Vanguard
Variable Insurance Funds
Money
Market Portfolio
April
28, 2023
Prospectus
This prospectus contains financial data for the Portfolio through the fiscal year ended December 31, 2022.
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
(Expenses that you pay each year as a percentage of the value of your investment)
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Management
Fees |
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12b-1
Distribution Fee |
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Other
Expenses |
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Total Annual
Portfolio Operating Expenses1
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1
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1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
1
2
3
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Total
Return |
Quarter |
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1
Year |
5
Years |
10
Years |
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Money
Market Portfolio |
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FTSE
3-Month U.S. Treasury Bill Index
(reflects no
deduction for fees or expenses) |
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Variable
Insurance U.S. Government Money Market
Funds
Average |
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Spliced
Variable Insurance U.S. Government Money
Market
Funds Average |
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4
Investment
Advisor
The Vanguard Group,
Inc. (Vanguard)
Portfolio
Manager
John C. Lanius,
Portfolio Manager at Vanguard. He has managed the Portfolio since
2006.
Tax
Information
The Portfolio
normally distributes its net investment income and net realized capital gains,
if any, to its shareholders, which are the insurance company separate accounts
that sponsor your variable annuity or variable life insurance contract. The tax
consequences to you of your investment in the Portfolio depend on the provisions
of the annuity or life insurance contract through which you invest. For more
information on taxes, please refer to the prospectus of the annuity or life
insurance contract through which Portfolio shares are offered.
Payments
to Financial Intermediaries
The Portfolio and
its investment advisor do not pay financial intermediaries for sales of
Portfolio shares.
5
Investing
in the Money Market Portfolio
Under Rule 2a-7,
the following are the main categories of money market funds:
• Retail
money market funds, which may
maintain a stable net asset value (NAV) but are subject to liquidity fees and
redemption gates.
• Government
money market funds, which may
maintain a stable NAV but are not required to implement liquidity fees and
redemption gates.
• Institutional
money market funds, which are
required to have a floating NAV and are subject to liquidity fees and redemption
gates.
Vanguard
Variable Insurance Funds Money Market Portfolio
Vanguard has
designated Vanguard Variable Insurance Funds Money Market Portfolio as a
government money market fund.
Government money
market funds are required to invest at least 99.5% of their total assets in
cash, U.S. government securities, and/or repurchase agreements that are
collateralized solely by U.S. government securities or cash (collectively,
government securities). The Portfolio generally invests 100% of its assets in
government securities and therefore will satisfy the 99.5% requirement for
designation as a government money market fund.
Government money market funds can also maintain a stable $1.00 NAV through the use of amortized cost accounting and may, but are not required to, implement liquidity fees and redemption gates. The Portfolio will continue to use amortized cost to transact at a stable $1.00 NAV.
Government money market funds can also maintain a stable $1.00 NAV through the use of amortized cost accounting and may, but are not required to, implement liquidity fees and redemption gates. The Portfolio will continue to use amortized cost to transact at a stable $1.00 NAV.
The Portfolio does
not currently intend to voluntarily implement liquidity fees or redemption
gates.
The
Portfolio is subject to money market fund reform regulatory risk, which is the
chance that future money market fund reforms will affect the Portfolio's
investment strategy, fees and expenses, portfolio, share liquidity, and return
potential.
6
More
on the Portfolio
This prospectus
describes the principal risks you would face as an investor in this Portfolio.
It is important to keep in mind one of the main principles of investing:
generally, the higher the risk of losing money, the higher the potential reward.
The reverse, also, is generally true: the lower the risk, the lower the
potential reward. As you consider an investment in any mutual fund, you should
take into account your personal tolerance for fluctuations in the securities
markets. Look for this
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Portfolio investor. To highlight
terms and concepts important to mutual fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Portfolio is
the right investment for you. We suggest that you keep this prospectus for
future reference.
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Portfolio investor. To highlight
terms and concepts important to mutual fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Portfolio is
the right investment for you. We suggest that you keep this prospectus for
future reference.A
Note About Vanguard Variable Insurance Funds
The Money Market
Portfolio of Vanguard Variable Insurance Funds is a mutual fund used solely as
an investment option for annuity or life insurance contracts offered by
insurance companies. This means that you cannot purchase shares of the Portfolio
directly, but only through a contract offered by an insurance
company.
