the future. Of course, the trustees may also decide to continue with a fund's existing index. In sum, we believe that this proposal holds significant benefits for shareholders. The new policy would allow the funds' trustees to seek out and adopt indexes that they believe will do a better job of tracking the market segment targeted by each fund's investment objective. In addition, this policy would allow the trustees to take prompt corrective action if a fund's existing index were to begin experiencing difficulties in tracking its targeted market segment. In short, the proposal would allow the trustees to change a fund's index in a prompt, efficient, and confidential manner when they believe this to be in the best interests of shareholders. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. ================================================================================ Proposal 4--RECLASSIFY CERTAIN INDEX FUNDS AS NONDIVERSIFIED >This proposal applies to 500 Index Fund, Balanced Index Fund, Emerging Markets Stock Index Fund, European Stock Index Fund, Extended Market Index Fund, Institutional Index Fund, Institutional Total Stock Market Index Fund, Mid-Cap Index Fund, Pacific Stock Index Fund, REIT Index Fund, Small-Cap Index Fund, Small-Cap Growth Index Fund, Small-Cap Value Index Fund, the Tax-Managed Funds, Total Stock Market Index Fund, Value Index Fund, and the Equity Index, Mid-Cap Index, and REIT Index Portfolios of the Variable Insurance Fund. ================================================================================ We propose to reclassify each of the above Vanguard stock index funds and stock index-oriented funds as "nondiversified" under the federal statute that regulates mutual funds. The purpose of this change is to eliminate a potential conflict between each fund's indexing objective and the statute's requirements for "diversified" funds. Specifically, the change to nondiversified status will ensure that a fund can continue to track its target index even if that index becomes dominated by a small number of stocks. Shareholders of the Growth Index Fund approved a change to nondiversified status in 2001 after facing this situation during 1999-2000. WHAT'S THE DIFFERENCE BETWEEN DIVERSIFIED FUNDS AND NONDIVERSIFIED FUNDS? By law, mutual funds must classify themselves as either diversified or nondiversified. The difference is that diversified funds are subject to stricter percentage limits on the amount of assets that can be invested in any one company. Specifically, diversified funds are required to satisfy the following requirements with respect to at least 75% of their total assets: A fund may not purchase securities of any issuer if, as a result, (i) more than 5% of the fund's total assets would be invested in securities of a single issuer, or (ii) more than 10% of the outstanding voting securities of the issuer would be held by the fund. For nondiversified funds, these requirements effectively apply to only 50% of the fund's total assets. Both diversified and nondiversified funds are prohibited from investing more than 25% of their total assets in the securities of a single issuer. 11 WHAT'S THE POTENTIAL CONFLICT FACED BY INDEX FUNDS CLASSIFIED AS DIVERSIFIED? Classifying an index or index-oriented fund as diversified has the potential to prevent the fund from meeting its indexing objective. This is because it's possible in certain markets for the largest positions in an index to appreciate significantly relative to the index's other positions, causing the index to become dominated by a handful of companies. A diversified index fund tied to such an index would be forced to make a difficult choice: continue to track the index, in which case the fund would violate its diversification policy; or comply with its diversification policy, in which case the fund would fail to track the index. We believe that an index fund should always track its target index as closely as possible, regardless of market conditions. WILL AN INDEX FUND MAKE ANY INVESTMENT CHANGES IF RECLASSIFIED AS NONDIVERSIFIED? No. It will be "business as usual" for any index fund or index-oriented fund reclassified as nondiversified. Unless and until changes in the composition of the fund's target index require otherwise, each fund will continue to meet the standards that apply to diversified funds. A fund will exceed the investment limits that apply to diversified funds only as necessary to track its target index. In such a case, the fund would be considered riskier than a diversified fund investing in the same types of securities. This is because the performance of a nondiversified fund can be hurt (or helped) to a greater degree by the performance of just a few securities. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. ================================================================================ PROPOSAL 5-- CHANGE TWO MONEY MARKET FUNDS' INDUSTRY CONCENTRATION POLICY >This proposal applies to Prime Money Market Fund and the Money Market Portfolio of the Variable Insurance Fund. ================================================================================ We propose to change the industry concentration policy of the two funds named above so that each will invest more than 25% of its assets in the financial services sector. The purpose of this change is to allow the funds to take full advantage of available money market opportunities. WHY CHANGE THE CURRENT POLICY? The current policy prohibits each fund from investing more than 25% of its assets in any one industry (with an exception for U.S. government-issued or -guaranteed securities and certain bank instruments). However, financial services companies are playing an increasingly important role in the world of money market securities. Over the past few years, asset-backed securities and other innovative financing vehicles offered by financial services companies have come to attract money market assets that traditionally were directed to certificates of deposit and banker's acceptances. Accordingly, financial services companies have become a key issuer of money market securities. We believe that our funds can take better advantage of money market opportunities by investing more than 25% of their assets in financial services companies. WHAT IS THE PROPOSED POLICY? The proposed policy reads as follows: The fund may not purchase securities of any issuer if, as a result, more than 25% of the fund's total assets would be invested in the securities of companies whose principal business activities are 12 in the same industry, except that: (i) the fund will invest more than 25% of its total assets in the financial services industry; and (ii) the fund may invest more than 25% of its total assets in securities issued or guaranteed by the U.S. government or its agencies and instrumentalities and in certificates of deposit or bankers' acceptances of domestic institutions. Consistent with SEC requirements, the new industry concentration policy would be "fundamental," meaning that it could be changed further in a material way only by a shareholder vote. WILL THE FUNDS STILL SEEK TO MAINTAIN A STABLE $1 SHARE PRICE? Yes. If shareholders approve this proposal, the funds will continue to invest in compliance with strict industry requirements for money market funds. These risk-limiting requirements are intended to ensure (but cannot guarantee) that money market funds will maintain a stable price of $1 per share. By concentrating their assets in financial services companies, the funds will assume the risk that negative developments in that sector may adversely affect them. However, we believe that this risk is negligible, given the diversity and breadth of the financial services sector and the protections afforded by money market fund regulations. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. ================================================================================ PROPOSAL 6-- CHANGE CERTAIN BOND AND BALANCED FUNDS' POLICY ON BORROWING MONEY >This proposal applies to Asset Allocation Fund, Balanced Index Fund, all Bond Index Funds, GNMA Fund, High-Yield Corporate Fund, High-Yield Tax-Exempt Fund, Inflation-Protected Securities Fund, Institutional Total Bond Market Index Fund, Insured Long-Term Tax-Exempt Fund, Intermediate-Term Corporate Fund, Intermediate-Term Tax-Exempt Fund, Intermediate-Term Treasury Fund, Limited-Term Tax-Exempt Fund, Long-Term Corporate Fund, Long-Term Tax-Exempt Fund, Long-Term Treasury Fund, Short-Term Corporate Fund, Short-Term Federal Fund, Short-Term Tax-Exempt Fund, Short-Term Treasury Fund, all State Tax-Exempt Funds, Tax-Exempt Money Market Fund, Tax-Managed Balanced Fund, the Balanced, High-Yield Bond, Short-Term Corporate, and Total Bond Market Index Portfolios of the Variable Insurance Fund, Wellesley Income Fund, and Wellington Fund. ================================================================================ We propose to change the borrowing policy of the funds listed above to make it clear that the funds may take advantage of certain investment opportunities that do not involve leverage or a change to the fund's objective or risk profile. WHAT'S THIS PROPOSAL ABOUT? The current policy is intended to permit certain borrowings, up to 15% of net assets, and is designed to prevent the funds from running leveraged investment programs. There is no plan to change the intent of the existing policy, which we believe is quite sound. The current wording of the policy, however, needs to be modified so that it is clear that the funds may take advantage of certain investment opportunities that do not involve leverage or a change to the fund's objectives or risk profile. 