INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of December, 2003, between
VANGUARD WINDSOR FUNDS, a Delaware statutory trust (the "Trust"), and HOTCHKIS
AND WILEY CAPITAL MANAGEMENT, LLC, a Delaware limited liability company (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 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 "H&W Portfolio"). As of the
date of this Agreement, the H&W 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 H&W Portfolio; to continuously
review, supervise, and administer an investment program for the H&W 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 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 H&W
Portfolio, and is directed to use its best efforts to obtain the best available
price and most favorable execution for such transactions. To the extent
expressly permitted by the written policies and procedures established by the
Board of Trustees, and subject to Section 28(e) of the Securities Exchange Act
of 1934, as amended, any interpretations thereof by the Securities and Exchange
Commission (the "SEC") or its staff, and other applicable law, the Advisor is
permitted to pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities to the accounts as to which it exercises
investment discretion. The execution of such transactions in conformity with the
authority expressly referenced in the immediately preceding sentence shall not
be deemed to represent an unlawful act or breach of any duty created by this
Agreement or otherwise. The Advisor agrees to use its best efforts to comply
with any directed brokerage or other brokerage arrangements that the Fund
communicates to the Advisor in writing. The Advisor will promptly communicate to
the Trust's officers and the Board of Trustees any information relating to the
portfolio transactions the Advisor has directed on behalf of the H&W Portfolio
as such officers or the Board 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 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 H&W Portfolio and will be paid to the Advisor quarterly.
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, including, but not limited to,
information about changes in partners of the Advisor.
6. COMPLIANCE. The Advisor agrees to comply with 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 directed brokerage arrangements.
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.
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9. DURATION; TERMINATION; NOTICES; AMENDMENT. This Agreement will become
effective on the date hereof and will continue in effect for a period of three
years 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:
If to the Fund, at:
Vanguard Windsor Funds - Vanguard Windsor II Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Advisor, at:
Hotchkis and Wiley Capital Management, LLC
Attention: Compliance Department
000 Xxxxx Xxxxxxxx Xx, 00xx Xxx.
Xxx Xxxxxxx, XX 00000-0000
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 of the Trust.
As used in this Section 9, 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.
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10. 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.
11. CONFIDENTIALITY. The Advisor 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 Directors 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
Directors of the Trust, or Vanguard.
12. 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 H&W
Portfolio.
13. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the date first set forth herein.
HOTCHKIS AND WILEY CAPTIAL MANAGEMENT, LLC VANGUARD WINDSOR FUNDS
/S/ XXXXX X. XXXXXX 12/1/2003 /S/ R. XXXXXXX XXXXXX 11/24/2003
Signature Date Signature Date
Xxxxx X. Xxxxxx 12/1/2003 R. Xxxxxxx Xxxxxx 11/24/2003
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Print Name Date Print Name Date
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VANGUARD WINDSOR II FUND
INVESTMENT ADVISORY AGREEMENT ADDENDUM
EFFECTIVE MAY 1, 2006
This Addendum amends Section 13.1 of Schedule A of the Investment Advisory
Agreement dated December 1, 2003 between Vanguard Windsor Funds (the "Trust")
and Hotchkis and Wiley Capital Management, LLC ("H&W," or the "Advisor") for the
management of a portion of Vanguard Windsor II Fund (the "Fund"), a series of
the Trust, as follows:
A. AMENDMENT
1.1. CALCULATION OF THE BASE FEE. The Base Fee for each fiscal quarter of the
Fund is calculated by multiplying an Annual Percentage Rate (shown below) to the
average daily net assets of the H&W Portfolio during such fiscal quarter, and
dividing the result by four. The Fund's fiscal quarter ends are the months
ending January, April, July, and October.
Annual Percentage Rate Schedule
-------------------------------
Average Net Assets Annual Percentage Rate
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In the event of termination of this Agreement, the fee provided in this Section
for the period beginning on the first day of the then-current fiscal quarter and
ending on the last business day on which this Agreement is in effect (the "Short
Quarter") shall be calculated by applying the foregoing annual percentage rates
to the average daily net assets of the H&W Portfolio during the Short Quarter,
dividing the result by four, and multiplying that figure by a ratio equal to the
number of days in the Short Quarter divided by the total number of days in the
full quarter.
B. MISCELLANEOUS
Except as specifically amended hereby, all of the terms and conditions of the
Investment Advisory Agreement are unaffected and shall continue to be in full
force and effect and shall be binding upon the parties in accordance with its
terms.
HOTCHKIS AND WILEY CAPITAL VANGUARD WINDSOR FUNDS
MANAGEMENT, LLC
/S/ Xxxxx X. Xxxxxx 6/8/06 /S/ Xxxx X. Xxxxxxx 6/7/06
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Signature Date Signature Date
XXXXX X. XXXXXX XXXX X. XXXXXXX
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