The Money Market
Portfolio is separate from other Vanguard mutual funds, even when the Portfolio
and a fund have the same investment objective and advisor. The Portfolio’s
investment performance will differ from the performance of other Vanguard funds
because of differences in the securities held and because of administrative and
insurance costs associated with the annuity or life insurance program through
which you invest.
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Plain
Talk About Costs of Investing |
|
Costs
are an important consideration in choosing a mutual fund. That is
because
you, as a contract owner, pay a proportionate share of the costs of
operating
a fund and any transaction costs incurred when the fund buys or
sells
securities. These costs can erode a substantial portion of the gross
income
or the capital appreciation a fund achieves. Even seemingly small
differences
in expenses can, over time, have a dramatic effect on a
fund’s
performance. |
The following
sections explain the principal investment strategies and policies that the
Portfolio uses in pursuit of its investment objective. The board of trustees of
Vanguard Variable Insurance Funds (the Board), which oversees the Portfolio's
management, may change investment strategies or policies in the
7
interest of
shareholders without a shareholder vote, unless those strategies or policies are
designated as fundamental. The Portfolio generally invests 100% of its assets in
government securities and therefore will satisfy the 99.5% requirement for
designation as a government money market fund.
Market
Exposure
The Portfolio’s
principal strategy is to invest in very high-quality money market instruments.
Also known as cash equivalent investments, these instruments are considered
short term (i.e., they usually mature in 397 days or less). The Portfolio
maintains a dollar-weighted average maturity of 60 days or less and a
dollar-weighted average life of 120 days or less. The Portfolio invests more
than 25% of its assets in money market instruments issued by companies in the
financial services industry, which includes, without limitation, securities
issued by certain government-sponsored enterprises.
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Plain
Talk About Money Market Instruments |
|
The
term “money market instruments” refers to a variety of short-term,
liquid
investments, usually with maturities of 397 days or less. Some
common
types are U.S.
Treasury bills and notes,
which are securities issued
by
the U.S. government; agency
securities,
which are securities issued or
guaranteed
by a U.S. executive agency or government-sponsored enterprise;
commercial
paper,
which is a promissory note issued by a large company or
a
financial firm; banker’s
acceptances,
which are credit instruments
guaranteed
by banks; and negotiable
certificates of deposit,
which are
promissory
notes issued by banks in large denominations. Money market
investments
can pay fixed, variable, or floating rates of
interest. |
The
Portfolio is subject to income risk, which is the chance that the Portfolio's
income will decline because of falling interest rates. The Portfolio's income
declines when interest rates fall because the Portfolio then must invest new
cash flow and cash from maturing instruments in lower-yielding instruments.
Because the Portfolio’s income is based on short-term interest rates—which can
fluctuate significantly over short periods—income risk is expected to be
high.
A low or negative
interest rate environment could magnify the risks associated with changes in
interest rates and adversely affect the Portfolio's return. Low or negative
interest rates, depending on their duration and severity, can prevent the
Portfolio from providing a positive yield to its shareholders, paying expenses
out of current income, and/or achieving its investment objective, including
maintaining a stable share price of $1. A wide variety of market factors can
8
cause interest
rates to rise or fall, including central bank monetary policy, inflationary or
deflationary pressures, and changes in general market and economic
conditions.
Market disruptions
can adversely affect local and global markets as well as normal market
conditions and operations. Any such disruptions could have an adverse impact on
the value of the Portfolio's investments and Portfolio performance.
Security
Selection
Vanguard, advisor
to the Portfolio, selects high-quality money market instruments.
The
Portfolio is subject to manager risk, which is the chance that poor security
selection will cause the Portfolio to underperform relevant benchmarks or other
funds with a similar investment objective.
The Portfolio
invests primarily in securities issued by U.S. governmental agencies and
instrumentalities whose interest and principal payments are backed by the full
faith and credit of the U.S. government, such as those issued by the U.S.
Treasury and the Government National Mortgage Association (GNMA). The Portfolio
also may invest in securities issued by U.S. governmental agencies and
instrumentalities whose interest and principal payments are neither guaranteed
by the U.S. Treasury nor backed by the full faith and credit of the U.S.
government. These agencies and instrumentalities include, among others, the
Federal Home Loan Banks, the Federal National Mortgage Association, and the
Federal Home Loan Mortgage Corporation.
