DRAFT
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this XXth day of Month, 2007, between Vanguard
Explorer Fund, a Delaware statutory trust (the "Trust"), and AXA Xxxxxxxxx
Investment Management LLC (the "Advisor"), a Delaware 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 Explorer 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 "AXA Xxxxxxxxx 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 provided that reasonable prior notice of additions to the AXA Xxxxxxxxx
Portfolio would be communicated to and agreed upon by 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 AXA Xxxxxxxxx Portfolio; to
continuously review, supervise, and administer an investment program for the AXA
Xxxxxxxxx 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 under
this Agreement needed for the Fund to comply with its books and records
obligations under applicable law or regulation; 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 but shall not
bear any other expenses in connection with performing the services hereunder.
3. SECURITIES TRANSACTIONS. The Advisor is authorized to select the brokers
or dealers that will execute purchases and sales of securities for the AXA
Xxxxxxxxx Portfolio, and is directed to use its best efforts to seek best
execution for such transactions, consistent with Section 28(e) of the Securities
Exchange Act of 1934. In selecting brokers or dealers to execute trades for the
AXA Xxxxxxxxx Portfolio, the Advisor will comply with all applicable statutes,
rules, and interpretations by the U.S. Securities and Exchange Commission or its
staff, other applicable law, and the written policies and procedures established
by the Board of Trustees and communicated to the Advisor in writing.
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 therefor, an investment advisory fee
consisting of a base fee plus a performance adjustment (together, the "Adjusted
Fee") at the rates specified in Schedule A to this agreement, payable quarterly
in arrears.
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 investment officers of the Advisor who are
responsible for managing the AXA Xxxxxxxxx Portfolio.
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 AXA Xxxxxxxxx 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 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, except Vanguard, 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 this Agreement 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 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.
Upon termination of this Agreement, the Trust and the Fund shall honor any
transactions undertaken by the Advisor on behalf of the Fund which are not
completed at the time of termination. 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 Explorer 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:
AXA Xxxxxxxxx Investment Management LLC
Xxxxxx Xxx, Xxxxxxxx X
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Chief Investment Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
With copy to:
AXA Xxxxxxxxx Global Services LLC
0 Xxxxxx Xxx, Xxxxxxxx X
Xxxxxx, XX 00000
Attention: Legal Counsel
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, (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,
or (iv) to the extent reasonably required for the Advisor to perform its
obligations hereunder.
13. PROXY POLICY. The Advisor acknowledges that Vanguard, at the direction
of the Fund, will vote the securities that are held by the Fund.
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 Delaware applicable to contracts made and to be performed in that state.
15. MISCELLANEOUS.
(a) By execution of this Agreement, the Trust acknowledges receipt of
Part II of the Advisor's Form ADV Part II.
(b) The Trust and the Fund warrant, represent, and covenant that (i)
they have the full power and authority to employ the Advisor under the
terms of this Agreement and the appointment of the Advisor is in
accordance with the Prospectus, Statement of Additional Information and
applicable law or regulation, and (ii) to the best of their knowledge,
the Fund's Prospectus and Statement of Additional Information is
consistent with the governing documents of the Trust and the Fund, and
applicable law and regulation.
(c) The Advisor will have no responsibility with respect to the custody
of the AXA Xxxxxxxxx Portfolio.
(d) The Trust and the Fund shall not use the name of the Advisor or
make representations regarding the Advisor without the prior consent of
the Advisor, such consent not to be unreasonably withheld.
Notwithstanding the foregoing, the Advisor's approval is not required
for representations regarding the Advisor which are used in a manner
consistent with disclosure previously approved by the Advisor,
including but not limited to the disclosure contained in the Fund's
Prospectus and Statement of Additional Information.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of the date first set forth herein.
AXA XXXXXXXXX INVESTMENT MANAGEMENT LLC VANGUARD EXPLORER FUND
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Signature Date Signature Date
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