13 WHAT'S UNCLEAR ABOUT THE CURRENT POLICY? Under the current policy, funds may only borrow for "temporary or emergency purposes", and funds may not make additional investments until they repay outstanding borrowings. In addition, funds can borrow only through banks, reverse repurchase agreements, or the Vanguard funds' interfund lending program. Reading this strictly, as we do, the current policy effectively prevents the funds from investing in certain types of instruments that may benefit the fund. For example, these instruments include "mortgage dollar rolls," which provide an efficient (and at times less expensive) way for funds to invest in the same types of mortgage-backed securities that they routinely own today. Mortgage dollar rolls are consistent with the funds' investment objectives and strategies and would not be used to leverage a fund's assets or change its risk profile. However, because mortgage dollar rolls could be considered borrowings, the current policy restricts the funds' ability to take advantage of the benefits they provide. WHAT IS THE NEW POLICY? The new policy reads as follows: A fund many not borrow money in excess of 15% of its net assets, and any borrowings by a fund must comply with all applicable regulatory requirements. Consistent with SEC requirements, the new borrowing policy would continue to be "fundamental," meaning that it could be changed further only by a shareholder vote. WILL THIS CHANGE MAKE THE FUND MORE RISKY? It shouldn't. A fund would engage in investment activities consistent with its existing risk profile, investment objective and investment strategies, though it would be able to use certain additional investment opportunities not currently available. A fund's total borrowings would be limited to 15% of its net assets (which is less than one-half the SEC limit of 33 1/3% of a fund's total assets), and separate accounts would be used to "cover" or informally collateralize any borrowings as required by securities laws. EACH FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. ================================================================================ PROPOSAL 7--CHANGE THE UTILITIES INCOME FUND'S INVESTMENT OBJECTIVE AND CONCENTRATION IN UTILITIES STOCKS >This proposal applies to Utilities Income Fund. ================================================================================ We propose to broaden the Utilities Income Fund's focus beyond utility stocks so as to provide the fund with the ability to invest in companies with the capacity to pay above average dividend income. This change also will increase the fund's industry diversification and, in doing so, should lower the fund's risk. If shareholders approve this proposal, the fund will be renamed Vanguard Dividend Growth Fund and will begin investing in stocks of companies from different industries. WHY CHANGE THE FOCUS ON UTILITY STOCKS? Currently, the fund invests at least 80% of its assets in common stocks of utility companies. In the past, this was considered a conservative investment policy because utility companies were closely regulated--they tended to have relatively consistent and modestly increasing earnings and the capacity to pay stable or increasing dividends. However, times have changed. The deregulation of the various utility sectors, including electricity producers and distributors, 14 natural gas transmission companies, and telephone companies, has led to far less stability in earnings and an overall decline in dividend payments. Broadening the fund's focus beyond utility companies will allow its adviser to invest across a diversified spectrum of companies whose stocks will typically offer reasonable dividend income and prospects for attractive earnings and dividend growth. HOW ELSE WOULD THE FUND CHANGE? The fund's current investment objective is to provide a high level of current income and, secondarily, to provide moderate long-term growth of capital and income. We propose to replace this with the objective to provide above-average income and, secondarily, to provide long-term growth of capital and income. In addition, the fund would adopt a policy to concentrate no more than 25% of its assets in any single industry. HOW WILL THESE CHANGES AFFECT SHAREHOLDERS? The changes will affect shareholders primarily in two ways. First, broadening the fund's focus beyond utility companies should decrease the fund's overall risk for shareholders. Currently, the fund is subject to "industry concentration risk," which is the chance that problems affecting the utility industry will cause the fund to decrease in value. If the fund is able to invest broadly in other industries, it will no longer be subject to industry concentration risk. Second, while decreasing its utility stock holdings, the fund could realize capital gains, which would be paid out as taxable distributions. If this proposal is approved, the fund's adviser expects to transition in an orderly manner approximately 95% of the current portfolio. However, even with such significant portfolio turnover, it is expected that tax losses carried forward by the fund would be sufficient to offset any gains in the transition. THE FUND'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL. PART III INFORMATION ON FUND GOVERNANCE This section provides information about each fund's board of trustees and independent accountants, including specifics of how they are compensated. The mailing address of the Vanguard funds' trustees and officers is P.O. Box 876, Valley Forge, PA 19482. BOARD RESPONSIBILITIES The primary responsibility of the board of trustees of each fund is to oversee the management of the fund for the benefit of shareholders. Each board has a supermajority of independent trustees who are not "interested persons" of the funds. As Vanguard's chairman and chief executive officer, Mr. Brennan is the lone management representative on the funds' boards. The independent trustees bring a broad range of relevant backgrounds, experiences, and skills to the boards, particularly in those domains critical to the funds and their shareholders. During 2001, the board of trustees of each fund held nine meetings (six one-day meetings and three two-day meetings). In the exercise of their oversight responsibilities, the funds' trustees focus on matters they determine to be vitally important to fund shareholders. This includes not only the management and performance of the funds, but also the operating plans and budgets, strategic plans, and composition, performance, and compensation of Vanguard management. 15 The business acumen, experience, and objective thinking of the funds' independent trustees are considered invaluable assets for Vanguard management and, ultimately, the funds' shareholders. Having management accountable to a group of independent, highly experienced, and exceptionally qualified individuals who act solely on behalf of shareholders makes management more effective in the long run. BOARD AND COMMITTEE MEETINGS The board of trustees of each fund has three standing committees composed exclusively of independent trustees. o NOMINATING COMMITTEE. This committee is responsible for the nomination of candidates for election to the board and has the authority to recommend the removal of any trustee from the board. The committee held two meetings in 2001. Shareholders may send recommendations for nominees as trustee to Mr. Wilson, chairman of the committee. o AUDIT COMMITTEE. This committee is responsible for overseeing the accounting and financial reporting policies, the systems of internal controls, and the independent audits of the funds. The committee held two meetings in 2001. o COMPENSATION COMMITTEE. This committee is responsible for overseeing the compensation programs established for Vanguard employees, officers, and trustees (including salary guidelines, merit increases, bonuses, and other compensation arrangements). The committee held two meetings in 2001. BOARD COMPOSITION There are important benefits in having the board of each fund include trustees who serve on the boards of the other Vanguard funds. Service on multiple fund boards gives the trustees greater familiarity with the funds' operations that are complex-wide in nature. Such service also permits the trustees to address common issues on a knowledgeable and consistent basis. It also avoids the substantial additional costs, administrative complexities, and redundancies that would result from having a different slate of trustees for every Vanguard fund. For these reasons, the same individuals serve as trustees of all funds, except as otherwise noted in the table on page ____ of this proxy statement. While there are many areas of common interest among the funds, the trustees recognize that they are responsible for exercising their responsibilities at all times on a fund-by-fund basis. TRUSTEE COMPENSATION Each fund (other than the Institutional Index Funds and Vanguard's funds of funds) pays its proportionate share of the independent trustees' compensation.(1) The funds' sole non-independent trustee--Mr. Brennan-- and the funds' officers--receive no compensation from the funds. (2) The funds compensate their independent trustees in three ways: -------------------------------- (1) The trustees of Vanguard Institutional Index Funds receive no compensation directly from those funds, but The Vanguard Group, Inc., is responsible for paying the trustees for their service. The trustees of Vanguard's funds-of-funds receive no compensation from those funds. (2) All fund officers are compensated by The Vanguard Group, Inc. 16 o The independent trustees receive an annual fee for their service to the funds, reduced for any absences from scheduled board meetings. o The independent trustees are reimbursed for the travel and other expenses that they incur in attending board meetings. o The independent trustees who began service prior to January 1, 2001, are eligible for retirement benefits they had accrued (plus interest) under a retirement plan. Those independent trustees who began their service on or after January 1, 2001, are not eligible to participate in the plan. FUND OFFICERS All 109 Vanguard funds employ their officers on a shared basis. Officers are considered "interested persons" of the funds. In addition to Mr. Brennan, they are as follows: R. Gregory Barton Managing Director and General Counsel of The Vanguard Born 1951 Group, Inc. (since September 1997); Secretary of The Fund Officer since Vanguard Group, Inc., and of each of the investment June 2001 companies served by The Vanguard Group (since June 2001); Principal of The Vanguard Group (since March 1982). Thomas J. Higgins Principal of The Vanguard Group, Inc. (since July Born 1957 1989); Treasurer of each of the investment Fund Officer since companies served by The Vanguard Group (since July 1998 July 1998). TRUSTEE COMPENSATION TABLE The following table provides compensation details for each of the trustees. We list the amounts paid as compensation and accrued as retirement benefits by each Vanguard fund for each trustee during the fund's most recent fiscal year. In addition, the table shows the total accrued retirement benefits for each trustee as of January 1, 2002, and the total amount of compensation paid to each trustee by all funds during 2001.

