DRAFT
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 8th day of January, 2007, between
Vanguard Windsor Funds, a StateDelaware statutory trust (the "Trust"), and
Lazard Asset Management LLC (the "Advisor"), a placeStateDelaware limited
liability company.
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 Windsor
II Fund (the "Fund"); and
WHEREAS, the Trust desires to retain the Advisor to render investment
advisory services to the Fund, and the Advisor is willing to render such
services.
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 "Lazard Portfolio"), 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 Lazard Portfolio; to
continuously review, supervise, and administer an investment program for the
Lazard Portfolio; to determine in its discretion the securities 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
the 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 objective, 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
Lazard Portfolio, and is directed to seek to obtain best execution for such
transactions consistent with Section 28(e) of the Securities Exchange Act of
1934, and subject to written policies and procedures provided to the Advisor.
The Advisor will promptly communicate to the Trust's officers and the Board of
Trustees such information relating to portfolio transactions as they may
reasonably request.
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 amount (the "Total Advisory
Fee") equal to a base fee ("Base Fee") plus a performance adjustment amount
("Performance Adjustment"), as specified in Schedule A.
5. Reports. The Fund and the Advisor agree to furnish to each other
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. The Fund acknowledges receipt of
Part II of the Advisor's Form ADV. The Fund hereby agrees to provide to the
Advisor with reasonable advance notice, in writing, of: (i) any change to the
Fund's investment objectives, policies and restrictions as stated in the
prospectus; (ii) any change to the Trust's declaration of trust or by-laws that
is material to the services to be provided by the Advisor; or (iii) any material
change in the Trust's compliance procedures. In addition to such notice, the
Fund shall provide to the Advisor a copy of a modified Prospectus and copies of
the revised Trust compliance procedures, as applicable, reflecting such changes.
6. Compliance. The Advisor agrees to comply with all Applicable Law and
all policies, procedures, or reporting requirements that the Board of Trustees
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, 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 in
relation to the Lazard Portfolio.
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. No provision of this Agreement will be deemed
to protect the Advisor 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. Limitations on Consultations. The Advisor is prohibited from
consulting with other advisors of the Fund 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
two years thereafter, and shall continue in effect for successive twelve-month
periods thereafter, only so long as each such continuance is approved at least
annually by the Board of Trustees, including a majority of those 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 or by vote of a majority of the outstanding voting securities of the
Fund, on thirty days' written notice to the Advisor, (ii) this
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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:
If to the Fund, at:
Vanguard Windsor II 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:
Lazard Asset Management LLC
00 Xxxxxxxxxxx Xxxxx 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Telephone: 000-000-0000
Facsimile: 000-000-0000
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.
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 shall keep confidential any and all
information obtained in connection with the services rendered hereunder and
shall not disclose any such information to any person other than the Trust, the
Board of Trustees, 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, 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 Lazard
Portfolio.
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 placeStateDelaware applicable to contracts made and to be performed in that
state.
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15. Use of Advisor's Name. It is understood that the name "Lazard Asset
Management" or "Lazard" and the logo associated with these names is the valuable
property of the Advisor. During the term of this Agreement, the Fund and
Vanguard shall have permission to use the Advisor's name in the marketing of the
Fund, and agrees to furnish the Advisor all prospectuses, proxy statements, and
reports to shareholders prepared for distribution to shareholders of the Fund or
the public, which refer to the Advisor in any way.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of the date first set forth herein.
Lazard Asset Management LLC Vanguard Windsor Funds
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Signature Date Signature Date
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