ADVISORY AGREEMENT
Agreement, made as of this 1st day of June, 1993, between Vanguard Variable
Insurance Fund, a Pennsylvania trust (the "Fund") and Xxxxxx Associates, a
California corporation (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which offers several diversified investment Portfolios each having its
own objectives and policies; and
WHEREAS, the Fund desires to retain the Adviser to render investment advisory
services to the Equity Income Portfolio of the Fund ("Portfolio"), and the
Adviser is willing to render such services;
Now, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises hereinafter set forth.
the parties hereto agree as follows:
1. Appointment of Adviser. The Fund hereby appoints the Adviser to act as
investment adviser to the Portfolio for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth. for the compensation herein provided.
2. Advisory Duties. Subject to the supervision of the Board of Trustees of the
Fund. the Adviser shall manage the investment operations of the Portfolio,
including the purchase, retention and disposition thereof, in accordance with
the Fund's investment objective and policies as stated in the Registration
Statement (as defined in paragraph 3(d) of this Agreement) and subject to the
following understandings:
(a) The Adviser shall provide supervision of the Portfolio's investments,
furnish a continuous investment program for the Portfolio, determine from
time to time what investments or securities will be purchased. retained or
sold by the Portfolio, and what portion of the assets will be invested or
held uninvested as cash;
(b) The Adviser shall use the same skill and care in the management of the
Portfolio as it uses in the administration of other fiduciary accounts for
which it has investment responsibility;
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Declaration of Trust,
By-Laws and Registration Statement of the Fund and with the instructions
and directions of the Board of Trustees of the Fund and will conform to and
comply with the requirements of the 1940 Act and all other applicable
federal and state laws and regulations;
(d) The Adviser shall determine the securities to be purchased or sold by
the Portfolio and will place orders pursuant to its determinations either
directly with the issuer or with any broker and/or dealer who deals in the
securities in which the Portfolio is active. The Adviser is directed to use
its best efforts to obtain the best available price and most favorable
execution, except as prescribed herein. Subject to policies established by
the
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Board of Trustees of the Fund, the Adviser may also be authorized to effect
individual securities transactions at commission rates in excess of the
minimum commission rates available, if the Adviser determines in good faith
that such amount of commission was reasonable in relation to the value of
the brokerage or research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Adviser's
overall responsibilities with respect to the Portfolio. The execution of
such transactions shall not be deemed to represent an unlawful act or
breach of any duty created by this Agreement or otherwise. The Adviser will
promptly communicate to the officers and Trustees of the Fund such
information relating to portfolio transactions as they may reasonably
request:
On occasions when the Adviser deems the purchase or sale of a security to be in
the best interest of the Portfolio as well as other clients, the Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the best execution and
lower brokerage commissions, if any, in such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to such other
clients;
(e) The Adviser shall maintain books and records with respect to the
Portfolio's securities transactions and shall render to the Fund's Board of
Trustees such periodic and special reports as the Board may reasonably
request;
(f) The Adviser shall provide the Fund on each business day with a list of
all securities transactions for that day;
(g) The investment advisory services of the Adviser to the Portfolio under
this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services to others.
3. Documents Delivered. The Fund has delivered to the Adviser copies of each of
the following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust of the Fund, dated November 29, 1989 (such
Declaration of Trust, as presently in effect and as amended from time to
time, is herein called the "Declaration of Trust");
(b) By-laws of the Fund (such By-Laws, as presently in effect and as
amended from time to time. are herein called the "By-Laws");
(c) Certified resolutions of the Board of Trustees of the Fund authorizing
the appointment of the Adviser and approving the form of this Agreement:
(d) The Fund's Registration Statement under the Securities Act of 1933, on
Form N-1A (the "Registration Statement") as currently in effect with the
Securities and Exchange Commission (the "Commission"), relating to shares
of the Fund's beneficial interest, and all amendments thereto,
4. Books and Records. The Adviser shall keep the Portfolio's books and records
required to be maintained by it pursuant to paragraph 2(e) hereof. The Adviser
agrees that all records which it maintains for the Portfolio are the property of
the Fund and it will surrender promptly to the Fund any of such records upon the
Fund's request. The Adviser further agrees to preserve for the
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periods prescribed by Rule 31a-2 of the Commission under the 1940 Act any such
records as are required to be maintained by Rule 31a-1 (F) of the Commission
under the 1940 Act.