Notes: (1) Mr. Ellis joined each fund's board, effective January 1, 2001. (2) Mr. Gupta joined the boards of 87 funds, effective December 31, 2001. (3) These amounts reflect the total compensation paid to each trustee for his or her services to 109 funds (107 in the case of Mr. Malkiel) for the 2001 calendar year, and therefore may not equal the sum of the amounts shown in the table, which reflect compensation for each fund's recently completed fiscal year. SELECTION OF PRICEWATERHOUSECOOPERS AS INDEPENDENT ACCOUNTANTS The independent trustees of each Vanguard fund have selected PricewaterhouseCoopers LLP (PwC) as independent accountants to audit and certify the funds' financial statements. Representatives of PwC will be present at the shareholder meeting and will be given the opportunity to make a statement if they so choose. In addition to serving as independent accountants, PwC has provided limited nonaudit services (primarily tax and business advisory services) to both the Vanguard funds and The Vanguard Group. The independent trustees carefully considered these nonaudit services when evaluating PwC's independence for purposes of its selection as the funds' independent accountants. In a letter to 17 the funds' audit committee dated June 25, 2002, PwC confirmed its status as independent accountants with respect to the Vanguard funds within the meaning of the federal securities laws. PWC AUDIT REPORTS PwC's audit report for each Vanguard fund's most recent fiscal year did not contain any adverse opinions or disclaimers of opinion, nor did PwC qualify or modify such reports as to uncertainty, audit scope, or accounting principles. Further, there were no disagreements between any of the Vanguard funds and PwC in three key areas: (i) accounting principles and practices, (ii) financial statement disclosures, or (iii) audit scope and procedures--which, if not resolved to PwC's satisfaction, would have caused the accountants to reference the matter in their audit reports. FUND-RELATED AUDIT FEES PAID TO PWC The Vanguard funds are organized under 35 separate trusts, each of which paid PwC the approximate amount shown in the table below as audit fees for the trust's most recently ended fiscal year. Please refer to Part V for the name of the trust to which each Vanguard fund belongs. TRUST AUDIT FEES ----------------------------------------------------------------------- Vanguard Admiral Funds $ 9,000 Vanguard Balanced Index Fund 12,500 Vanguard Bond Index Funds 48,000 Vanguard California Tax-Free Funds 33,000 Vanguard Convertible Securities Fund 12,500 Vanguard Explorer Fund 12,500 Vanguard Fenway Funds 25,000 Vanguard Fixed Income Securities Funds 120,000 Vanguard Florida Tax-Free Funds 12,000 Vanguard Horizon Funds 40,000 Vanguard Index Funds 112,000 Vanguard Institutional Index Funds 25,000 Vanguard International Equity Index Funds 45,000 Vanguard Malvern Funds 25,000 Vanguard Massachusetts Tax-Exempt Funds 12,000 Vanguard Money Market Reserves 8,000 Vanguard Morgan Growth Fund 12,500 Vanguard Municipal Bond Funds 81,000 Vanguard New Jersey Tax-Free Funds 21,000 Vanguard New York Tax-Free Funds 21,000 Vanguard Ohio Tax-Free Funds 21,000 Vanguard Pennsylvania Tax-Free Funds 21,000 Vanguard PRIMECAP Fund 12,500 Vanguard Quantitative Funds 12,500 Vanguard Specialized Funds 62,500 Vanguard STAR Funds 81,000 Vanguard Tax-Managed Funds 62,500 Vanguard Treasury Fund 9,000 Vanguard Trustees' Equity Fund 15,000 Vanguard Variable Insurance Fund 320,000 18 Vanguard Wellesley Income Fund $ 12,500 Vanguard Wellington Fund 12,500 Vanguard Whitehall Funds 12,500 Vanguard Windsor Funds 25,000 Vanguard World Fund 40,000 ----------------------------------------------------------------------- TOTAL AUDIT FEES $1,417,000 ALL OTHER FEES PAID TO PWC For the year ended June 30, 2002, PwC was paid approximately $71,000 for all nonaudit services rendered to the Vanguard funds, including tax compliance services and SEC registration statement procedures. For that same year, PwC was paid approximately $532,400 for nonaudit services provided to The Vanguard Group and certain of its affiliates. This amount includes services in connection with Vanguard's benefit plans and statements, transfer agent system, tax reporting and documentation and educational training materials. No fees were paid to PwC by any Vanguard entity for design or implementation of financial information systems. PART IV MORE ON PROXY VOTING AND SHAREHOLDER MEETINGS This section provides information on a number of topics relating to proxy voting and shareholder meetings. VOTES NEEDED TO ELECT TRUSTEES. Shareholders of funds that are part of the same trust will elect their trustees on a joint basis. (A list of trusts and their component Vanguard funds is included in Part V of this proxy statement.) For each trust, the seven nominees (six in the case of Vanguard Fenway Funds) receiving the highest number of affirmative votes cast at the meeting will be elected. A nominee will not be elected, however, if more votes are cast against than for him or her. VOTES NEEDED TO APPROVE PROPOSALS 2-7. Shareholders of each fund will vote separately on each proposal applicable to that fund. For a proposal to pass for a fund, it must be approved by the lesser of (i) shares representing 67% or more of the fund's net assets voted, so long as shares representing more than 50% of the fund's net assets are present or represented by proxy; or (ii) shares representing more than 50% of the fund's net assets. PROXY SOLICITATION METHODS. The funds will solicit shareholder proxies in a variety of ways. All shareholders who are entitled to vote will receive these proxy materials either by mail or electronically (assuming that applicable requirements are met). In addition, Vanguard employees and officers may solicit shareholder proxies in person, by telephone, by mail, or over the Internet. PROXY SOLICITATION COSTS. Each fund will pay all costs of soliciting proxies from its shareholders, including costs relating to the printing, mailing, and tabulation of proxies. By voting immediately, you can help your fund avoid the considerable expense of a second proxy solicitation. 19 QUORUM. Each fund must achieve a quorum in order for the shareholder meeting to go forward. This means that a majority of a fund's shares must be represented at the meeting, either in person or by proxy. All returned proxies count toward a quorum, regardless of how they are voted ("For," "Against," or "Abstain"). The funds will count abstentions and broker non-votes toward establishing a quorum, but not toward the approval of any proposals. (A broker non-vote is a proxy received from a broker who holds fund shares on behalf of an investor, but who does not have discretionary power to vote the shares on the investor's behalf, indicating that the broker has not received instructions from the investor on the matter at issue.) REVOKING YOUR PROXY. Your latest vote is the one that counts. Therefore you can revoke a prior proxy simply by voting again--over the Internet, by using your proxy card, or by toll-free telephone call. You can also revoke a prior proxy by writing to the funds' secretary at the following address: R. Gregory Barton, V26, The Vanguard Group, P.O. Box 2600, Valley Forge, PA 19482-2600, or by voting in person at the meeting. You may revoke your proxy at any time up until voting results are announced at the shareholder meeting. SHAREHOLDER PROPOSALS. Any shareholder proposals to be included in the proxy statement for a fund's next meeting of shareholders must be received by the fund within a reasonable period of time prior to that meeting. None of the funds currently plans to hold a meeting of shareholders in 2003. VOTING RIGHTS. Shareholders are entitled to cast one vote for each dollar of fund net assets owned on the record date and a fractional vote for each fractional dollar of net assets owned on that date. NOMINEE ACCOUNTS. Upon request, the Vanguard funds will reimburse nominees for their reasonable expenses in forwarding proxy materials to beneficial owners of the funds' shares. Please submit invoices for our review to: Melissa Nassar, V26, The Vanguard Group, P.O. Box 2600, Valley Forge, PA 19482-2600. ANNUAL/SEMIANNUAL REPORTS. Each fund's most recent annual and semiannual reports to shareholders are available at no cost. To request a report, please call us toll-free at 1-800-992-0833, or write to us at P.O. Box 2600, Valley Forge, PA 19482-2600. The reports also are available at our website, www.vanguard.com. Participants in a company-sponsored 401(k) or other retirement plan administered by Vanguard should call us at 1-800-523-1188. OTHER MATTERS. At this point, we know of no other business to be brought before the shareholder meeting. However, if any other matters do come up, we will use our best judgment to vote on your behalf. If you object to our voting other matters on your behalf, please tell us so in writing before the meeting. THE VANGUARD GROUP, INC. Except as noted below, each of the Vanguard funds soliciting proxies is a member of The Vanguard Group, Inc. ("Vanguard"). Vanguard is owned jointly by the funds it oversees (and therefore indirectly by the shareholders of those funds). Vanguard provides the funds--more than 95 distinct investment portfolios--with their corporate management, administrative, and distribution services on an at-cost basis. 20 Funds organized under Vanguard Institutional Index Funds and Vanguard STAR Funds are not members of The Vanguard Group, although they are administered by and pay fees to The Vanguard Group for management, advisory, marketing, accounting, transfer agency, and other services. 21 PART V FUND AND INVESTMENT ADVISER INFORMATION This section provides information regarding the funds' and their investment advisers. INVESTMENT ADVISERS: Listed below are the names and addresses of all of the Vanguard funds' investment advisers.