The
Portfolio is subject to industry concentration risk, which is the chance that
there will be overall problems affecting a particular industry. Because the
Portfolio invests more than 25% of its assets in securities issued by companies
in the financial services industry, the Portfolio's performance depends to a
greater extent on the overall condition of that industry and is more susceptible
to events affecting that industry.
More than 25% of
the Portfolio’s assets are invested in instruments issued by companies in the
financial services industry. The Portfolio considers the financial services
industry to include issuers principally engaged in providing financial services
to consumers and industry, such as securities issued by government-sponsored
enterprises, including the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Federal Home Loan Banks, and the Federal
Farm Credit Banks Funding Corporation; U.S. and foreign banks; insurance
companies; real estate-related companies (i.e., companies having at least 50% of
their assets, revenues, or net income related
9
to, or derived
from, the real estate industry); securities firms; and leasing companies, among
others. Because of this concentration, changes in economic, regulatory, and
political conditions that affect financial services issuers could have a
significant effect on the Portfolio. These conditions include changes in
interest rates and defaults in payments by borrowers.
The market values of U.S. government and agency securities and U.S. Treasury securities are subject to fluctuation and the expectation that the U.S. Treasury will be able to honor its obligations.
The market values of U.S. government and agency securities and U.S. Treasury securities are subject to fluctuation and the expectation that the U.S. Treasury will be able to honor its obligations.
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Plain
Talk About U.S. Government-Sponsored Enterprises |
|
A
variety of U.S. government-sponsored enterprises (GSEs), such as the
Federal
Home Loan Mortgage Corporation (FHLMC), the Federal National
Mortgage
Association (FNMA), and the Federal Home Loan Banks (FHLBs),
issue
debt and mortgage-backed securities. Although GSEs may be chartered
or
sponsored by acts of Congress, they are not funded by congressional
appropriations.
In September of 2008, the U.S. Treasury placed FNMA and
FHLMC
under conservatorship and appointed the Federal Housing Finance
Agency
(FHFA) to manage their daily operations. In addition, the U.S. Treasury
entered
into purchase agreements with FNMA and FHLMC to provide them
with
capital in exchange for senior preferred stock. Generally, a GSE’s
securities
are neither issued nor guaranteed by the U.S. Treasury and are not
backed
by the full faith and credit of the U.S. government. In most cases,
these
securities are supported only by the credit of the GSE, standing alone. In
some
cases, a GSE’s securities may be supported by the ability of the GSE to
borrow
from the U.S. Treasury or may be supported by the U.S. government in
some
other way. Securities issued by the Government National Mortgage
Association
(GNMA), however, are backed by the full faith and credit of the
U.S.
government. |
The
Portfolio is subject to credit risk, which is the chance that the issuer of a
security will fail to pay interest or principal in a timely manner or that
negative perceptions of the issuer’s ability to make such payments will cause
the price of that security to decline. Credit risk should be very low for the
Portfolio because it invests primarily in securities that are considered to be
of high quality.
Because some of the
securities included in the Portfolio are not backed by the full faith and credit
of the U.S. government, the potential credit risk and yield for the Portfolio is
higher than if it held only securities backed by the full faith and credit of
the U.S. government.
10
Under certain
circumstances, the exposure to a single issuer could cause the Portfolio to fail
to maintain a share price of $1.
Although the
Portfolio invests in high-quality money market instruments, the Portfolio is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
agency of the U.S. government.
The
Portfolio reserves the right to invest in repurchase agreements, which are
subject to specific risks.
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Plain
Talk About Repurchase Agreements |
|
Repurchase
agreements are contracts in which a bank, securities dealer, or
other
counterparty that meets minimum credit requirements sells
government
securities and agrees to repurchase the securities on a specific
date
(normally the next business day) at a specific
price. |
Repurchase
agreements carry several risks. For instance, if the seller is unable to
repurchase the securities as promised, the Portfolio may experience a loss when
trying to sell the securities to another buyer. Also, if the seller becomes
insolvent, a bankruptcy court may determine that the securities do not belong to
the Portfolio and order that the securities be used to pay off the seller’s
debts. The Portfolio's advisor believes that these risks can be controlled
through careful security and counterparty selection and monitoring.
The
Portfolio reserves the right to invest, to a limited extent, in adjustable-rate
securities, which are a type of derivative.
