INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of April, 2007, between Vanguard
Variable Insurance Fund, a Delaware statutory trust (the "Trust"), and Grantham,
Mayo, Van Otterloo & Co. LLC, a Massachusetts limited liability company (the
"Advisor").
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 Small Company
Growth Portfolio (the "Fund"); and
WHEREAS, the Trust retained the Advisor to render investment advisory
services to the Fund under an Investment Advisory Agreement, dated as of
September 29, 2000, which was amended on April 30, 2003 (the "Prior Agreement");
and
WHEREAS, the Trust desires to amend and restate such Investment
Advisory Agreement in certain respects, and the Advisor is willing to render
investment advisory services to the Fund in accordance with such amendments.
NOW THEREFORE, in consideration of the mutual promises and undertakings
set forth in this Agreement, the Trust and the Advisor hereby agree as follows:
1. Appointment of Advisor. The Trust hereby employs the Advisor as investment
advisor, on the terms and conditions set forth herein, for the portion of the
assets of the Fund that the Trust's Board of Trustees (the "Board of Trustees")
determines in its sole discretion to assign to the Advisor from time to time
(referred to in this Agreement as the "GMO Portfolio"), as communicated to the
Advisor 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 Fund assigned to the Advisor. The
Advisor accepts such employment and agrees to render the services herein set
forth, for the compensation herein provided.
2. Duties of Advisor. The Trust employs the Advisor to manage the investment and
reinvestment of the assets of the GMO Portfolio; to continuously review,
supervise, and administer an investment program for the GMO 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 Fund with all
records concerning the activities of the Advisor that the Fund is required to
maintain; and to render regular reports to the Trust's officers and the Board of
Trustees concerning the discharge of the foregoing responsibilities. The Advisor
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 objective, policies, and limitations set forth in the Fund's prospectus
and Statement of Additional Information, any additional operating policies or
procedures that the Fund communicates to the Advisor in writing, and applicable
laws and regulations. The Advisor 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 Advisor is authorized to select the brokers or
dealers that will execute purchases and sales of securities for the GMO
Portfolio, 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 the Advisor. The Advisor will promptly communicate to the Trust's
officers and the Board of Trustees such information relating to portfolio
transactions as they may reasonably request. In selecting brokers or dealers to
execute trades for the GMO Portfolio, the Advisor will comply with all
applicable law.
4. Compensation of Advisor. For services to be provided by the Advisor pursuant
to this Agreement, the Fund will pay to the Advisor, and the Advisor agrees to
accept as full compensation therefor, an investment advisory fee consisting of a
base fee plus a performance adjustment at the rates specified in Schedule A to
this Agreement, payable quarterly in arrears.
5. Reports. The Fund and the Advisor agree to furnish to each other current
prospectuses, proxy statements, reports to shareholders, certified copies of the
Fund's 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 the investment officers of the Advisor who are responsible for
managing the GMO Portfolio.
6. Compliance. The Advisor agrees to comply with all Applicable Law and all
policies, procedures, or reporting requirements that the Board of Trustees
reasonably adopts and communicates to the Advisor in writing, including, without
limitation, any such policies, procedures, or reporting requirements relating to
soft dollar or other brokerage arrangements. "Applicable Law" means (i) the
"federal securities laws" as defined in Rule 38a-1(e)(1) under the 1940 Act, as
they relate to the services provided by the Advisor to the Fund pursuant to this
Agreement, and (ii) any and all other laws, rules, and regulations, whether
foreign or domestic, in each case applicable at any time and from time to time
to the investment management operations of the Advisor in relation to the GMO
Portfolio.
7. Status of Advisor. The services of the Advisor to the Fund are not to be
deemed exclusive, and the Advisor will be free to render similar services to
others so long as its services to the Fund are not impaired thereby. The Advisor
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
Fund in any way or otherwise be deemed an agent of the Fund or the Trust.
8. Liability of Advisor. No provision of this Agreement will be deemed to
protect the Advisor against any liability to the Fund 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.
9. Limitations on Consultations. The Advisor is prohibited from consulting with
other advisors of the Fund, except Vanguard, concerning transactions for the
Fund in securities or other assets.
10. Duration; Termination; Notices; Amendment. This Agreement and the terms and
conditions herein shall become effective on the date hereof and shall continue
in effect for successive twelve-month periods, only so long as each such
continuance specifically is approved at least annually by the Board of Trustees,
including a majority of those 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 Fund; 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 Fund.
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 or by vote of a majority of the outstanding voting securities of the
Fund, on sixty days' written notice to the Advisor, (ii) this Agreement will
automatically terminate in the event of its assignment, and (iii) this Agreement
may be terminated by the Advisor 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 as follows:
If to the Fund, at:
Vanguard Variable Insurance Fund
Small Company Growth Portfolio
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Advisor, at:
Grantham, Mayo, Van Otterloo & Co. LLC
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, with a copy to the General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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 Fund.
As used in this Section 10, 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.
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. Confidentiality. The Advisor shall keep confidential any and all information
obtained in connection with the services rendered hereunder and relating
directly or indirectly to the Fund, the Trust, or Vanguard and shall not
disclose any such information to any person other than the Trust, the Board of
Trustees, 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 Advisor, or (iii) for information that is publicly available other than
due to disclosure by the Advisor or its affiliates or becomes known to the
Advisor from a source other than the Trust, the Board of Trustees, or Vanguard.
13. Proxy Policy. The Advisor acknowledges that Vanguard, at the direction of
the Fund, will vote the shares of all securities that are held by the Fund.
14. 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 thereof) of the State of Delaware
applicable to contracts made and to be performed in that state.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of the date first set forth herein.
Grantham, Mayo, Van Otterloo & Co. Vanguard Variable
LLC Insurance Fund
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Signature Date Signature Date
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