23 VANGUARD FUND INFORMATION This section provides certain required information for each of the Vanguard(R) funds. The funds appear in alphabetical order and all information presented is as of June 30, 2002. The year in parentheses is the fund's year of inception. Among other things, we list the trustees' beneficial ownership of each fund's shares based on certain dollar ranges. All trustees allocate personal assets among the Vanguard funds according to their own investment needs. In the aggregate, each trustee owns over $100,000 in shares of all Vanguard funds. As a group, each fund's trustees and officers own less than 1% of the outstanding shares of that fund. As we explained earlier in this statement, Mr. Brennan is the only interested trustee of the Vanguard funds. All other trustees are independent of Vanguard and the Vanguard funds. VANGUARD(R)500 INDEX FUND (1976) ------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $76,997,630,057 and 843,099,074 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; GUPTA, over $100,000; MALKIEL, $50,001-$100,000; RANKIN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. A VANGUARD(R)ADMIRAL TREASURY MONEY MARKET FUND (1992) --------------------------------------------- o A series of Vanguard Admiral Funds(R). o Advised by The Vanguard Group, Inc. o Net assets of $9,595,397,961 and 9,594,949,105 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. FedEx Corporation Retirement Savings Plan, Memphis, Tenn., owns approximately 7.0%. VANGUARD(R)ASSET ALLOCATION FUND (1988) --------------------------------- o A series of Vanguard Malvern Funds. o Advised by Mellon Capital Management Corporation. o Net assets of $7,876,613,759 and 379,945,871 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. B VANGUARD(R)BALANCED INDEX FUND (1992) ------------------------------ o A series of Vanguard Balanced Index Fund. o Advised by The Vanguard Group, Inc. o Net assets of $4,319,343,628 and 260,633,436 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 24 C VANGUARD(R)CALIFORNIA INTERMEDIATE-TERM TAX-EXEMPT FUND (1994) ------------------------------------------------------- o A series of Vanguard California Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,378,125,210 and 212,154,109 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)CALIFORNIA LONG-TERM TAX-EXEMPT FUND (1986) ----------------------------------------------- o A series of Vanguard California Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,077,045,558 and 177,466,040 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)CALIFORNIA TAX-EXEMPT MONEY MARKET FUND (1987) -------------------------------------------------- o A series of Vanguard California Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,209,174,915 and 3,209,065,639 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)CALVERT SOCIAL INDEX FUND (2000) ------------------------------------ o A series of Vanguard World Fund. o Advised by The Vanguard Group, Inc. o Net assets of $94,755,463 and 14,655,069 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: 1. Preferred Professional Insurance Co., Omaha Neb., owns approximately 6.2%. VANGUARD(R)CAPITAL OPPORTUNITY FUND (1995) ----------------------------------- o A series of Vanguard Horizon Funds(R). o Advised by PRIMECAP Management Company. o Net assets of $4,182,264,634 and 213,719,228 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; HEISEN, over $100,000; MALKIEL, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)CAPITAL VALUE FUND (2001) ----------------------------- o A series of Vanguard Malvern Funds. o Advised by Wellington Management Company, LLP. o Net assets of $232,214,597 and 28,634,748 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $10,001-$50,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 25 VANGUARD(R)CONVERTIBLE SECURITIES FUND (1986) -------------------------------------- o A series of Vanguard Convertible Securities Fund. o Advised by Oaktree Capital Management, LLC. o Net assets of $280,807,365 and 25,884,603 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. D VANGUARD(R)DEVELOPED MARKETS INDEX FUND (2000) --------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $300,385,602 and 43,763,499 outstanding shares. o Trustees who own shares of this fund: GUPTA, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. Chevrontexaco Employee Savings Investment Plan, San Ramon, Calif., owns approximately 7.9%. 2. Rohm and Haas Company Employee Stock Ownership and Savings Plan, Philadelphia, Pa., owns approximately 7.5%. E VANGUARD(R)EMERGING MARKETS STOCK INDEX FUND (1994) -------------------------------------------- o A series of Vanguard International Equity Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,024,618,822 and 120,992,609 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. Vanguard Total International Stock Index Fund Custodian Account--Emerging Markets Portfolio, Valley Forge, Pa., owns approximately 26.5%. VANGUARD(R)ENERGY FUND (1984) ---------------------- o A series of Vanguard Specialized Funds. o Advised by Wellington Management Company, LLP. o Net assets of $1,543,405,943 and 555,666,510 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 26 VANGUARD(R)EQUITY INCOME FUND (1988) ----------------------------- o A series of Vanguard Fenway Funds. o Advised by Newell Associates; John A. Levin & Co., Inc.; Wellington Management Company, LLP; and The Vanguard Group, Inc. o Net assets of $2,476,993,802 and 109,217,255 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $1-$10,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)EUROPEAN STOCK INDEX FUND (1990) ------------------------------------ o A series of Vanguard International Equity Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $5,210,185,871 and 256,268,445 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; ELLIS, over $100,000; MALKIEL, over $100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. Vanguard Total International Stock Index Fund Custodian Account--European Portfolio, Valley Forge, Pa., owns approximately 40.6%. VANGUARD(R)EXPLORER(TM)FUND (1967) --------------------------- o A series of Vanguard Explorer Fund. o Advised by Chartwell Investment Partners; Granahan Investment Management, Inc.; Grantham, Mayo, Van Otterloo & Co. LLC; The Vanguard Group, Inc.; and Wellington Management Company, LLP. o Net assets of $4,383,912,021 and 83,910,119 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; GUPTA, $50,001-$100,000; RANKIN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)EXTENDED MARKET INDEX FUND (1987) ------------------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $4,422,373,876 and 208,411,863 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $10,001-$50,000; GUPTA, $50,001-$100,000; RANKIN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. F VANGUARD(R)FEDERAL MONEY MARKET FUND (1981) ------------------------------------ o A series of Vanguard Money Market Reserves. o Advised by The Vanguard Group, Inc. o Net assets of $6,777,514,148 and 6,777,591,756 outstanding shares. o Trustees who own shares of this fund: WILSON, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 27 VANGUARD(R)FLORIDA LONG-TERM TAX-EXEMPT FUND (1992) -------------------------------------------- o A series of Vanguard Florida Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,162,734,996 and 99,743,641 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. G VANGUARD(R)GLOBAL EQUITY FUND (1995) ----------------------------- o A series of Vanguard Horizon Funds. o Advised by Marathon Asset Management Limited. o Net assets of $244,932,738 and 19,875,537 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)GNMA FUND (1980) -------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by Wellington Management Company, LLP. o Net assets of $23,286,379,610 and 2,207,514,893 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)GROWTH AND INCOME FUND (1986) --------------------------------- o A series of Vanguard Quantitative Funds. o Advised by Franklin Portfolio Associates, LLC. o Net assets of $6,118,489,569 and 237,296,776 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)GROWTH EQUITY FUND (1992) ----------------------------- o A series of Vanguard Fenway Funds. o Advised by Turner Investment Partners, Inc. o Net assets of $615,203,284 and 81,158,283 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)GROWTH INDEX FUND (1992) ---------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $8,326,711,333 and 381,425,503 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. 