An adjustable-rate
security’s interest rate, as the name implies, is not set; instead, it
fluctuates periodically. Generally, the security’s yield is based on a U.S.
dollar-based interest rate benchmark such as the federal funds rate, the 90-day
U.S. Treasury bill rate, or another reference rate. Adjustable-rate securities
reset their yields on a periodic basis (e.g., daily, weekly, or quarterly) or
upon a change in the benchmark interest rate. These yields are closely
correlated to changes in money market interest rates.
The Portfolio will
not use derivatives for speculation or for the purpose of leveraging
(magnifying) investment returns.
11
|
Plain
Talk About Derivatives |
|
A
derivative is a financial contract whose value is based on the value of a
financial
asset (such as a stock, a bond, or a currency), a money market
benchmark
(such as U.S. Treasury bill rates or the federal funds effective
rate),
a physical asset (such as gold, oil, or wheat), a market index, or a
reference
rate. |
In addition, the
Portfolio may invest up to 5% of its net assets in illiquid securities. These
are securities that the Portfolio may not be able to sell or dispose of in the
ordinary course of business within seven calendar days at approximately the
value ascribed to it by the Portfolio.
|
Plain
Talk About Weighted Average Maturity and Weighted Average
Life |
|
A
money market fund will maintain a dollar-weighted average maturity
(WAM)
of 60 days or less and a dollar-weighted average life (WAL) of 120
days
or less. For purposes of calculating a fund’s WAM, the maturity of
certain
longer-term adjustable-rate securities held in the portfolio will
generally
be the period remaining until the next interest rate adjustment.
When
calculating its WAL, the maturity for these adjustable-rate securities
will
generally be the final maturity date—the date on which principal is
expected
to be returned in full. Maintaining a WAL of 120 days or less limits
a
fund’s ability to invest in longer-term adjustable-rate securities, which
are
generally
more sensitive to changes in interest rates, particularly in
volatile
markets. |
Cash
Management
The Portfolio's
daily cash balance may be invested in Vanguard Market Liquidity Fund and/or
Vanguard Municipal Cash Management Fund (each, a CMT Fund), which are low-cost
money market funds. When investing in a CMT Fund, the Portfolio bears its
proportionate share of the expenses of the CMT Fund in which it invests.
Vanguard receives no additional revenue from Portfolio assets invested in a CMT
Fund.
Frequent
Trading or Market-Timing
Vanguard
anticipates that investors will purchase and sell shares of money market funds
frequently because these funds are designed to offer investors a liquid
investment. For this reason, the Board has determined that it is not
12
necessary to adopt
policies and procedures designed to detect and deter frequent trading and
market-timing in the money market fund shares. For information on
frequent-trading limits of other Vanguard funds, please see the appropriate
fund’s prospectus.
See
the accompanying prospectus for the annuity or insurance program through which
Portfolio shares are offered for further details on transaction
policies.
The
Portfolio and Vanguard
The Portfolio is a
member of The Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All
of the funds that are members of Vanguard (other than funds of funds) share in
the expenses associated with administrative services and business operations,
such as personnel, office space, and equipment.
Vanguard Marketing
Corporation provides marketing services to the funds. Although fund shareholders
do not pay sales commissions or 12b-1 distribution fees, each fund (other than a
fund of funds) or each share class of a fund (in the case of a fund with
multiple share classes) pays its allocated share of the Vanguard funds’
marketing costs.
Vanguard and the
Board have voluntarily agreed to temporarily limit certain net operating
expenses in excess of the Money Market Portfolio’s daily yield so as to maintain
a zero or positive yield for the Portfolio. Vanguard and the Board may terminate
the temporary expense limitation at any time.
|
Plain
Talk About Vanguard’s Unique Corporate Structure |
|
Vanguard
is owned jointly by the funds it oversees and thus indirectly by the
shareholders
in those funds. Most other mutual funds are operated by
management
companies that are owned by third parties—either public or
private
stockholders—and not by the funds they
serve. |
Investment
Advisor
The Vanguard Group,
Inc., P.O. Box 2600, Valley Forge, PA 19482, which began operations in 1975,
provides investment advisory services to the Portfolio through its Fixed Income
Group pursuant to the Funds' Service Agreement and
13
subject to the supervision and
oversight of the trustees and officers of Vanguard Variable Insurance Funds. As
of December 31, 2022, Vanguard served as advisor for approximately $6 trillion
in assets.
