INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of this 23rd day of January, 1998, between
VANGUARD/HORIZON FUND, INC., a Maryland Corporation, (the "Fund") and XXXXXXXX
XXXXXXXXXX COMPANY, a California corporation (the "Advisor").
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's Capital Opportunity Portfolio (the
"Portfolio"), and the Adviser is willing to render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the premises and mutual promises set forth below,
the Fund and the Adviser agree as follows:
1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to
act as investment adviser to the Portfolio 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 Fund's Board of
Directors, the Adviser shall manage the investment operations of the Portfolio
in accordance with the investment objective and policies stated in the Fund's
Registration Statement (as defined in paragraph 3(d) of this Agreement), and
subject to the following understandings:
(a) The Adviser shall supervise the Portfolio's investments, furnish a
continuous investment program for the Portfolio, determine from time to
time what investments or securities will be purchased, retained or sold
by the Portfolio, and what portion of the Portfolio's assets will be
invested or held uninvested as cash;
(b) The Adviser shall use the same skill and care in the management of
the 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. The Adviser 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 Portfolio and will place orders pursuant to its determination
either directly with the issuer or with any broker and/or dealer who
deals in the securities in which the Portfolio is active. The Adviser 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 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's Capital Opportunity
Portfolio 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
transactions, will be made by the Adviser in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to
the Portfolio and to such other clients;
(e) The Adviser shall maintain books and records with respect to
the Portfolio'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 Portfolio on each business day
with a list of all securities transactions for that day;
(g) The investment advisory services of the Adviser to the
Portfolio 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) Articles of Incorporation of the Fund, dated November 3,
1994 (such Articles of Incorporation, as presently in effect and as
amended from time to time, are 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:
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(d) 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 December 19, 1997, and all
amendments thereto;
4. BOOKS AND RECORDS. The Adviser shall keep the Portfolio's books
and records required to be maintained by it pursuant to paragraph 2(c) 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 31a-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. 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 Portfolio and the
taxes, and brokerage commissions, if any, payable in connection with the
purchase and/or sale of such securities. Notwithstanding, any other requirements
of this paragraph, the Fund is not required to provide the Adviser with copies
of materials that merely identify the Adviser.
6. COMPENSATION OF THE ADVISER. 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 each of the Portfolio's fiscal quarters, a Basic Fee calculated by
applying a quarterly rate, based on the following annual percentage rates, to
the Portfolio's average month-end assets for the quarter.
Net Assets Rate
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First $50 million 0.500%
Next $200 million 0.450%
Next $250 million 0.375%
Next $1,750 million 0.250%
Next $2,750 million 0.200%
Next $5,000 million 0.175%
Over $10,000 million 0.150%
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.
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7. LIABILITY OF ADVISER. No provision of this Agreement shall be
deemed to protect the Adviser against any liability to the Fund, the Portfolio
or the Portfolio's 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.
8. DURATION AND TERMINATION. This Agreement, unless sooner terminated
as provided herein, shall continue until February 2, 2000 and will be renewable
thereafter 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 persons (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 of 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).
9. 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.
10. 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.
11. Proxy Policy. With regard to the solicitation, the Fund shall
vote the shares held of the Portfolio.
ATTEST: VANGUARD HORIZON
FUND, INC.
By By
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Secretary President and Chief Executive Officer
ATTEST: XXXXXXXX XXXXXXXXXX
COMPANY
By By
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