28 H VANGUARD(R)HEALTH CARE FUND (1984) --------------------------- o A series of Vanguard Specialized Funds. o Advised by Wellington Management Company, LLP. o Net assets of $16,889,201,174 and 177,291,420 outstanding shares. o Trustees who own shares of this fund: HEISEN, $10,001-$50,000; RANKIN, $50,001-$100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)HIGH-YIELD CORPORATE FUND (1978) ------------------------------------ o A series of Vanguard Fixed Income Securities Funds. o Advised by Wellington Management Company, LLP. o Net assets of $6,772,418,257 and 1,129,340,137 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; MALKIEL, over $100,000; WILSON, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)HIGH-YIELD TAX-EXEMPT FUND (1978) ------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,933,052,427 and 369,313,999 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. I VANGUARD(R)INFLATION-PROTECTED SECURITIES FUND (2000) ---------------------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,690,196,787 and 151,075,998 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. 29 VANGUARD(R)INSTITUTIONAL DEVELOPED MARKETS INDEX FUND (2000) ----------------------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $279,265,321 and 40,989,194 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Amica Mutual Insurance Company, Lincoln, R.I., owns approximately 13.4%. 2. Harvard International Investment Partnership, Boston, Mass., owns approximately 13.0%. 3. Bost & Co., Pittsburgh, Pa., owns approximately 9.6%. 4. Marshall & Ilsley Trust Co., FBO Cuna Unitized Plans, Milwaukee, Wis., owns approximately 8.3%. 5. Vanguard Fiduciary Trust Company, Aggressive Growth Portfolio, Valley Forge, Pa., owns approximately 8.1%. 6. Conref & Co., Trustee, FBO Laclede Gas Pension, Milwaukee, Wis., owns approximately 6.6%. VANGUARD(R)INSTITUTIONAL INDEX FUND (1990) ----------------------------------- o A series of Vanguard Institutional Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $32,727,340,471 and 361,707,275 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Allfirst Trust Company, Custodian, The City of New York, Deferred Compensation Plan, C/O Fascorp, Englewood, Co., owns approximately 5.3%. VANGUARD(R)INSTITUTIONAL TOTAL BOND MARKET INDEX FUND (2002) ----------------------------------------------------- o A series of Vanguard Institutional Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $429,403,056 and 8,557,870 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. SCIC Holdings LLC, C/O AON Insurance Managers, Burlington Vt., owns approximately 43.1%. 2. State of Utah, Land Permanent Trust Fund, Salt Lake City, Utah, owns approximately 28.5%. 3. MAC & Co., Pittsburgh Pa., owns approximately 23.4%. 30 VANGUARD(R)INSTITUTIONAL TOTAL STOCK MARKET INDEX FUND (2001) ------------------------------------------------------ o A series of Vanguard Institutional Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,271,532,955 and 62,789,692 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Trustees of the University of Pennsylvania (Endowment), Philadelphia, Pa., owns approximately 28.7%. 2. Citibank NA, RJ Reynolds Capital Investment Plan, New York, N.Y., owns approximately 23.2%. 3. The Glenmede Trust Co., Trustee, The Pew Memorial Trust, Philadelphia, Pa., owns approximately 21.7%. 4. Trustees of the University of Pennsylvania (Defined Benefit), Philadelphia, Pa., owns approximately 7.4%. VANGUARD(R)INSURED LONG-TERM TAX-EXEMPT FUND (1984) -------------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,812,021,323 and 222,156,096 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)INTERMEDIATE-TERM BOND INDEX FUND (1994) -------------------------------------------- o A series of Vanguard Bond Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,673,519,687 and 261,372,134 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)INTERMEDIATE-TERM CORPORATE FUND (1993) ------------------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,213,697,366 and 331,288,806 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)INTERMEDIATE-TERM TAX-EXEMPT FUND (1977) -------------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $11,254,717,662 and 830,297,655 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 31 VANGUARD(R)INTERMEDIATE-TERM TREASURY FUND (1991) ------------------------------------------ o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,883,340,864 and 345,241,991 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)INTERNATIONAL EXPLORER(TM)FUND (1996)3 ----------------------------------------- o A series of Vanguard Whitehall Funds. o Advised by Schroder Investment Management North America Inc. VANGUARD(R)INTERNATIONAL GROWTH FUND (1981) ------------------------------------ o A series of Vanguard World Fund. o Advised by Schroder Investment Management North America Inc. o Net assets of $6,556,727,215 and 408,029,139 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $50,001-$100,000; RANKIN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)INTERNATIONAL VALUE FUND (1983) ----------------------------------- o A series of Vanguard Trustees' Equity Fund. o Advised by Hansberger Global Investors, Inc. o Net assets of $1,062,473,440 and 46,797,069 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. FedEx Corporation Retirement Savings Plan, Memphis, Tenn., owns approximately 7.6%. L VANGUARD(R) LIFESTRATEGY(R) CONSERVATIVE GROWTH FUND (1994) ---------------------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $2,203,163,094 and 164,939,169 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Mars Deferred Compensation Plan, Mount Olive, N.J., owns approximately 6.4%. 2. IBEW Local 613 Defined Contribution Pension Plan, Atlanta, Ga., owns approximately 5.3%. ------------------------ (3) Vanguard International Explorer Fund did not become a Vanguard fund until after June 30, 2002. Therefore, financial information for the fund is not available as of June 30, 2002. 32 VANGUARD(R) LIFESTRATEGY(R) GROWTH FUND (1994) --------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $3,542,159,633 and 222,710,105 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R) LIFESTRATEGY(R) INCOME FUND (1994) --------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $956,286,134 and 76,739,365 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Mars Deferred Compensation Plan, Mount Olive, N.J., owns approximately 5.4%. VANGUARD(R) LIFESTRATEGY(R) MODERATE GROWTH FUND (1994) ------------------------------------------------ o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $4,172,622,068 and 280,931,147 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Georgia-Pacific Corporation Salaried 401(k) Plan, Atlanta, Ga., owns approximately 6.9%. VANGUARD(R)LIMITED-TERM TAX-EXEMPT FUND (1987) --------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $4,602,794,015 and 418,748,370 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)LONG-TERM BOND INDEX FUND (1994) ------------------------------------ o A series of Vanguard Bond Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $627,086,722 and 58,178,492 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)LONG-TERM CORPORATE FUND (1973) ----------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by Wellington Management Company, LLP. o Net assets of $4,078,113,331 and 468,259,394 outstanding shares. o Trustees who own shares of this fund: MALKIEL, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 33 VANGUARD(R)LONG-TERM TAX-EXEMPT FUND (1977) ------------------------------------ o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,028,411,504 and 180,248,047 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)LONG-TERM TREASURY FUND (1986) ---------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,842,256,576 and 168,739,974 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Variable Annuity Life Insurance Company, Houston, Texas, owns approximately 13.1%. M VANGUARD(R)MASSACHUSETTS TAX-EXEMPT FUND (1998) ---------------------------------------- o A series of Vanguard Massachusetts Tax-Exempt Funds. o Advised by The Vanguard Group, Inc. o Net assets of $343,014,353 and 34,191,210 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)MID-CAP GROWTH FUND (1997)4 ------------------------------ o A series of Vanguard Whitehall Funds. o Advised by Provident Investment Counsel, Inc. VANGUARD(R)MID-CAP INDEX FUND (1998) ----------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,604,384,362 and 288,408,749 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)MORGAN(TM)GROWTH FUND (1968) -------------------------------- o A series of Vanguard Morgan Growth Fund. o Advised by Franklin Portfolio Associates, LLC; The Vanguard Group, Inc.; and Wellington Management Company, LLP. o Net assets of $3,115,244,592 and 237,332,253 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; RANKIN, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: NONE. ----------------------------- (4) Vanguard Mid-Cap Growth Fund did not become a Vanguard fund until after June 30, 2002. Therefore, financial information for the fund is not available as of June 30, 2002. 34 N VANGUARD(R) NEW JERSEY LONG-TERM TAX-EXEMPT FUND (1988) ------------------------------------------------ o A series of Vanguard New Jersey Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,522,761,229 and 126,533,806 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)NEW JERSEY TAX-EXEMPT MONEY MARKET FUND (1988) -------------------------------------------------- o A series of Vanguard New Jersey Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,660,355,372 and 1,660,325,241 outstanding shares. o Trustees who own shares of this fund: MALKIEL, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R) NEW YORK LONG-TERM TAX-EXEMPT FUND (1986) ---------------------------------------------- o A series of Vanguard New York Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,083,811,536 and 185,238,703 outstanding shares. o Trustees who own shares of this fund: MALKIEL, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)NEW YORK TAX-EXEMPT MONEY MARKET FUND (1997) ------------------------------------------------ o A series of Vanguard New York Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,488,170,440 and 1,488,186,020 outstanding shares. o Trustees who own shares of this fund: MALKIEL, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: NONE. O VANGUARD(R)OHIO LONG-TERM TAX-EXEMPT FUND (1990) ----------------------------------------- o A series of Vanguard Ohio Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $518,992,304 and 42,938,256 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)OHIO TAX-EXEMPT MONEY MARKET FUND (1990) -------------------------------------------- o A series of Vanguard Ohio Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $645,445,328 and 645,461,825 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Jaton Trust, Hudson, Ohio, owns approximately 9.3%. 