For the fiscal year ended December
31, 2022, the Portfolio’s advisory expenses represented an effective annual rate
of less than 0.01% of the Portfolio’s average net assets.
Under the terms of
an SEC exemption, the board of trustees of Vanguard Variable Insurance Funds
may, without prior approval from shareholders, change the terms of an advisory
agreement with a third-party investment advisor or hire a new third-party
investment advisor—either as a replacement for an existing advisor or as an
additional advisor. Any significant change in the Portfolio’s advisory
arrangements will be communicated to shareholders in writing. As the Portfolio’s
sponsor and overall manager, Vanguard may provide investment advisory services
to the Portfolio at any time. Vanguard may also recommend to the board of
trustees that an advisor be hired, terminated, or replaced or that the terms of
an existing advisory agreement be revised. Vanguard Variable Insurance Funds has
filed an application seeking a similar SEC exemption with respect to investment
advisors that are wholly owned subsidiaries of Vanguard. If the exemption is
granted, the Portfolio may rely on the new SEC relief.
For a discussion of
why the Board approved the Portfolio's investment advisory arrangement, see the
most recent semiannual report to shareholders covering the fiscal period ended
June 30.
The manager
primarily responsible for the day-to-day management of the Portfolio
is:
John
C. Lanius, Portfolio Manager
at Vanguard. He has been with Vanguard since 1996, has worked in investment
management since 1997, has managed investment portfolios since 2004, and has
managed the Money Market Portfolio since 2006. Education: B.A., Middlebury
College.
The Portfolio's
Statement
of Additional Information provides
information about the portfolio manager’s compensation, other accounts under
management, and ownership of shares of the Portfolio.
14
Taxes
The Portfolio
normally distributes its net investment income and net realized short-term or
long-term capital gains, if any, to its shareholders, which are the insurance
company separate accounts that fund your variable annuity or variable life
insurance contract. The tax consequences to you of your investment in the
Portfolio depend on the provisions of the annuity or life insurance contract
through which you invest; please refer to the prospectus of such contract for
more information.
The Portfolio
intends to operate in such a manner that a separate account investing only in
Portfolio shares will result in the variable annuity and variable life insurance
contracts supported by that account receiving favorable tax treatment. This
favorable treatment means that you generally will not be taxed on Portfolio
distributions or proceeds on dispositions of Portfolio shares received by the
separate account funding your contract. In order to qualify for this favorable
treatment, the insurance company separate accounts that invest in the Portfolio
must satisfy certain requirements. If a Portfolio funding your contract does not
meet such requirements, your contract could lose its favorable tax treatment and
income and gain allocable to your contract could be taxable to you. Also, if the
IRS were to determine that contract holders have an impermissible level of
control over the investments funding their contracts, your contract could lose
its favorable tax treatment and income and gain allocable to your contract could
be taxable currently to you. Please see the Portfolio’s Statement
of Additional Information for more
information.
Share
Price
Share price, also
known as net
asset value (NAV), is
calculated as of the close of regular trading on the New York Stock Exchange
(NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for
business (a business day). In the rare event the NYSE experiences unanticipated
disruptions and is unavailable at the close of the trading day, NAVs will be
calculated as of the close of regular trading on the Nasdaq (or another
alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s
discretion), generally 4 p.m., Eastern time. The NAV per share is computed by
dividing the total assets, minus liabilities, of the Portfolio by the number of
Portfolio shares outstanding. On U.S. holidays or other days when the NYSE is
closed, the NAV is not calculated, and the Portfolio does not sell or redeem
shares. However, on those days the value
15
of the Portfolio’s
assets may be affected to the extent that the Portfolio holds securities that
change in value on those days (such as foreign securities that trade on foreign
markets that are open).
The instruments
held by the Money Market Portfolio are generally valued on the basis of
amortized cost. The values of any foreign securities held by a portfolio are
converted into U.S. dollars using an exchange rate obtained from an independent
third party as of the close of regular trading on the NYSE. The values of any
mutual fund shares, including institutional money market fund shares, held by a
portfolio are based on the NAVs of the shares. The values of any ETF shares or
closed-end fund shares held by a portfolio are based on the market value of the
shares.
