INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of May, 1996, by and between VANGUARD
SPECIALIZED PORTFOLIOS, INC., a Maryland corporation, (the "Fund"), and
WELLINGTON MANAGEMENT COMPANY, a Massachusetts partnership (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended, offering several diversified investment Portfolios, each having its own
objective and policies; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund's Energy Portfolio, Health Care Portfolio,
Utilities Income Portfolio _and such other Portfolios as may hereafter be
offered by the Fund and assigned to the Adviser, and the Adviser is willing to
render such services;
NOW THEREFORE, in consideration of mutual covenants herein contained, the
parties hereto agree as follows:
1. Appointment of Adviser. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund's Energy Portfolio, Health Care Portfolio,
Utilities Income Portfolio and such other Portfolios as may hereafter be offered
by the Fund and assigned to the Adviser, for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. Duties of Adviser. The Fund hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund's said Portfolios to
continuously review, supervise and administer .the investment program of each of
the Portfolios, to determine in its discretion the securities to be purchased or
sold and the portion of each such Portfolio's assets to be held uninvested, to
provide the Fund with records concerning the Adviser's activities which the Fund
is required to maintain, and to render regular reports to the Fund's officers
and Board of Directors concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Directors of the Fund,
and in compliance with the objectives, policies and limitations for each
Portfolio set forth in the Fund's prospectus and applicable laws and
regulations. The Adviser accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Adviser is authorized to use its best
judgment to select the brokers or dealers that will execute the purchases and
sales of securities for each of the Fund's Portfolios and is directed to use its
best efforts to obtain the best available price and most favorable execution,
except as prescribed therein. Subject to policies established by the Board of
Directors of the Fund, the Adviser may also be authorized to effect individual
securities transactions at commission rates in excess of the minimum. commission
rates available, if the Adviser determines in good faith that such rates were
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 the Adviser's overall responsibilities with respect to the
Portfolios, the Fund and the other Funds in The Vanguard Group. 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. The Adviser will promptly
communicate to the officers and Directors of the Fund such information relating
to portfolio transactions as they may reasonably request.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser as provided in Section 2 of this Agreement, the Fund shall pay to the
Adviser at the end of each of the Fund's fiscal quarters, a fee calculated by
applying a quarterly rate, based on the following annual percentage rates to the
aggregate average month-end net assets of the Fund's Portfolios for which the
Adviser serves as investment adviser for the quarter:
0.150% on the first $500 million of the aggregate net assets of the Portfolios;
0.125% on the next $500 million of the aggregate net assets of the Portfolios;
0.100% on the next $1 billion of the aggregate net assets of the Portfolios;
0.075% on the next $1 billion of the aggregate net assets of the Portfolios;
0.050% on the aggregate net assets of the Portfolios in excess of $3 billion.
The fee, as determined above, shall be allocated to each Portfolio based on
the relative net assets of each. Provided, however, that the maximum annual fee
rate to be paid by the Utilities Income Portfolio shall be 0.08% of such
Portfolio's average annual net assets.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current fiscal quarter as a percentage of
the total number of days in such quarter.
5. Other Services. At the request of the Fund, the Adviser in its
discretion may make available to the Fund (or to The Vanguard Group, Inc., its
service company) office facilities, equipment, personnel and other services.
Such office facilities, equipment, personnel and services shall be provided for
or rendered by the Adviser and billed to the Fund at the Adviser's cost.
6. Reports. The Fund and the Adviser agree to furnish to each other current
prospectuses, proxy statements, reports to shareholders, certified copies of
their financial statements, and such other information, including changes in
partners of the Adviser, with. regard to their affairs as each may reasonably
request.
7. Status of the Adviser. The services of the Adviser to the Fund are not
to be deemed exclusive, and'the Adviser shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby. The
Adviser shall be deemed to be an independent contractor and shall, 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.
8. Liability of Adviser. No provision of this Agreement shall be deemed to
protect the Adviser 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. Permissible Interests. Subject to and in accordance with the charters of
the Fund and the Adviser, respectively, Directors, agents and shareholders of
the Fund are or may be interested in the Adviser (or any successor thereof) as
Directors, partners, officers or shareholders, or otherwise; Directors, officers
employees and partners of the Adviser are or may be interested in the Fund as
Directors, shareholders or otherwise; and the Adviser (or any successor) is or
may be interested in
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the Fund as a shareholder or otherwise; and that the effect of any such
interrelationships shall be governed by said charters and provisions of the 1940
Act:
10. Duration and Termination. This Agreement, unless sooner terminated as
provided herein, shall continue until April 30, 1998, and thereafter for periods
of one year so long as such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of
Directors of the Fund 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 approval, and (b) by the Board of Directors of the Fund or by
vote of a majority of the outstanding voting securities of each Portfolio of the
Fund; provided however, that if the holders of any Portfolio fail to approve the
Agreement as provided herein, the Adviser may continue to serve in such capacity
in the manner and to the extent permitted by the 1940 Act and Rules thereunder.
This Agreement may be terminated by any Portfolio of the Fund at any time,
without the payment of any penalty, by vote of a majority of the entire Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Portfolio on 60 days' written notice to the Adviser. This
Agreement may be terminated by the Adviser at any time, without the payment of
any penalty, upon 90 days' written notice to the Fund. This Agreement will
automatically and immediately terminate in the event of its assignment. Any
notice under this Agreement shall 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 10, the terms "assignment", "interested persons",
and a "vote of a majority of the outstanding voting securities" shall 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 shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. Proxy Policy. With regard to the solicitation of shareholder votes, the
Fund shall vote the shares of all Portfolio securities held by the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 1 st day of May, 1996.
ATTEST VANGUARD SPECIALIZED
PORTFOLIOS, INC.
Xxxxxxx X. Xxxxxxxxx By Xxxx X. Xxxxxxx
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Secretary President and Chief Executive Officer
ATTEST WELLINGTON MANAGEMENT COMPANY
By Xxxxxx X. XxXxxxxxx
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