ADVISORY AGREEMENT
Agreement, made as of this 1st day of May, 1993, between Vanguard Equity Income
Fund, Inc., a Maryland Corporation, (the "Fund") and Xxxxxx Associates. a
California corporation (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"): and
WHEREAS, the Fund desires to retain the Adviser to render investment advisory
services to the Fund, and the Adviser is willing to render such services;
Now, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises hereinafter set
forth, the parties hereto agree as follows:
. 1. Appointment of Adviser. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund 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. Advisory Duties. Subject to the supervision of the Board of Directors of
the Fund, the Adviser shall manage the investment operations of the Fund
and the composition of the Fund's portfolio, including the purchase,
retention and disposition thereof, in accordance with the Fund's investment
objective and policies as stated in the Registration Statement (as defined
in paragraph 3(d) of this Agreement) and subject to the following
understandings:
(a) The Adviser shall provide supervision of the Fund's investments,
furnish a continuous investment program for the Fund's portfolio, determine
from time to time what investments or securities will be purchased,
retained or sold by the Fund, and what portion of the assets will be
invested or held uninvested as cash;
(b) The Adviser shall use the same skill and care in the management of
the Fund's portfolio as it uses in the administration of other fiduciary
accounts for which it has investment responsibility;
(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws and Registration Statement of the Fund and with the
instructions and directions of the Board of Directors of the Fund and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations;
(d) The Adviser shall determine the securities to be purchased or sold
by the Fund - and will place orders pursuant to its determinations either
directly with the issuer or with any broker and/or dealer who deals in the
securities in which the Fund is active. The Adviser is directed to use its
best efforts to obtain the best available price and
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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 was 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 Fund. 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;
On occasions when the Adviser deems the purchase or sale of a security to be in
the best interest of the Fund as well as other clients, the Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the best execution and
lower brokerage commissions, if any In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other clients;
(e) The Adviser shall maintain books and records with respect to the
Fund's securities transactions and shall render to the Fund's Board of
Directors such periodic and special reports as the Board may reasonably
request;
(f) The Adviser shall provide the Fund on each business day with a list of
all securities transactions for that day;
(g) The investment advisory services of the Adviser to the Fund under this
Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others.
3. Documents Delivered. The Fund has delivered to the Adviser copies of each of
the following documents and will deliver to it all future amendments and
supplements, if any:
(a) Amended and Restated Articles of Incorporation of the Fund, dated
November 4, 1987 (such Articles of Incorporation, as presently in effect
and as amended from time to time, is herein called the "Articles of
Incorporation");
(b) By-Laws of the Fund (such By-Laws, as presently in effect and as
amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Fund
authorizing the appointment of the Adviser and approving the form of this
Agreement;
(d) The Fund's Registration Statement under the Securities Act of
1933, on Form N-1A (the "Registration Statement") as filed with the
Securities and Exchange Commission (the "Commission") on March 1, 1988,
relating to shares of the Fund's Common Stock, and all amendments thereto;
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(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission on January 5, 1988, and all
amendments thereto.
4. Books and Records. The Adviser shall keep the Fund's books and records
required to be maintained by it pursuant to paragraph 2(e) hereof. The Adviser
agrees that all records which it maintains for the Fund are the property of the
Fund and it will surrender promptly to the Fund any of such records upon the
Fund's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31 a-2 of the Commission under the 1940 Act any such records
as are required to be maintained by Rule 31a-1(F) of the Commission under the
1940 Act.
5. Reports to Adviser. The Fund agrees to furnish the Adviser at its principal
office all prospectuses, proxy statements, reports to stockholders, sales
literature, or other material prepared for distribution to shareholders of the
Fund or the public, which refer in any way to the Adviser, ten (10) days prior
to use thereof and not to use such material if the Adviser should object thereto
in writing within seven (7) days after receipt of such material. In the event of
termination of this Agreement,-the Fund will, on written request of the Adviser,
forthwith delete any reference to the Adviser from any materials described in
the preceding sentence. The Fund shall furnish or otherwise make available to
the Adviser such other information relating to the business affairs of the Fund
as the Adviser at any time, or from time to time, reasonably requests in order
to discharge its obligations hereunder.
6. Expenses. During the term of this Agreement the Adviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities purchased for the Fund and the taxes, and brokerage
commissions, if any, payable in connection with the purchase and/or sale of such
securities.
7. Compensation. For the services to be rendered by the Adviser as provided in
this Agreement, the Fund shall pay to the Adviser at the end of the Fund's
fiscal quarters, a fee calculated by applying a quarterly rate, based on the
following annual percentage rates, to the Fund's average month-end assets for
the quarter:
0.200% on the first $250 million of net assets of the Fund.
0.150% on the next $500 million of net assets.
0.100% on the next $250 million of net assets.
0.080% on the net assets of the Fund in excess of $1 billion.
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.
8. Limitation of Liability. In the absence of (i) wilful misfeasance or gross
negligence on the part of the Adviser in performance of its obligations and
duties hereunder, (ii) reckless disregard by the Adviser of its obligations and
duties hereunder, or (iii) a loss resulting from a beach 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
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amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not be
subject to any liability whatsoever to the Fund, or to any shareholder of the
Fund, 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 that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Fund.
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
any such laws.
9. Duration and Termination. This Agreement, unless sooner terminated as
provided herein shall continue until April 30, 1995, and shall thereafter
continue thereafter automatically 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 periods (as defined in the 0000 Xxx) of
any such party, cast in person at a meeting called for the purpose of voting
such approval, and (b) by the Board of Directors of the Fund or by vote as a
majority of the outstanding voting securities of the Fund. This Agreement may be
terminated by 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 Fund on 60 days' written
notice to the Adviser. This Agreement may also be terminated by the Adviser on
90 days' written notice to the Fund. This Agreement will automatically, and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
10. Independent Contractor. The Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Board of Directors of the Fund from time to time,
have no authority to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
11. Amendment of Agreement. This Agreement may be amended by mutual consent, but
the consent of the Fund must be approved (a) by 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 amendment, and (b) by vote of a
majority of the outstanding voting securities of the Fund. a
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
(SEAL)
ATTEST:
VANGUARD EQUITY INCOME FUND, INC.
/S/Xxxxxxx X Xxxxxxxxx By /S/Xxxx X Xxxxx
Secretary Chairman and Chief Executive Officer
ATTEST:
XXXXXX ASSOCIATES
/S/Xxxxxx Xxxx By /S/Xxxxx X Xxxxxx
Secretary Chairman
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