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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 "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'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 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 and composition 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 determinations
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
Portfolio. 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 Portfolio as well as other clients, the
Adviser, to the extent permitted by applicable laws and
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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 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:
(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(e) hereof. The
Adviser agrees that all records which it maintains for the Portfolio 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.
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%
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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.
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 Portfolio 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, or (b) by vote of a
majority of the outstanding voting securities of the Fund.
11. PROXY POLICY. With regard to any proxy solicitations, the Fund shall
vote the shares of all securities held by the Portfolio.
ATTEST: VANGUARD HORIZON FUND, INC.
By By
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Secretary President and Chief Executive
Officer
ATTEST: XXXXXXXX XXXXXXXXXX COMPANY
By
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