MANAGEMENT AGREEMENT
AGREEMENT, made as of this 31st day of May, 2001, between VANGUARD
INSTITUTIONAL INDEX FUNDS, a Delaware business trust (the "Trust"), and THE
VANGUARD GROUP, INC., a Pennsylvania Corporation ("Vanguard").
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, Vanguard is registered as an investment adviser under the
Investment Advisers Act of 1940 and as a transfer agent under the Securities
Exchange Act of 1934;
WHEREAS, Vanguard provides management, administrative, transfer agency,
dividend disbursing, investment advisory and other services to registered
investment companies and others;
WHEREAS, Vanguard has served as investment adviser, administrator and
transfer agent to the Trust and its series known as Vanguard Institutional Index
Fund ("VIIF") under a Service and Advisory Agreement dated April 16, 1991, as
amended on May 16, 1997 (the "Prior Agreement");
WHEREAS, the Trust and Vanguard wish to provide for the continuation of
Vanguard's services to the Trust and VIIF on substantially the same terms and
conditions as provided in the Prior Agreement;
WHEREAS, the Trust and Vanguard further wish to provide for the appointment
of Vanguard as investment adviser, administrator, and transfer agent to a new
series of the Trust, to be known as Vanguard Institutional Total Stock Market
Index Fund ("VITSMIF"), and to such additional series as the Trust may from time
to time offer; and
WHEREAS, the Trust and Vanguard wish to accomplish the foregoing objectives
by replacing the Prior Agreement with this Agreement concerning investment
advisory and administrative services and a separate Shareholder Services
Agreement concerning transfer agency services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Vanguard. The Trust hereby appoints Vanguard to act as
investment adviser and administrator to each series of the Trust listed in
Exhibit A to this Agreement (each a "Fund," collectively the "Funds"), as it may
from time to time be amended ("Exhibit A"). Vanguard accepts such appointment
and agrees to serve as investment adviser and administrator to the Funds on the
terms set forth in this Agreement and Exhibit A.
2. Duties of Vanguard as Investment Adviser. As investment adviser, it will
be the responsibility of Vanguard to manage the investment and reinvestment of
each Fund's assets; to continuously review, supervise and administer an
investment program for each Fund; to determine in its discretion the securities
to be purchased or sold for each Fund, and the portion of each Fund's assets to
be held uninvested; to provide each Fund with all records concerning the
activities of
Vanguard that the Fund is required to maintain; and to render regular reports to
each Fund's officers and Board of Trustees concerning Vanguard's discharge of
the foregoing responsibilities. Vanguard will discharge the foregoing
responsibilities subject to the supervision and control of each Fund's officers
and Board of Trustees, and in compliance with the objectives, policies, and
limitations set forth in each Fund's registration statement, Declaration of
Trust, By-laws, any additional operating policies or procedures that the Fund
communicates to Vanguard in writing, and any applicable laws and regulations.
(a) Securities Transactions. Vanguard is authorized to select the
brokers or dealers that will execute purchases and sales of securities for
each Fund, and is directed to use its best efforts to obtain the best
available price and most favorable execution for such transactions, except
as otherwise permitted by the Board of Trustees pursuant to written
policies and procedures provided to Vanguard. Subject to policies
established by the Board of Trustees, Vanguard also may be authorized to
effect individual securities transactions at commission rates in excess of
the minimum commission rates available, if Vanguard determines in good
faith that such amount of commission is 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 Vanguard's overall
responsibilities with respect to the accounts as to which Vanguard
exercises investment discretion. 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. Vanguard will promptly communicate to each
Fund's officers and Board of Trustees such information relating to
portfolio transactions as they may reasonably request.
3. Duties of Vanguard as Administrator. As administrator, it will be the
responsibility of Vanguard to manage, administer and conduct the general
business affairs of the Trust and each Fund, and to secure and oversee any
services contracted for the Trust or the Funds directly from parties other than
Vanguard.
(a) Accounting Services. In its role as administrator, Vanguard also
will provide the following accounting services: (i) maintenance of the
books and records and accounting controls for each Fund's assets; (ii)
calculation of each Fund's net asset value; (iii) accounting for dividends
and interest received by each Fund, and for any distributions made by each
Fund; (iv) preparation and filing of each Fund's tax returns and
semi-annual reports on Form N-SAR; (v) the production of transaction data,
financial reports, and such other periodic and special reports as each
Fund's officers and Board of Trustees may reasonably request; (vi) the
services of an independent accountant for each Fund and liaison with such
independent accountant; and (vii) such other accounting services as may be
agreed upon by the parties. Vanguard will discharge the foregoing
responsibilities subject to the supervision and control of each Fund's
officers and Board of Trustees
4. Responsibility for Expenses. Vanguard will provide, at its own expense,
the office space, furnishings and equipment and the personnel required by it to
perform its responsibilities as investment adviser and administrator.