Although the
Vanguard retail and government money market funds seek to maintain a stable NAV
of $1 per share, a stable share price is not guaranteed. A low or negative
interest rate environment could impact a fund’s ability to provide a positive
yield to its shareholders, pay expenses out of current income, and/or achieve
its investment objective, including maintaining a stable NAV of $1 per
share.
The Portfolio has authorized
certain financial intermediaries and their designees, and may, from time to
time, authorize certain fund of funds for which Vanguard serves as the
investment advisor (Vanguard Funds of Funds), to accept orders to buy or sell
fund shares on its behalf. The Portfolio will be deemed to receive an order when
accepted by the financial intermediary, its designee, or one of the Vanguard
Funds of Funds, and the order will receive the NAV next computed by the
Portfolio after such acceptance.
The Portfolio’s NAV is used to determine the unit value for the annuity or life insurance program through which you invest. For more information on unit values, please refer to the accompanying prospectus of the insurance company that offers your annuity or life insurance program.
The Portfolio’s NAV is used to determine the unit value for the annuity or life insurance program through which you invest. For more information on unit values, please refer to the accompanying prospectus of the insurance company that offers your annuity or life insurance program.
16
Financial
Highlights
Financial
highlights information is intended to help you understand a fund’s performance
for the past five years (or, if shorter, its period of operations). Certain
information reflects financial results for a single fund share. Total return
represents the rate that an investor would have earned or lost each period on an
investment in a fund or share class (assuming reinvestment of all
distributions). This information has been obtained from the financial statements
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, whose report, along with fund financial statements, is included
in a fund’s most recent annual report to shareholders. You may obtain a free
copy of a fund’s latest annual or semiannual report, which is available upon
request.
Yields and total
returns presented for the Portfolio are net of the Portfolio's operating
expenses, but they do not take into account charges and expenses attributable to
the annuity or life insurance program through which you invest. The expenses of
the annuity or life insurance program reduce the returns and yields you
ultimately receive, so you should bear those expenses in mind when evaluating
the performance of the Portfolio and when comparing the yields and returns of
the Portfolio with those of other mutual funds.
|
Vanguard
Money Market Portfolio |
Year Ended December
31, | ||||
|
For a
Share Outstanding Throughout Each Period |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
.0154 |
.0001 |
.005 |
.022 |
.020 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
(.0004) |
— |
— |
— |
— |
|
Total from
Investment Operations |
.0150 |
.0001 |
.005 |
.022 |
.020 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(.0150) |
(.0001) |
(.005) |
(.022) |
(.020) |
|
Distributions
from Realized Capital Gains |
(.0000)2 |
— |
— |
— |
— |
|
Total
Distributions |
(.0150) |
(.0001) |
(.005) |
(.022) |
(.020) |
|
Net
Asset Value, End of Period |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
$1.00 |
|
Total
Return |
1.51% |
0.02% |
0.52% |
2.26% |
1.97% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$1,217 |
$1,106 |
$1,301 |
$1,243 |
$1,218 |
|
Ratio of
Expenses to Average Net Assets3 |
0.14%4 |
0.07% |
0.15% |
0.15% |
0.15% |
|
Ratio of
Net Investment Income to Average Net Assets |
1.54% |
0.01% |
0.49% |
2.23% |
1.97% |
|
|
|
|
1 |
Calculated
based on average shares outstanding. |
|
2 |
Distribution
was less than $0.0001 per share. |
|
3 |
Vanguard
and the board of trustees have agreed to temporarily limit certain net
operating expenses in excess of the
portfolio’s
daily yield in order to maintain a zero or positive yield for the
portfolio. Vanguard and the board of
trustees
may terminate the temporary expense limitation at any time. The portfolio
is not obligated to repay this
amount
to Vanguard. The ratio of total expenses to average net assets before an
expense reduction was 0.15% for
2022,
0.15% for 2021 and 0.15% for 2020. For the years ended December 31, 2019
and 2018, there were no
expense
reductions. |
|
4 |
The
ratio of expenses to average net assets for the period net of reduction
from custody fee offset arrangements
was
0.14%.
|
17
General
Information
This Portfolio of
Vanguard Variable Insurance Funds offers its shares to insurance companies to
fund both annuity and life insurance contracts. Because of differences in tax
treatment or other considerations, the best interests of various contract owners
participating in the Portfolio might at some time be in conflict. The Board will
monitor for any material conflicts and determine what action, if any, should be
taken.