5. Reports to Adviser. The Fund agrees to furnish the Adviser at its principal
office all prospectuses, proxy statements, reports to stockholders, sales
literature, or other material prepared for distribution to shareholders of the
Fund or the public, which refer in any way to the Adviser, ten (10) days prior
to use thereof and not to use such material if the Adviser should object thereto
in writing within seven (7) days after receipt of such material. In the event of
termination of this Agreement, the Fund will, on written request of the Adviser,
forthwith delete any reference to the Adviser from any materials described in
the preceding sentence. The Fund shall furnish or otherwise make available to
the Adviser such other information relating to the business affairs of the Fund
as the Adviser at any time, or from time to time, reasonably requests in order
to discharge its obligations hereunder.
6. Expenses. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities purchased for the Fund and the taxes, and brokerage
commissions, if any, payable in connection with the purchase and/or sale of such
securities.
7. Compensation. For the services to be rendered by the Adviser as provided in
this Agreement, the Fund shall pay to the Adviser at the end of the Fund's
fiscal quarters, a fee calculated by applying a quarterly rate, based on an
annual percentage rate of .10%, to the Portfolio's average month-end assets for
the quarter.
In the event of termination of this Agreement, the fee provided in this Section
shall be computed on the basis of the period ending on the last business day on
which this Agreement is in effect subject to a pro rata adjustment based on the
number of days elapsed in the current fiscal quarter as a percentage of the
total number of days in such quarter.
8. Limitation of Liability. In the absence of (i) misfeasance or negligence on
the part of the Adviser in performance of its obligations and duties hereunder,
or (ii) a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act), the Adviser shall not be subject to any liability whatsoever to the
Fund, or to any shareholder of the Fund, for any error of judgment, mistake of
law or any other act or omission in the course of, or connected with, rendering
services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of the Portfolio. Federal and state securities laws impose
liabilities under certain circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a waiver or limitation of
any rights which the Fund may have under any such laws.
9. Duration and Termination. This Agreement, unless sooner terminated as
provided herein shall continue until May 31, 1995, and shall thereafter continue
thereafter automatically for periods of one year so long as such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Board of Trustees of the Fund who are not parties to this
Agreement or interested persons (as defined in the 0000 Xxx) of any such party,
cast in person at a meeting called for the purpose of voting such approval, and
(b) by the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Fund. This Agreement may be terminated by
the Fund at any time, without the payment of any penalty, by vote of a majority
of the entire Board of Trustees of the Fund or by vote of a majority of the
outstanding
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voting securities of the Fund on 60 days' written notice to the Adviser. This
Agreement may also be terminated by the Adviser on 90 days' written notice to
the Fund. This Agreement will automatically and immediately terminate in the
event of its assignment (as defined in the 1940 Act).
10. Independent Contractor. The Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Board of Trustees of the Fund from time to time,
have no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
11. Amendment of Agreement. This Agreement may be amended by mutual consent, but
the consent of the Fund must be approved (a) by vote of a majority of those
members of the Board of Trustees of the Fund who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of the Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
(SEAL)
ATTEST: VANGUARD VARIABLE INSURANCE FUND
/S/ Xxxxxxx X. Xxxxxxxxx /S/ Xxxx X. Xxxxx
Secretary Chairman and Chief Executive Officer
ATTEST: XXXXXX ASSOCIATES
/S/ Xxxxxx Xxxxx /S/ Xxxxx X. Xxxxxx
Secretary Chairman
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