Vanguard VIF Moderate Allocation Portfolio

Objective And Strategy

Objective
The investment seeks to provide capital appreciation and a low to moderate level of current income.

Strategy
Vanguard Variable Insurance Fund Moderate Allocation Portfolio uses a moderate approach and emphasizes broad diversification to moderate risk in pursuit of long-term capital appreciation, reasonable current income, and capital preservation. The portfolio seeks current income through short-, intermediate-, and long-term U.S. government, agency, and corporate bonds, and long-term capital appreciation through broadly diversified exposure to the major stock markets in and outside the United States.
Low Cost Fund

Principal Risks

* This portfolio invests in securities of foreign issuers which involves risks not typically associated with domestic issuers, including currency fluctuations and the possibility of political and economic instability. Emerging markets involve risks in addition to those generally associated with foreign securities, because political and economic structures in many emerging markets may be undergoing significant evolution and rapid development.

* The portfolio's exposure to the US Dollar Index and/or foreign currencies subjects the portfolio to the risk that foreign currencies will fluctuate in value relative to the US Dollar or, in the case of short position, that the US Dollar will decline in value to the currency being hedged. Currency rates in foreign countries may move significantly over short periods of time for a number of reasons including changes in interest rates, the imposition of currency controls or other political developments in the US or abroad.

* This Fund may invest in publicly issued equity securities, including common stocks. Investments in common stocks are subject to market risks that may cause their prices to fluctuate over time.

* This fund has a risk of prepayment and extension. A mortgage backed bond, unlike other bonds can be hurt when interest rates fall because homeowners refinance and prepay principal. Receiving increasing prepayments in a falling interest rate environment cause the average maturity of the portfolio to shorten, reducing its potential for price gains. It requires the fund to reinvest at lower interest rates, which reduced the portfolio's total return and yield, and may cause certain bond prices to fall below the level the fund paid for them, resulting in a capital loss.

* Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. When interest rates rise, fixed income security prices fall. When interest rates fall, fixed income security prices rise.

* Credit risk is the risk that the issuer of a security may be unable to make interest payments and/or repay principal when due. A downgrade to an issuer's credit rating or a perceived change in an issuer's financial strength may affect a security's value, and thus, impact the VA Short-Term Fixed Portfolio's performance.

* During periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the portfolio to reinvest in lower yielding securities.

* There is no assurance that the objective or target return of the portfolio will be met. A moderate portfolio will accept moderate risks in order to achieve higher long term returns.