INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of February, 2006, between VANGUARD
SPECIALIZED FUNDS, a Delaware statutory trust (the "Trust"), and M&G INVESTMENT
MANAGEMENT LIMITED, a corporation organized under the laws of England and
authorized and regulated by the Financial Services Authority of the United
Kingdom (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 VANGUARD PRECIOUS METALS
AND MINING FUND (the "Fund"); and
WHEREAS, the Trust retains the Advisor to render investment advisory services
to the Fund under an Investment Advisory Agreement, dated as of April 28, 1999,
as amended as of December 11, 2000 (the "Prior Agreement");
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 "M&G Portfolio"). As of the date of this
Agreement, the M&G Portfolio will consist of the portion of the assets of the
Fund that the Board of Trustees has determined to assign to the Advisor, 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 M&G Portfolio; to continuously review,
supervise, and administer an investment program for the M&G Portfolio; to
determine in its discretion the securities, bullion, and coins 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
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 objectives, 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 M&G
Portfolio, and is directed to use its best efforts to obtain best execution for
such transactions. In selecting brokers or dealers to execute trades for the M&G
Portfolio, the Advisor will comply with all applicable statutes, rules,
interpretations by the Securities and Exchange Commission or its staff, other
applicable law, and the written policies and procedures established by the
Fund's Board of Trustees and communicated to the Advisor in writing.
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 therefore, an investment advisory fee at
the rate specified in Schedule A to this Agreement. The fee will be calculated
based on annual percentage rates applied to the average month-end net assets of
the M&G Portfolio and will be paid to the Advisor quarterly.
5. REPORTS. The Fund and the Advisor agree to furnish to each other (so far as
applicable) 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, including, but not
limited to, information about changes in senior management or ownership of the
Advisor. The Fund shall furnish or otherwise make available to the Advisor such
other information relating to the business affairs of the Fund as the Advisor at
any time, or from time to time, reasonably requests in order to discharge its
obligations hereunder.
The Fund agrees to furnish to the Advisor all Fund prospectuses, statements of
additional information, proxy statements and reports to shareholders which refer
in any way to the Advisor or the M & G Portfolio. The Fund also agrees similarly
to furnish to the Advisor any sales literature or other material prepared for
distribution to shareholders of the Fund or the public in the event that they
contain references to the Advisor or the M & G Portfolio that materially depart
from language that appears in the Fund's prospectus or shareholder reports, or
that has not been previously reviewed by the Advisor. In the event of
termination of this Agreement, the Fund will, on written request of the Advisor,
forthwith delete any reference to the Advisor from any Fund materials.
6. COMPLIANCE. The Advisor agrees to comply with all Applicable Law and all
policies, procedures or reporting requirements that the Board of Trustees of the
Trust 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 amended from time to time, and (ii) any and all other laws, rules,
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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.
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. In the absence of (i) misfeasance and negligence, on
the part of the Advisor in performance of its obligations and duties hereunder
or (ii) a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages shall
be limited to the period and the amount set forth in Section 36(b)(3) of the
1940 Act), the Advisor and its officers, directors, employees and shareholders
shall not be subject to any liability whatsoever to the Fund, or to the
shareholders of the Fund, and the Fund shall indemnify such persons for any
error of judgment, mistake of law or any other act or omission in the course of,
or connected with, rendering services hereunder including, without limitation,
for any losses which may be sustained in connection with the purchase, holding,
redemption or sale of any security or other investment on behalf of the
Portfolio. Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and therefore nothing herein
shall in any way constitute a waiver or limitation of any rights which the Fund
may have under such laws.
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 will become
effective on the date hereof and will continue in effect for a period of one
year thereafter, and shall continue in effect for successive twelve-month
periods thereafter, only so long as this Agreement is approved at least annually
by votes of the Trust's Board of 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 of the Trust or by vote of a majority of the outstanding voting
securities of the Fund, on thirty 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:
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If to the Fund, at:
Vanguard Precious Metals and Mining Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Advisor, at:
M&G Investment Management Limited
Xxxxxxxx Xxxxxxxx Xxxx
Xxxxxx, XX0X OHH, England
Attention: Xxxxxxxx Xxxx
Telephone: 000 0000 0000
Facsimile: 020 7548 3008
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 of the Trust.
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 and the Trust 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 of the Trust, 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 of the Trust, or Vanguard.
13. PROXY POLICY. The Advisor acknowledges that Vanguard will vote the shares
of all securities that are held by the Fund unless other mutually acceptable
arrangements are made with the Advisor with respect to the M&G Portfolio.
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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.
M&G INVESTMENT MANAGEMENT LIMITED VANGUARD SPECIALIZED FUNDS
/s/ Xxxxxx Xxxxxxxxxxx 03/28/2006 /s/Xxxx X. Xxxxxxx 04/04/2006
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Signature Date Signature Date
Xxxxxx Xxxxxxxxxxx Xxxx X. Xxxxxxx
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