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SHAREHOLDER SERVICES AGREEMENT
AGREEMENT, made as of this _______ day of ___________, 2002, between
VANGUARD VARIABLE INSURANCE FUND, 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, the Trust offers a series of shares known as Vanguard Variable
Insurance Fund - Total Stock Market Index Portfolio (the "Portfolio") which is
an open-end non-diversified management investment company registered under the
1940 Act; and
WHEREAS, the Portfolio employs a "fund of funds" investment strategy in
which its assets are invested in other registered investment companies managed
or administered to Vanguard;
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; and
WHEREAS, the Trust wishes to retain Vanguard to render certain management,
administrative, transfer agency, dividend disbursing and other services to the
Portfolio, and Vanguard is willing to render such 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
transfer agent and administrator of the Portfolio. Vanguard accepts such
appointment and agrees to provide services to the Portfolio on the terms set
forth in this Agreement.
2. DUTIES OF VANGUARD AS TRANSFER AGENT. As transf er agent, it will be
Vanguard's responsibility to provide the Portfolio with the Basic Services and
Special Services described in sub-paragraphs (a) and (b) of this section.
Vanguard will provide such services subject to the supervision and control of
the Trust's officers and Board of Trustees, and in compliance with the
Portfolio's objectives, policies, and limitations as set forth in the Trust's
registration statement, Declaration of Trust, By-laws, and any additional
operating policies or procedures that the Portfolio communicates to Vanguard in
writing, and any applicable laws and regulations.
(a) BASIC SERVICES. Basic Services to be provided by Vanguard will
include:
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(i) Maintaining records on behalf of the Portfolio's registered
shareholders and furnishing to the Trust all information
regarding such records as may be required by law or reasonably
requested by the Trust's officers;
(ii) Processing all orders for the purchase, redemption, exchange,
transfer or conversion of the Portfolio's registered shares in
accordance with its current registration statement and compliance
policies;
(iii)Issuing quarterly account statements to registered shareholders
of the Portfolio, as well as confirmation statements in
connection with purchase, redemption, exchange, transfer, and
conversion transactions;
(iv) Acknowledging correspondence from registered shareholders, and
providing such other shareholder correspondence and portfolio
investment reviews as may from time to time be mutually agreed
upon;
(v) Preparing, filing with the Internal Revenue Service, and mailing
to registered shareholders of the Portfolio such returns for
reporting payments of dividends and distributions as are required
by applicable law;
(vi) Withholding from any dividends or distributions paid to
registered shareholders of the Portfolio such amounts as may be
required by applicable tax laws, rules, or regulations;
(vii)Mailing proxy materials, shareholder reports and other materials
to registered shareholders of the Portfolio;
(viii) Providing tabulation and reporting services in connection with
any shareholder votes; and
(ix) Acting as dividend disbursing agent for the Portfolio, and, as
such, arranging for the appropriate crediting and handling of all
dividend and capital gains payments to registered shareholders.
(b) SPECIAL SERVICES. Special Services to be provided by Vanguard will
consist of certain services unique to institutional plan accounts,
including trustee services, plan participant education services, plan
participant telephone services, plan participant recordkeeping (VISTA)
services, and ancillary services that may be common for shareholders
of this type.
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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 Portfolio, and to secure and oversee any services
contracted for the Portfolio directly from parties other than Vanguard.
(a) ACCOUNTING SERVICES. In its role as administrator, Vanguard also
will provide the following accounting services to the Portfolio: (i)
maintenance of the books and records and accounting controls for the
Portfolio's assets; (ii) calculation of the Portfolio's net asset value;
(iii) accounting for dividends and interest received by the Portfolio, and
for any distributions made by the Portfolio; (iv) preparation and filing of
the Portfolio'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 the Trust's officers and Board of Trustees may
reasonably request; (vi) act as liaison with the Trust's 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 the Trust's officers and Board of
Trustees.
4. RESPONSIBILITY FOR EXPENSEs.
(a) EXPENSES OF VANGUARD. Vanguard will provide, at its own
expense, the office space, furnishings and equipment and the personnel
required by it to perform its responsibilities under this Agreement.
(b) EXPENSES OF THE PORTFOLIO. The Portfolio will be responsible
for bearing the expense of:
(i) Any services contracted for the Portfolio directly from
parties other than Vanguard;
(ii) Taxes, insurance premiums and other fees and expenses
applicable to the operations of the Portfolio;
(iii)Costs incidental to shareholder and Board of Trustee
meetings; and
(iv) All fees required to be paid to federal and state
regulatory authorities.
5. COMPENSATION TO VANGUARD.
(a) COSTS. The Portfolio will pay to Vanguard in consideration
for the services provided and the expenses assumed pursuant to this
Agreement, the out-of-pocket, incremental costs incurred by Vanguard
in connection with the providing of such services.
(b) REIMBURSEMENT FROM VANGUARD TO THE PORTFOLIO. Vanguard will
reimburse the Portfolio in an amount representing the following:
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(i) Contributions made by the Portfolio to the cost of
operating the Vanguard funds in which the Portfolio
invests; and
(ii) Certain savings in administrative and marketing costs
derived by Vanguard from the operation of the
Portfolio.
(c) FUND OF FUNDS. The Portfolio:
(i) shall not be obligated or permitted to make capital
contributions or to acquire shares of Vanguard, except
to the extent that the Portfolio's assets are not
invested in shares of other registered investment
companies in The Vanguard Group;
(ii) shall not be allocated or obligated to pay any portion
of the expenses of Vanguard, other than those expenses
described in Section 3(a) of this Agreement; and
6. REPORTS. The Portfolio and Vanguard agree to furnish to each other
organizational documents, 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: (a) all of the Portfolio's
policies, procedures, and reporting requirements of which it is aware, or , in
the exercise of reasonable diligence should have been aware; (b) the Portfolio's
objectives, policies and limitations as set forth in the Trust's registration
statement, declaration of trust, and by-laws; and (c) applicable laws and
regulations.
8. STATUS OF VANGUARD. The services of Vanguard to the Portfolio are not to
be deemed exclusive, and Vanguard will be free to render similar services to
others so long as its services to the Portfolio are not impaired thereby.
9. LIABILITY OF VANGUARD. No provision of this Agreement will be deemed to
protect Vanguard 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.
10. DURATION AND TERMINATION. This Agreement will become effective on
________________, 2002 and will continue in effect thereafter until terminated
by the Trust or Vanguard upon sixty days written notice to the other party.
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.
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12. 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 ________ day of ___________, 2002
VANGUARD VARIABLE INSURANCE FUND
By _____________________________
Chairman and Chief Executive Officer
THE VANGUARD GROUP, INC.
By _____________________________
Chairman and Chief Executive Officer