35 P VANGUARD(R)PACIFIC STOCK INDEX FUND (1990) ----------------------------------- o A series of Vanguard International Equity Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $1,831,183,459 and 247,670,771 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; ELLIS, over $100,000; MALKIEL, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this fund: 1. Vanguard Total International Stock Index Fund Custodian Account--Pacific Portfolio, Valley Forge, Pa., owns approximately 45.7%. VANGUARD(R)PENNSYLVANIA LONG-TERM TAX-EXEMPT FUND (1986) ------------------------------------------------- o A series of Vanguard Pennsylvania Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,362,298,358 and 206,630,898 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND (1988) ---------------------------------------------------- o A series of Vanguard Pennsylvania Tax-Free Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,348,681,765 and 2,348,924,538 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $1-$10,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)PRECIOUS METALS FUND (1984) ------------------------------- o A series of Vanguard Specialized Funds. o Advised by M&G Investment Management Limited. o Net assets of $604,802,441 and 54,263,997 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R) PRIMECAP FUND (1984) ------------------------- o A series of Vanguard PRIMECAP Fund. o Advised by PRIMECAP Management Company. o Net assets of $16,239,551,388 and 375,179,146 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; RANKIN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. FedEx Corporation Retirement Savings Plan, Memphis, Tenn., owns approximately 7.2%. 36 VANGUARD(R)PRIME MONEY MARKET FUND (1975) ---------------------------------- o A series of Vanguard Money Market Reserves. o Advised by The Vanguard Group, Inc. o Net assets of $54,583,318,804 and 54,583,215,817 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $1-$10,000; HEISEN, $1-$10,000; WILSON, $1-$10,000. o Shareholders who beneficially own more than 5% of this fund: NONE. R VANGUARD(R)REIT INDEX FUND (1996) -------------------------- o A series of Vanguard Specialized Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,082,477,884 and 138,506,529 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. S VANGUARD(R)SELECTED VALUE FUND (1996) ------------------------------ o A series of Vanguard Whitehall Funds. o Advised by Barrow, Hanley, Mewhinney & Strauss, Inc. o Net assets of $1,396,256,753 and 102,600,127 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SHORT-TERM BOND INDEX FUND (1994) ------------------------------------- o A series of Vanguard Bond Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,559,124,209 and 253,017,313 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SHORT-TERM CORPORATE FUND (1982) ------------------------------------ o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $10,780,906,242 and 1,009,448,233 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 37 VANGUARD(R)SHORT-TERM FEDERAL FUND (1987) ---------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,696,662,355 and 254,436,916 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SHORT-TERM TAX-EXEMPT FUND (1977) ------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,289,942,355 and 209,155,332 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SHORT-TERM TREASURY FUND (1991) ----------------------------------- o A series of Vanguard Fixed Income Securities Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,047,320,040 and 286,459,874 outstanding shares. o Trustees who own shares of this fund: WILSON, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SMALL-CAP GROWTH INDEX FUND (1998) -------------------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $532,243,893 and 51,894,900 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. State Street Bank & Trust Co., Trustee, IBM Tax Deferred Savings Plan, Westwood, Mass., owns approximately 22.1%. VANGUARD(R)SMALL-CAP INDEX FUND (1960) ------------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $4,912,632,143 and 258,573,853 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)SMALL-CAP VALUE INDEX FUND (1998) ------------------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,191,637,838 and 206,295,073 outstanding shares. o Trustees who own shares of this fund: ELLIS, over $100,000. o Shareholders who beneficially own more than 5% of this fund: 1. State Street Bank & Trust Co., Trustee, IBM Tax Deferred Savings Plan, Westwood, Mass., owns approximately 19.8%. 38 VANGUARD(R) STAR(TM) FUND (1985) ------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $7,904,492,940 and 513,940,050 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)STRATEGIC EQUITY FUND (1995) -------------------------------- o A series of Vanguard Horizon Funds. o Advised by The Vanguard Group, Inc. o Net assets of $983,085,877 and 66,436,191 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. T VANGUARD(R)TAX-EXEMPT MONEY MARKET FUND (1980) --------------------------------------- o A series of Vanguard Municipal Bond Funds. o Advised by The Vanguard Group, Inc. o Net assets of $9,770,495,564 and 9,771,580,382 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TAX-MANAGED BALANCED FUND (1994) ------------------------------------- o A series of Vanguard Tax-Managed Funds(R). o Advised by The Vanguard Group, Inc. o Net assets of $422,631,186 and 26,167,405 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TAX-MANAGED CAPITAL APPRECIATION FUND (1994) ------------------------------------------------ o A series of Vanguard Tax-Managed Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,269,441,108 and 84,895,673 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TAX-MANAGED GROWTH AND INCOME FUND (1994) --------------------------------------------- o A series of Vanguard Tax-Managed Funds. o Advised by The Vanguard Group, Inc. o Net assets of $2,025,964,724 and 81,398,859 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 39 VANGUARD(R)TAX-MANAGED INTERNATIONAL FUND (1999) ----------------------------------------- o A series of Vanguard Tax-Managed Funds. o Advised by The Vanguard Group, Inc. o Net assets of $425,324,960 and 55,248,649 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: 1. Blue Cross and Blue Shield of Florida Inc., Jacksonville, Fla., owns approximately 10.3%. 2. Vanguard National Trust Company, Personal Trust Services, Valley Forge, Pa., owns approximately 7.4%. VANGUARD(R)TAX-MANAGED SMALL-CAP FUND (1999) ------------------------------------- o A series of Vanguard Tax-Managed Funds. o Advised by The Vanguard Group, Inc. o Net assets of $701,689,603 and 46,971,610 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TOTAL BOND MARKET INDEX FUND (1986) --------------------------------------- o A series of Vanguard Bond Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $24,122,638,267 and 2,381,216,290 outstanding shares. o Trustees who own shares of this fund: WILSON, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TOTAL INTERNATIONAL STOCK INDEX FUND (1996) ----------------------------------------------- o A series of Vanguard STAR Funds. o Advised by the fund's board of trustees. o Net assets of $3,225,060,939 and 351,353,764 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)TOTAL STOCK MARKET INDEX FUND (1992) ---------------------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $24,320,799,879 and 1,038,220,199 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; MALKIEL, over $100,000; RANKIN, over $100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 40 VANGUARD(R)TREASURY MONEY MARKET FUND (1983) ------------------------------------- o A series of Vanguard Treasury Fund. o Advised by The Vanguard Group, Inc. o Net assets of $4,722,799,221 and 4,722,173,907 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: 1. Georgia-Pacific Corporation Salaried 401(k) Plan, Atlanta, Ga., owns approximately 5.8%. U VANGUARD(R) U.S. GROWTH FUND (1959) --------------------------- o A series of Vanguard World Fund. o Advised by Alliance Capital Management L.P. o Net assets of $7,113,376,520 and 468,027,061 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R) U.S VALUE FUND (2000) -------------------------- o A series of Vanguard Malvern Funds. o Advised by Grantham, Mayo, Van Otterloo & Co. LLC. o Net assets of $551,594,274 and 50,374,035 outstanding shares. o Trustees who own shares of this fund: WILSON, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)UTILITIES INCOME FUND (1992) -------------------------------- o A series of Vanguard Specialized Funds. o Advised by Wellington Management Company, LLP. o Net assets of $655,650,183 and 59,911,015 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. V VANGUARD(R)VALUE INDEX FUND (1992) --------------------------- o A series of Vanguard Index Funds. o Advised by The Vanguard Group, Inc. o Net assets of $3,860,095,054 and 227,520,844 outstanding shares. o Trustees who own shares of this fund: NONE. o Shareholders who beneficially own more than 5% of this fund: NONE. 41 VANGUARD(R)VARIABLE INSURANCE FUND--BALANCED PORTFOLIO (1991) ------------------------------------------------------ o A series of Vanguard Variable Insurance Fund. o Advised by Wellington Management Company, LLP. o Net assets of $744,708,654 and 47,899,561 outstanding shares. o Trustees who own shares of this portfolio: BRENNAN, $10,001-$50,000. