INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of May, 1996, by and between VANGUARD
FIXED INCOME SECURITIES FUND, 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, as amended, offering
several diversified investment Portfolios, each having its own objectives and
policies; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund's GNMA Portfolio, Long-Term Corporate Portfolio,
High Yield Corporate 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 GNMA Portfolio, Long-Term Corporate
Portfolio, High Yield Corporate 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 employs the Adviser to manage the investment
and reinvestment of the assets of the Fund's GNMA Portfolio, Long-Term
Corporate and High Yield Corporate Portfolios, to continuously review,
supervise and administer the investment program of each of these
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 select the brokers or
dealers that will execute the purchases and sales of securities for the
GNMA Portfolio, Long-Term Corporate and High Yield Corporate Portfolios of
the Fund and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed herein.
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 amount of commission is
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 Portfolio, the Fund and the other Funds in the same Fund
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 this Agreement, the GNMA Portfolio, Long-Term Corporate and
High Yield Corporate Portfolios shall pay to the Adviser at the end of each
of the Fund's fiscal quarters, an aggregate fee calculated by applying a
quarterly rate, based on the following annual percentage rates, to the
total average month-end net assets of said three Portfolios for the
quarter:
GNMA PORTFOLIO
0.020% on the first $3 billion of net assets of the Portfolio; 0.010% on
the next $3 billion of net assets of the Portfolio; 0.008% on the net
assets of the Portfolio over $6 billion.
LONG-TERM CORPORATE PORTFOLIO
0.040% on the first $1 billion of net assets of the Portfolio; 0.030% on
the next $1 billion of net assets of the Portfolio; 0.020% on the next $1
billion of net assets of the Portfolio; 0.0 15% on the net assets of the
Portfolio over $3 billion.
HIGH YIELD CORPORATE PORTFOLIO
0.060% on the first $1 billion of net assets of the Portfolio; 0.040% on
the next $1 billion of net assets of the Portfolio; 0.030% on the next $~
billion of net assets of the Portfolio; 0.025% on the net assets of the
Portfolio over $3 billion.
The fee, as determined above, shall be allocated to each Portfolio based on
the relative net assets of each. In the event of termination of this Agreement,
the fee provided in this paragraph 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 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.
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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, officers or partners, or otherwise; directors,
officers, agents and partners of the Adviser are or may be interested in
the Fund as directors, officers, shareholders or otherwise; and the Adviser
(or any successor) is or may be interested in 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 Investment Company Act of
1940.
10. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall continue as to each Portfolio until April 30 1998,
and thereafter, for periods of one year so long as such continuance is
specifically approved at least annually by vote of the Fund's Board of
Directors, including the vote of a majority of the Directors 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. In
addition, the question of continuance of the Agreement may be presented to
the shareholders of the Fund; in such event, such continuance shall be
effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of the Fund.
This Agreement may be terminated by any Portfolio 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, or
by the Adviser at any time, without the payment of any penalty, on 90 day's
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", 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)(l9) and
Section 2(a)(42) of the Investment Company Act of 1940.
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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 1st day of May, 1996.
ATTEST VANGUARD FIXED INCOME
SECURITIES FUND, INC.
By _______________________ By _______________________
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SECRETARY PRESIDENT ARD CHIEF EXECUTIVE OFFICER
ATTEST: WELLINGTON MANAGEMENT
COMPANY
By _______________________ By _______________________
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