If the Board
determines that continued offering of shares would be detrimental to the best
interests of the Portfolio’s shareholders, the Portfolio may suspend the
offering of shares for a period of time. If the Board determines that a specific
purchase acceptance would be detrimental to the best interests of the
Portfolio’s shareholders (for example, because of the size of the purchase
request or a history of frequent trading by the investor), the Portfolio may
reject such a purchase request.
If you wish to
redeem money from the Portfolio, please refer to the instructions provided in
the accompanying prospectus for the annuity or life insurance program. Shares of
the Portfolio may be redeemed on any business day that the NYSE is open for
trading. The redemption price of shares will be at the next-determined NAV per
share. Redemption proceeds generally will be wired to the administrator within
one business day following receipt of the redemption request, but no later than
seven business days. Contract owners will receive their redemption checks from
the administrator.
Under normal
circumstances, the Portfolio typically expects to meet redemptions with positive
cash flows. When this is not an option, the Portfolio seeks to maintain its risk
exposure by selling a cross section of the Portfolio’s holdings to meet
redemptions, while also factoring in transaction costs. Additionally, the
Portfolio may work with the insurance companies through which contract owners
participate in the Portfolio to implement redemptions in a manner that is least
disruptive to the portfolio.
Under certain
circumstances, including under stressed market conditions, there are additional
tools that the Portfolio may use in order to meet redemptions, including
advancing the settlement of market trades with counterparties to match investor
redemption payments or delaying settlement of an investor’s transaction to match
trade settlement within regulatory requirements. The Portfolio may also suspend
payment of redemption proceeds for up to seven days. Additionally, under these
unusual circumstances, the Portfolio may borrow money (subject to certain
regulatory conditions and if available under
18
board-approved
procedures) through an interfund lending facility; through a bank
line-of-credit, including a joint committed credit facility; or through an
uncommitted line-of-credit from Vanguard in order to meet redemption
requests.
The Portfolio may
suspend the redemption right or postpone payment at times when the NYSE is
closed or during any emergency circumstances, as determined by the SEC. In
connection with a determination by the Board, in accordance with Rule 22e-3
under the Investment Company Act of 1940, a money market fund may suspend
redemptions and postpone payment of redemption proceeds in order to facilitate
an orderly liquidation of the fund.
The exchange
privilege (your ability to redeem shares from one Portfolio to purchase shares
of another Portfolio) may be available to you through your contract. Although we
make every effort to maintain the exchange privilege, Vanguard reserves the
right to revise or terminate this privilege, limit the amount of an exchange, or
reject any exchange, at any time, without notice.
The Portfolio may pay redemption proceeds, in
whole or in part, by an in-kind distribution of readily marketable securities if
Vanguard determines that it would be detrimental to the best interests of the
Portfolio's remaining shareholders to pay redemption proceeds in cash.
For certain
categories of investors, the Portfolio has authorized one or more brokers to
accept on its behalf purchase and redemption orders. The brokers are authorized
to designate other intermediaries to accept purchase and redemption orders on
the Portfolio’s behalf. The Portfolio will be deemed to have received a purchase
or redemption order when an authorized broker, or a broker’s authorized
designee, accepts the order in accordance with the Portfolio’s instructions. In
most cases, for these categories of investors, a contract owner’s properly
transmitted order will be priced at the Portfolio’s next-determined NAV after
the order is accepted by the authorized broker or the broker’s designee. The
contract owner should review the authorized broker’s policies relating to
trading in the Vanguard funds.
Please consult the
Portfolio’s Statement
of Additional Information or our website for
a description of the policies and procedures that govern disclosure of the
Portfolio's portfolio holdings.
19
The Portfolio's
Bylaws require, unless the Trust otherwise consents in writing, that the U.S.
Federal District Courts be the sole and exclusive forum for the resolution of
complaints under the Securities Act of 1933. This provision may limit a
shareholder’s ability to bring a claim in a different forum and may result in
increased shareholder costs in pursuing such a claim.