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--DIVERSIFIED VALUE PORTFOLIO (1999) --------------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Barrow, Hanley, Mewhinney & Strauss, Inc. o Net assets of $186,687,194 and 18,095,764 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--EQUITY INCOME PORTFOLIO (1993) ----------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Newell Associates. o Net assets of $339,098,758 and 18,444,264 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--EQUITY INDEX PORTFOLIO (1991) ---------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $1,091,166,238 and 45,178,952 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--GROWTH PORTFOLIO (1993) ---------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Alliance Capital Management L.P. o Net assets of $377,357,753 and 38,113,491 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--HIGH YIELD BOND PORTFOLIO (1996) ------------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Wellington Management Company, LLP. o Net assets of $194,573,480 and 24,235,367 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. 42 VANGUARD(R)VARIABLE INSURANCE FUND--INTERNATIONAL PORTFOLIO (1994) ----------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Schroder Investment Management North America Inc. o Net assets of $247,478,246 and 22,003,644 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--MID-CAP INDEX PORTFOLIO (1999) ------------------------------------------------------------ o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $307,611,985 and 25,603,955 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--MONEY MARKET PORTFOLIO (1991) ----------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $956,653,134 and 956,633,330 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--REIT INDEX PORTFOLIO (1999) -------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $183,127,046 and 13,058,443 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R)VARIABLE INSURANCE FUND--SHORT-TERM CORPORATE PORTFOLIO (1999) ------------------------------------------------------------------ o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $190,735,012 and 18,526,778 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. VANGUARD(R) VARIABLE INSURANCE FUND--SMALL COMPANY GROWTH PORTFOLIO (1996) ------------------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by Granahan Investment Management, Inc., and Grantham, Mayo, Van Otterloo & Co. LLC. o Net assets of $471,645,394 and 33,890,732 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. 43 VANGUARD(R)VARIABLE INSURANCE FUND - TOTAL BOND MARKET INDEX PORTFOLIO (1991) ---------------------------------------------------------------------- o A series of Vanguard Variable Insurance Fund. o Advised by The Vanguard Group, Inc. o Net assets of $581,439,762 and 52,141,998 outstanding shares. o Trustees who own shares of this portfolio: NONE. o Shareholders who beneficially own more than 5% of this portfolio: NONE. W VANGUARD(R)WELLESLEY(R)INCOME FUND (1970) ---------------------------------- o A series of Vanguard Wellesley Income Fund. o Advised by Wellington Management Company, LLP. o Net assets of $8,035,103,304 and 373,366,242 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)WELLINGTON(TM)FUND (1929) ------------------------------------ o A series of Vanguard Wellington Fund. o Advised by Wellington Management Company, LLP. o Net assets of $24,415,287,529 and 874,786,511 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; HEISEN, $1-$10,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R)WINDSOR(TM)FUND (1958) -------------------------- o A series of Vanguard Windsor Funds. o Advised by Sanford C. Bernstein & Co., LLC; The Vanguard Group, Inc.; and Wellington Management Company, LLP. o Net assets of $15,641,123,897 and 1,015,167,414 outstanding shares. o Trustees who own shares of this fund: BRENNAN, over $100,000; GUPTA, $50,001-$100,000; MALKIEL, over $100,000; RANKIN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. VANGUARD(R) WINDSOR(TM) II FUND (1985) ------------------------------- o A series of Vanguard Windsor Funds. o Advised by Barrow, Hanley, Mewhinney & Strauss, Inc.; Equinox Capital Management, LLC; Tukman Capital Management, Inc.; and The Vanguard Group, Inc. o Net assets of $23,944,474,222 and 945,845,815 outstanding shares. o Trustees who own shares of this fund: BRENNAN, $1-$10,000; RANKIN, $50,001-$100,000. o Shareholders who beneficially own more than 5% of this fund: NONE. 500 is a trademark of The McGraw-Hill Companies, Inc., and has been licensed for use by The Vanguard Group, Inc. Vanguard mutual funds are not sponsored, endorsed, sold, or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the funds. 44 Calvert Social Index is a trademark of Calvert Group, Ltd. and has been licensed for use by The Vanguard Group, Inc. Vanguard Calvert Social Index Fund is not sponsored, endorsed, sold, or promoted by Calvert Group, Ltd., and Calvert Group, Ltd. makes no representation regarding the advisability of investing in the fund. 45 [SHIP] [THE VANGUARD GROUP LOGO] INTRODUCING VANGUARD'S EZVOTE(SM) PROXY CARD Our new proxy card makes voting faster and easier than ever. And it reduces proxy costs-savings that we pass along to you in the form of lower fund expenses! ================================================================================ STEP ONE: CHOOSE YOUR EZVOTE BALLOT ================================================================================ Use the Consolidated Ballot Use the Individual Ballots at the bottom of this page to vote on the back of this page and just once for all your OR any additional pages to accounts registered to the same vote each account separately. address and Tax ID number. ================================================================================ STEP TWO: CHOOSE YOUR EZVOTE METHOD OF VOTING ================================================================================ Vote by Internet Vote by Phone * Go to www.vanguard.com * Call 1-888-221-0689 * Click on Vote My Proxy. OR * Enter the Master OR * Enter the Master Control Number shown below. Control Number shown below. Vote by Mail * Complete your proxy ballot. * Sign and date your card. * Mail in the envelope provided. ================================================================================ MASTER CONTROL NUMBER: XXX XXX XXX XXX XX ================================================================================ PLEASE NOTE: [ ] Before voting, read the proxy statement carefully for an explanation of each proposal. [ ] Your proxy will be voted FOR each proposal unless you specify otherwise. [ ] Your votes will count only for funds actually considering specific proposals. [ ] The Board of Trustees recommends a vote FOR all proposals and nominees. By signing this proxy ballot, I appoint John J. Brennan, J. Lawrence Wilson, and R. Gregory Barton as my Attorneys to vote all Vanguard fund shares that I am entitled to vote at the Special Meeting of Shareholders to be held at 9:30 a.m., E.T., on December 3, 2002, and at any adjournments thereof. Any one of my Attorneys may vote my shares as specified on this ballot, vote any other matters that arise at the meeting in accordance with his best judgment, and appoint substitute Attorneys to vote on my behalf. I revoke any previous proxies that I have executed, and acknowledge receipt of the Notice of Special Meeting of Shareholders and the proxy statement. Proxy Solicitation by the Board of Trustees. -------------------------------------------------------------------------------- CONSOLIDATED BALLOT Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. PROPOSALS: 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees: FOR AGAINST ABSTAIN 2. Change certain funds' policy on investing [ ] [ ] [ ] in other mutual funds. 3. Authorize the trustees of certain index funds [ ] [ ] [ ] to change target indexes. 4. Reclassify certain index funds as nondiversified. [ ] [ ] [ ] 5. Change two money market funds' industry [ ] [ ] [ ] concentration policy. 6. Change certain bond and balanced funds' [ ] [ ] [ ] policy on borrowing money. 7. Change the Utilities Income Fund's investment objective and concentration in utilities stocks. [ ] [ ] [ ] Date __________________ 2002 NOTE: All required shareholders should sign exactly as their names appear on this ballot. When signing in a fiduciary capacity (e.g., trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. ------------------------------------------------ Signature(s) (and Title(s), if applicable). -------------------------------------------------------------------------------- INDIVIDUAL BALLOTS TRUSTEES NOMINEES: . (01) John J. Brennan, (02) Charles D. Ellis, (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Fund. -------------------------------------------------------------------------------- Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. (X) XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. Authorize trustees to change the target index [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify as nondiversified [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify as nondiversified [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. Authorize trustees to change the target index [ ] [ ] [ ] 4. Reclassify as nondiversified [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. Change industry concentration policy [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change policy on borrowing money [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change policy on borrowing money [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify as nondiversified [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change