INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 19th day of December, 2005, between the
Vanguard Windsor Funds, a Delaware business trust (the "Trust"), and Equinox
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");
WHEREAS, the Trust offers a series of shares known as Vanguard Windsor II
Fund (the "Fund");
WHEREAS, the Trust retains the Advisor to render investment advisory
services to the Fund under an Investment Advisory Agreement, dated as of August
1, 1996 (the "Prior Agreement");
WHEREAS, the Trust desires to amend and restate such Investment Advisory
Agreement in certain respects, and the Advisor is willing to render investment
advisory services to the Fund in accordance with such amendments.
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 "Equinox Portfolio"). As
of the date of this Agreement, the Equinox 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"), including cash
that may be directed to The Vanguard Group, Inc. for cash management
purposes. 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 Equinox Portfolio; to continuously
review, supervise, and administer an investment program for the Equinox
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 Equinox
Portfolio, and is directed to use its best efforts to obtain best execution
for such transactions. In selecting brokers or dealers to execute trades
for the Equinox Portfolio, the Advisor will comply with all applicable
statutes, rules, interpretations by the Securities and Exchange Commission
or its staff, other applicable law, and the written policies established by
the Fund's 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 therefore, a Basic Fee at the
rate specified in Schedule A to this Agreement. The Basic Fee will be
calculated based on annual percentage rates applied to the average
month-end net assets of the Equinox Portfolio and will be paid to the
Advisor quarterly.
Notwithstanding the foregoing, for services rendered pursuant to this
Agreement, the Fund shall pay to the Advisor, for the first fiscal quarter
within which this Agreement is in effect, a Basic Fee calculated as described in
Schedule B.
The Basic Fee, as provided above, will be increased or decreased by
applying a Performance Fee Adjustment (the "Adjustment") as specified in
Schedule A.
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.
6. COMPLIANCE WITH APPLICABLE LAW AND BOARD REQUIREMENTS. The Advisor agrees
to comply with all Applicable Law and 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. "Applicable Law" means (i) the "federal
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securities laws" as defined in Rule 38a-1(e)(1) under the 1940 Act, as
amended from time to time, as they relate to the services provided by the
Advisor to the Trust pursuant to this Agreement, 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.
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.
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 shall continue in effect for successive
twelve-month periods, 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:
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If to the Fund, at:
Vanguard Windsor II 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:
Equinox Capital Management, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
Attn: Xxxxxx X. Xxxxxx
Phone:
Fax:
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 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
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 Trustees 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 Trustees of the Trust, or Vanguard.
13. 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
Equinox Portfolio.
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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.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be executed as of the date first set forth herein.
Equinox Capital Management, LLC Vanguard Windsor Funds
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Signature Date Signature Date
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