INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 28th day of July, 2003, between VANGUARD
VARIABLE INSURANCE FUNDS, a Delaware statutory trust (the "Trust"), and
WELLINGTON MANAGEMENT COMPANY, LLP, a Massachusetts limited liability
partnership (the "Adviser").
W I T N E S S E T H
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust offers a series of shares known as Equity Income
Portfolio (the "Portfolio"); and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Portfolio, and the Adviser is willing to render such
services.
NOW THEREFORE, in consideration of the mutual promises and undertakings set
forth in this "Agreement," the Trust and the Adviser hereby agree as follows:
1. APPOINTMENT OF ADVISER. The Trust hereby employs the Adviser as
investment adviser, on the terms and conditions set forth herein, for the
portion of the assets of the Portfolio that the Trust's Board of Trustees (the
"Board of Trustees") determines in its sole discretion to assign to the Adviser
from time to time (referred to in this Agreement as the "Wellington Portfolio").
As of the date of this Agreement, the Wellington Portfolio will consist of the
portion of the assets of the Portfolio that the Board of Trustees has determined
to assign to the Adviser, as communicated to the Adviser on behalf of the Board
of Trustees by The Vanguard Group, Inc. ("Vanguard"). The Board of Trustees may,
from time to time, make additions to, and withdrawals from, the assets of the
Portfolio assigned to the Adviser. The Adviser accepts such employment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES OF ADVISER. The Trust employs the Adviser to manage the
investment and reinvestment of the assets of the Wellington Portfolio; to
continuously review, supervise, and administer an investment program for the
Wellington Portfolio; to determine in its discretion the securities to be
purchased or sold and the portion of such assets to be held uninvested; to
provide the Portfolio with all records concerning the activities of the Adviser
that the Portfolio is required to maintain; and to render regular reports to the
Trust's officers and Board of Trustees concerning the discharge of the foregoing
responsibilities. The Adviser will discharge the foregoing responsibilities
subject to the supervision and oversight of the Trust's officers and the Board
of Trustees, and in compliance with the objectives, policies and limitations set
forth in the Portfolio's prospectus and Statement of Additional Information, any
additional operating policies or procedures that the Portfolio communicates to
the Adviser in writing, and applicable laws and regulations. The Adviser agrees
to provide, at its own expense, the office space, furnishings and equipment, and
personnel required by it to perform the services on the terms and for the
compensation provided herein.
3. SECURITIES TRANSACTIONS. The Adviser is authorized to select the brokers
or dealers that will execute purchases and sales of securities for the
Wellington Portfolio, and is directed to use its best efforts to obtain the best
available price and most favorable execution for such transactions. To the
extent expressly permitted by the written policies and procedures established by
the Board of Trustees, and subject to Section 28(e) of the Securities Exchange
Act of 1934, as amended, any interpretations thereof by the Securities and
Exchange Commission (the "SEC") or its staff, and other applicable law, the
Adviser is permitted to pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities to the accounts as to which it exercises
investment discretion. The execution of such transactions in conformity with the
authority expressly referenced in the immediately preceding sentence shall not
be deemed to represent an unlawful act or breach of any duty created by this
Agreement or otherwise. The Adviser agrees to comply with any directed brokerage
or other brokerage arrangements that the Portfolio communicates to the Adviser
in writing. The Adviser will promptly communicate to the Trust's officers and
the Board of Trustees any information relating to the portfolio transactions the
Adviser has directed on behalf of the Wellington Portfolio as such officers or
the Board may reasonably request.
4. COMPENSATION OF ADVISER.
5. REPORTS. The Portfolio and the Adviser agree to furnish to each other
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as each may reasonably request, including, but not limited to,
information about changes in partners of the Adviser.
6. COMPLIANCE. The Adviser agrees to comply with all policies, procedures
or reporting requirements that the Board of Trustees of the Trust reasonably
adopts and communicates to the Adviser in writing, including, without
limitation, any such policies, procedures or reporting requirements relating to
soft dollar or directed brokerage arrangements.
7. STATUS OF ADVISER. The services of the Adviser to the Portfolio are not
to be deemed exclusive, and the Adviser will be free to render similar services
to others so long as its services to the Portfolio are not impaired thereby. The
Adviser will be deemed to be an independent contractor and will, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Portfolio in any way or otherwise be deemed an agent of the
Portfolio or the Trust.
8. LIABILITY OF ADVISER. No provision of this Agreement will be deemed to
protect the Adviser against any liability to the Portfolio or its shareholders
to which it might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations under this Agreement.
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9. DURATION; TERMINATION; NOTICES; AMENDMENT. This Agreement will become
effective on the date hereof and will continue in effect for a period of three
years thereafter, and shall continue in effect for successive twelve-month
periods thereafter, only so long as this Agreement is approved at least annually
by votes of the Trust's Board of Trustees who are not parties to such Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. In addition, the question of continuance
of the Agreement may be presented to the shareholders of the Portfolio; in such
event, such continuance will be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities of the Portfolio.
Notwithstanding the foregoing, however, (i) this Agreement may at any time
be terminated without payment of any penalty either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Portfolio, on thirty days' written notice to the Adviser, (ii)
this Agreement will automatically terminate in the event of its assignment, and
(iii) this Agreement may be terminated by the Adviser on ninety days' written
notice to the Portfolio. Any notice under this Agreement will be given in
writing, addressed and delivered, or mailed postpaid, to the other party as
follows:
If to the Portfolio, at:
Vanguard Variable Insurance Funds - Vanguard Equity Income Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Adviser, at:
Wellington Management Company, LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
This Agreement may be amended by mutual consent, but the consent of the
Trust must be approved (i) by a majority of those members of the Board of
Trustees 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 (ii) to the extent required by the 1940 Act, by a vote of a
majority of the outstanding voting securities of the Portfolio of the Trust.
As used in this Section 9, the terms "assignment," "interested persons,"
and "vote of a majority of the outstanding voting securities" will have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
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10. SEVERABILITY. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
11. CONFIDENTIALITY. The Adviser shall keep confidential any and all
information obtained in connection with the services rendered hereunder and
relating directly or indirectly to the Portfolio, the Trust, or Vanguard and
shall not disclose any such information to any person other than the Trust, the
Board of Directors of the Trust, Vanguard), and any director, officer, or
employee of the Trust or Vanguard, except (i) with the prior written consent of
the Trust, (ii) as required by law, regulation, court order or the rules or
regulations of any self-regulatory organization, governmental body or official
having jurisdiction over the Adviser, or (iii) for information that is publicly
available other than due to disclosure by the Adviser or its affiliates or
becomes known to the Adviser from a source other than the Trust, the Board of
Directors of the Trust, or Vanguard.
12. PROXY POLICY. The Adviser acknowledges that Vanguard will vote the
shares of all securities that are held by the Portfolio unless other mutually
acceptable arrangements are made with the Adviser with respect to the Wellington
Portfolio.
13. GOVERNING LAW. All questions concerning the validity, meaning, and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-interest law principles thereof) of
the State of Delaware applicable to contracts made and to be performed in that
state.
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IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the date first set forth herein.
WELLINGTON MANAGEMENT COMPANY, LLP VANGUARD VARIABLE INSURANCE FUNDS
/S/ Xxxxxx X. XxXxxxxxx 7/25/2003 /S/ R. Xxxxxxx Xxxxxx 7/28/2003
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Signature Date Signature Date
Xxxxxx X. XxXxxxxxx, Chairman and CEO R. Xxxxxxx Xxxxxx, Secretary
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