policy on borrowing money [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] XXX XXXXXXXXXX XXX NAME PRINTS HERE NAME PRINTS HERE CONTROL NUMBER XXX XXX XXX XXX XX FUNE NAME PRINTS HERE 1. ELECT THE FOLLOWING NOMINEES AS TRUSTEES. FOR WITHHOLD FOR ALL (REFER TO NOMINEES AT TOPE OF PAGE) ALL ALL EXCEPT** **EXCEPT#____________________________ [ ] [ ] [ ] FOR AGAINST ABSTAIN 2. Change policy on investing in other mutual funds [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] NOTE: All required shareholders should sign exactly as their names appear on this ballot. When signing in a fiduciary capacity (e.g., trustee, etc.) please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. Date______________________2002 ___________________________________________ Signature(s) (and Title(s), if applicable) EASY, FAST ELECTRONIC OPTIONS [SHIP] [THE VANGUARD GROUP LOGO] Vote by Internet: Go to www.vanguard.com and click on Vote My Proxy. Enter the *** MASTER CONTROL NUMBER *** shown below. Vote by Phone: Call 1-888-221-0689. Enter the *** MASTER CONTROL NUMBER *** shown below. *** MASTER CONTROL NUMBER: 999 999 999 999 99 *** FUND NAME PRINTS HERE By signing this proxy ballot, I appoint John J. Brennan, J. Lawrence Wilson, and R. Gregory Barton as my Attorneys to vote all Vanguard fund shares that I am entitled to vote at the Special Meeting of Shareholders to be held at 9:30 a.m., E.T., on December 3, 2002, and at any adjournments thereof. Any one of my Attorneys may vote my shares as specified on this ballot, vote any other matters that arise at the meeting in accordance with his best judgment, and appoint substitute Attorneys to vote on my behalf. I revoke any previous proxies that I have executed, and acknowledge receipt of the Notice of Special Meeting of Shareholders and the proxy statement. Proxy Solicitation by the Board of Trustees. Date _____________________________ , 2002 NOTE: All required shareholders should sign exactly as their names appear on this ballot. When signing in a fiduciary capacity (e.g. trustee, etc.), please so state. Signers for corporate and partnership accounts should be authorized persons and indicate their title. -------------------------------------------- Signature(s) (and Titles(s), if applicable). CONTINUED ON REVERSE SIDE Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-1 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-2 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. Authorize the fund's trustees to change the target index. [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-3 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify the fund as nondiversified. [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-4 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify the fund as nondiversified. [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-5 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. Authorize the fund's trustees to change the target index. [ ] [ ] [ ] 4. Reclassify the fund as nondiversified. [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-6 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. Change the fund's industry concentration policy. [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-7 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. NOT APPLICABLE [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change the fund's policy on borrowing money. [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-8 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change the fund's policy on borrowing money. [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-9 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. Reclassify the fund as nondiversified. [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. Change the fund's policy on borrowing money. [ ] [ ] [ ] 7. NOT APPLICABLE [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-10 Please fill in box(es) as shown using black or blue ink or number 2 pencil. PLEASE DO NOT USE FINE POINT PENS. ================================================================================ PLEASE NOTE: * Before voting, read the proxy statement carefully for an explanation of each proposal. * YOUR PROXY WILL BE VOTED FOR EACH PROPOSAL UNLESS YOU SPECIFY OTHERWISE. * The Board of Trustees recommends a vote FOR all proposals and nominees. ================================================================================ PROPOSALS: 1.ELECT THE FOLLOWING NOMINEES AS TRUSTEES: FOR WITHHOLD FOR ALL ALL ALL EXCEPT** 1. (01) John J. Brennan, (02) Charles D. Ellis, [ ] [ ] [ ] (03) Rajiv L. Gupta, (04) JoAnn Heffernan Heisen, (05) Burton G. Malkiel*, (06) Alfred M. Rankin, Jr., (07) J. Lawrence Wilson *NOT a nominee for Vanguard Equity Income Fund or Vanguard Growth Equity Fund. ** Write number(s) of excluded nominees on the line below: ------------------------------------------------ FOR AGAINST ABSTAIN 2. Change the fund's policy on investing in other mutual funds. [ ] [ ] [ ] 3. NOT APPLICABLE [ ] [ ] [ ] 4. NOT APPLICABLE [ ] [ ] [ ] 5. NOT APPLICABLE [ ] [ ] [ ] 6. NOT APPLICABLE [ ] [ ] [ ] 7. Change the fund's investment objective and concentration in utilities stocks. [ ] [ ] [ ] PLEASE SIGN AND DATE ON REVERSE SIDE VGD-11 Description: Vanguard EzVote E-Delivery Template Reply to: online@vanguard.com Subject: IMPORTANT FUND PROPOSALS: YOUR VOTE COUNTS. From: The Vanguard Group Thank you for electing to receive proxy material electronically. On December 3, 2002, all Vanguard(R) funds will conduct a Special Meeting of Shareholders to consider important fund proposals. Those proposals are outlined in your proxy statement. To reduce expenses, we've prepared a combined proxy statement. Please review the proposal(s) for fund(s) you owned as of September 6, 2002 and cast your vote. The Board of Trustees recommends a vote FOR all proposals under consideration. Casting your vote online is faster and easier than ever. Our new EzVote Consolidated Proxy lets you vote once for all of your accounts registered to the same address and Tax ID number. Or you can continue to vote each of these accounts separately. The choice is yours. * You can read the proxy statement at: http://personal.vanguard.com/pdf/proxy2002.pdf * You can cast your vote at http://www.proxyweb.com/vanguard or by touch-tone phone at 1-888-221-0689. You will need your Master Control Number shown below. ~HHBEGIN~ ~FUND~ ~CNTLNUM~ ACCOUNT NUMBER: ~ACCTNUM~ ~HHEND~ When you vote online, you appoint John J. Brennan, J. Lawrence Wilson, and R. Gregory Barton as your Attorneys to vote on your behalf at the Special Meeting of Shareholders and at any adjournments thereof. Your Attorney(s) may vote as you specify, vote on any matters that arise at the meeting in accordance with his best judgment, or appoint substitute Attorney(s) to vote on your behalf. You acknowledge receipt of the Notice of Special Meeting of Shareholders and the proxy statement and revoke any previous proxies you have executed. Proxy Solicitation by the Board of Trustees. If you need to contact us, don't reply to this e-mail. Instead: 1. For questions about fund proposals or the shareholder meeting, call Vanguard's Investor Information Department at 1-800-992-0833. Clients of Vanguard's Institutional Investor Group or our Voyager(R) or Flagship Services(R) should call their Vanguard representative or service team with questions. 2. For technical questions about the online proxy vote, call Vanguard(R) Web Technical Support Services at 1-800-860-8394. You can update your mailing preferences or change your e-mail address online at http://www.vanguard.com. Any change will apply to all Vanguard(R) accounts registered under your taxpayer ID number. Description: Vanguard single account E-Delivery Template Reply to: online@vanguard.com Subject: IMPORTANT FUND PROPOSALS: YOUR VOTE COUNTS. From: The Vanguard Group Thank you for electing to receive proxy material electronically. On December 3, 2002, all Vanguard(R) funds will conduct a Special Meeting of Shareholders to consider important fund proposals. Those proposals are outlined in your proxy statement. To reduce expenses, we've prepared a combined proxy statement. Please review the proposal(s) for fund(s) you owned as of September 6, 2002 and cast your vote. The Board of Trustees recommends a vote FOR all proposals under consideration. * You can read the proxy statement at: http://personal.vanguard.com/pdf/proxy2002.pdf * You can cast your vote at http://www.proxyweb.com/vanguard or by touch-tone phone at 1-888-221-0689. You will need your Master Control Number shown below. ~HHBEGIN~ MASTER CONTROL NUMBER: ~CNTLNUM~ FUND: ~FUND~ ACCOUNT NUMBER: ~ACCTNUM~ ~HHEND~ When you vote online, you appoint John J. Brennan, J. Lawrence Wilson, and R. Gregory Barton as your Attorneys to vote on your behalf at the Special Meeting of Shareholders and at any adjournments thereof. Your Attorney(s) may vote as you specify, vote on any matters that arise at the meeting in accordance with his best judgment, or appoint substitute Attorney(s) to vote on your behalf. You acknowledge receipt of the Notice of Special Meeting of Shareholders and the proxy statement and revoke any previous proxies you have executed. Proxy Solicitation by the Board of Trustees. If you need to contact us, don't reply to this e-mail. Instead: 1. For questions about fund proposals or the shareholder meeting, call Vanguard's Investor Information Department at 1-800-992-0833. Clients of Vanguard's Institutional Investor Group or our Voyager(R) or Flagship Services(R) should call their Vanguard representative or service team with questions. 2. For technical questions about the online proxy vote, call Vanguard(R) Web Technical Support Services at 1-800-860-8394. You can update your mailing preferences or change your e-mail address online at http://vanguard.com. Any change will apply to all Vanguard(R) accounts registered under your Taxpayer ID number.