Shareholder
Rights
The Portfolio's
Agreement and Declaration of Trust, as amended, requires a shareholder bringing
a derivative action on behalf of Vanguard Variable Insurance Funds (the Trust)
that is subject to a pre-suit demand to collectively hold at least 10% of the
outstanding shares of the Trust or at least 10% of the outstanding shares of the
series or class to which the demand relates and to undertake to reimburse the
Trust for the expense of any counsel or advisors used when considering the
merits of the demand in the event that the board of trustees determines not to
bring such action. In each case, these requirements do not apply to claims
arising under the federal securities laws to the extent that any such federal
securities laws, rules, or regulations do not permit such
application.
20
Glossary
of Investment Terms
Cash
Equivalent Investments. Cash deposits,
short-term bank deposits, and money market instruments that include U.S.
Treasury bills and notes, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker’s acceptances.
Dividend
Distributions. Payments to
portfolio shareholders of income from interest or dividends generated by a
portfolio's investments.
Expense
Ratio.
A portfolio's total annual operating expenses expressed as a percentage of the
portfolio's average net assets. The expense ratio includes management and
administrative expenses, but it does not include the transaction costs of buying
and selling portfolio securities.
FTSE
3-Month U.S. Treasury Bill Index. An index that
measures the performance of short-term U.S. government debt securities and
accrues income on a monthly basis.
Inception
Date.
The date on which the assets of a portfolio are first invested in accordance
with the portfolio's investment objective. For portfolios with a subscription
period, the inception date is the day after that period ends. Investment
performance is generally measured from the inception date.
Joint
Committed Credit Facility. The Portfolio
participates, along with other funds managed by Vanguard, in a committed credit
facility provided by a syndicate of lenders pursuant to a credit agreement that
may be renewed annually; each Vanguard fund is individually liable for its
borrowings, if any, under the credit facility. The amount and terms of the
committed credit facility are subject to approval by the Portfolio's board of
trustees and renegotiation with the lender syndicate on an annual
basis.
Money
Market Instruments. Short-term, liquid
investments (usually with a maturity of 397 days or less) that include U.S.
Treasury bills and notes, agency securities, bank certificates of deposit (CDs),
repurchase agreements, commercial paper, and banker’s acceptances.
Mutual
Fund.
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over
time.
New
York Stock Exchange (NYSE). A stock exchange
based in New York City that is open for regular trading on business days, Monday
through Friday, from 9:30 a.m. to 4 p.m., Eastern time.
21
Principal. The face value of
a debt instrument or the amount of money put into an investment.
Securities. Stocks, bonds,
money market instruments, and other investments.
Stable
Net Asset Value (NAV). A share price that
maintains a consistent value (e.g., $1.00 or $100.00) using special pricing and
valuation conventions.
Total
Return. A percentage
change, over a specified time period, in a portfolio's net asset value, assuming
the reinvestment of all distributions of dividends and capital
gains.
Variable
Insurance Money Market Funds Average. The average
performance of open-end investment companies classified as variable annuity
funds by Lipper that invest in high-quality financial instruments rated in the
top two grades with dollar-weighted average maturities of less than 90 days.
These funds intend to keep constant net asset value.
Volatility. The fluctuations
in value of a mutual fund or other security. The greater a portfolio's
volatility, the wider the fluctuations in its returns.
Yield. Income (interest
or dividends) earned by an investment, expressed as a percentage of the
investment’s price.
22
Connect
with Vanguard®
˃
vanguard.com
For
More Information
If you would
like more information about Vanguard Variable Insurance Funds Money Market
Portfolio, the following documents are available free upon request:
Annual/Semiannual
Reports to Shareholders
Additional
information about the Portfolio's investments is available in the Portfolio's
annual and semiannual reports to shareholders.
Statement
of Additional Information (SAI)
The SAI
provides more detailed information about the Portfolio and is incorporated by
reference into (and thus legally a part of) this prospectus.
To receive a
free copy of the latest annual or semiannual reports or the SAI, or to request
additional information about the Portfolio or other Vanguard funds, please visit
vanguard.com or contact us
as follows:
Telephone:
800-522-5555; Text telephone for people with hearing impairment:
800-749-7273
Information
Provided by the SEC
Reports and
other information about the Portfolio are available in the EDGAR database on the
SEC’s website at sec.gov, or you can receive copies of this information, for a
fee, by electronic request at the following email address:
[email protected].
Portfolio's
Investment Company Act file number: 811-05962
© 2023 The
Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
P 104 042023
Vanguard Marketing Corporation, Distributor.
P 104 042023