(a) Other Expenses of Vanguard. In its role as investment adviser and
administrator, Vanguard will be responsible for all expenses of the
following: (i) services of
outside legal counsel to the Trust or the Funds; (ii) any services
contracted for the Trust or the Funds directly from parties other than
Vanguard; (iii) the salary and expenses of any officer, employee, or
Trustee of the Trust; (iv) the services associated with custodian and
depository banks; (v) the payment of all registration and filing fees
required under federal, state, or foreign securities laws and regulations;
(vi) services related to the maintenance of fidelity bond and trustees' and
officers' liability insurance, including the costs of insurance premiums;
and (vii) all other services, including any fees or expenses arising out of
the Trust's or the Funds' operations, except as listed in subparagraph (b)
below.
(b) Expenses of the Trust and the Funds. The Trust and the Funds will
be responsible for the following expenses: (i) expenses incurred outside of
Vanguard associated with each Fund's trading operations, including
brokerage fees, commissions, and transfer taxes in connection with the
purchase and sale of securities for each Fund; (ii) any other taxes
relating to each Fund's operations; (iii) fees payable to Vanguard under
this Agreement or a separate Shareholder Services Agreement; and (iv) any
expenses payable by the Trust or the Funds under a separate Shareholder
Services Agreement..
5. Compensation of Vanguard. For the services to be rendered by Vanguard as
provided in this Agreement, each Fund will pay to Vanguard, at the end of each
month, a fee calculated by applying a monthly rate, based on the annual
percentage rate specified in Exhibit A, to the average daily net assets of the
Fund for the applicable month.
6. Reports. The Trust and Vanguard 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.
7. Compliance. Vanguard agrees to comply with all policies, procedures or
reporting requirements that the Board of Trustees of the Trust reasonably adopts
and communicates to Vanguard in writing, including any such policies, procedures
or reporting requirements relating to soft dollar or directed brokerage
arrangements.
8. Status of Vanguard. The services of Vanguard to the Trust and the Funds
are not to be deemed exclusive, and Vanguard will be free to render similar
services to others so long as its services to the Trust and the Funds are not
impaired thereby. Vanguard 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 Trust or the Funds in any way or otherwise be deemed an
agent of the Trust or the Funds.
9. Liability of Vanguard. No provision of this Agreement will be deemed to
protect Vanguard against any liability to the Trust, the Funds, or their
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.
10. Duration and Termination. This Agreement will become effective on May
31, 2001 and will continue in effect thereafter only so long as such continuance
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 a Fund; in such event, such continuance will be effected with
respect to that Fund only if approved by the affirmative vote of a majority of
the outstanding voting securities of the Fund.
Provided, however, that (i) this Agreement may at any time be terminated
with respect to the Trust or with respect to any Fund without payment of any
penalty either by vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund, on sixty days' written notice to
Adviser, (ii) this Agreement will automatically terminate in the event of its
assignment, and (iii) this Agreement may be terminated by Adviser on ninety
days' written notice to the Fund. Any notice under this Agreement will be given
in writing, addressed and delivered, or mailed postpaid, to the other party at
any office of such party.
As used in this Section 9, the terms "assignment," "interested persons," a
"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 Investment Company Act of 1940.
11. 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.
12. Proxy Policy. The Trust retains the right to vote any proxies with
respect to securities held by a Fund.
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- law principles thereunder) of the
Commonwealth of Pennsylvania applicable to contracts made and to be performed in
that state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed this 31st day of May, 2001
ATTEST: VANGUARD INSTITUTIONAL INDEX FUNDS
By /s Xxxxxxx X. Xxxxxx By /s Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
ATTEST: THE VANGUARD GROUP, INC.
By /s Xxxxxxx X. Xxxxxx By /s Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
EXHIBIT A
to
Management Agreement
Dated May 31, 2001
Series of the Trust Annual Percentage Rate
------------------- ----------------------
Vanguard Institutional Index Fund 0.02%
Vanguard Institutional Total Stock Market Index Fund 0.02%
ACKNOWLEDGED AND AGREED:
ATTEST: VANGUARD INSTITUTIONAL INDEX FUNDS
By /s Xxxxxxx X. Xxxxxx By /s Xxxx X. Xxxxxxx 5/31/2001
Chairman and Chief Executive Officer Date
ATTEST: THE VANGUARD GROUP, INC.
By /s Xxxxxxx X. Xxxxxx By /s Xxxx X. Xxxxxxx 5/31/2001
Chairman and Chief Executive Officer Date
EXHIBIT A
to
Management Agreement
Amended October 1, 2001
Series of the Trust Annual Percentage Rate
------------------- ----------------------
Vanguard Institutional Index Fund 0.02%
Vanguard Institutional Total Bond Market Index Fund 0.02%
Vanguard Institutional Total Stock Market Index Fund 0.02%
ACKNOWLEDGED AND AGREED:
ATTEST: VANGUARD INSTITUTIONAL INDEX FUNDS
By /s Xxxxx X. Xxxxxxxx By /s Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Date October 1, 2001
ATTEST: THE VANGUARD GROUP, INC.
By /s Xxxxx X. Xxxxxxxx By /s Xxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Date October 1, 2001
